Overview of the Banking Industry

Question 1

What is a bank

Answer 1

A bank is a financial intermediary that accepts deposits and channels these deposits into lending activities

Question 2

Bank comes from the Italian word

Answer 2

Banco which means bench. This is where the earliest transactions between buyers and sellers took place

Question 3

What are the three traits that make banks special?

Answer 3

First, they offer transaction accounts as defined. Second, they are the backup source of liquidity for all other institutions; Third, they are the transmission belt of monetary policy (responsible for the creation of new wealth in the economy)

Question 4

One of the ways in which money is created is

Answer 4

fractional reserve banking

Question 5

3 Common Monetary Policy Tools / Instrujments

Answer 5

Policy Rate, Open Market Operations, Reserve Requirements

Question 6

Money Supply affects economic activity and prices. This is explained through the

Answer 6

Quantity theory of money

Question 7

Explain the quantity theory of money

Answer 7

money supply x velocity = prices x y (finished goods and services)