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Exam 20: Money, Financial Institutions, and the Federal Reserve

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Question 21

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Historically, savings and loans always paid lower interest rates on time deposits.

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Question 22

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When comparing a letter of credit and a banker's acceptance for financing international business transactions, a letter of credit:

A) provides payment anywhere in the world. A banker's acceptance pays in areas in which the bank has a branch.
B) pays a specified amount if certain conditions are met. Conversely, a banker's acceptance represents an unconditional promise to pay.
C) requires both the buyer and seller to deal in the same currencies. A banker's acceptance provides for currency exchange.
D) provides financing directly between buyers and sellers in different countries. A banker's acceptance provides an arrangement in which a bank serves as a broker taking title to the goods.

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Question 23

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On payday, employers can designate their banks to electronically transfer funds from the business' checking account to the employees' checking account. This represents an example of a(n) :

Great news! The Fed just announced that the discount rate will rise by as much as 1% over the next three months. This will make it easier for Ben, the owner of a laser engraving business, to borrow money for that new piece of equipment he needs.

Smart cards can allow the user to access secure areas within buildings or buy gas with the swipe of the card.

Certificates of deposit (CDs) represent demand deposits issued by banks.

The currencies of some countries, although durable and portable are relatively unstable, which makes international exchanges difficult.

Credit cards represent the trend toward an electronic funds transfer system.

The global money markets trade more than $1.9 trillion every day.

The redesign and new colors added to U.S. paper money is intended to:

Real dollars are made with various lines of colors such as peach and blue. They have art work that is off-center, and there are other identifiable watermarks for the purpose of making replication quite easy.

Bob read a newspaper story that indicated a dramatic increase in money market accounts and certificates of deposit during the last three months. The story reported that all other major components of the U.S. money supply remained unchanged. Based on this information, Bob can conclude that for the past quarter:

A "run on the bank" occurs when large numbers of depositors lose faith in the banking system and withdraw their deposits.

A(n) allows money to be exchanged electronically more quickly and more economically than with paper checks.

If you are trying to sell your state-of-the-art bicycles into the Japanese market, you are likely to sell more bicycles if the dollar has strength against the Japanese yen.

The National Credit Union Administration provides coverage up to $100,000 per individual depositor at each credit union.

Which of the following historical events motivated Congress to establish the Federal Reserve System?

Both the M-1 and M-2 definitions of money include coins and paper money.

After the bank failures of the Great Depression, the U.S. government formed three organizations: the FDIC (Federal Deposit Insurance Corporation); the SAIF (Savings Association Insurance Fund); and, NCUA (National Credit Union Administration to restore people's confidence and insure deposits.

The money supply represents the amount of money the Federal Reserve Bank makes available for people to buy goods and services.