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

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Question 131

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The FDIC insures individual accounts in member institutions up to a maximum of ___________,and temporarily,it increased the maximum level to _________,through December 31,2009.

A) $10,000;$100,000
B) $40,000;$100,000
C) $100,000;$250,000
D) $1,000,000;$2,500,000

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Question 132

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After Bill and Jillian deposited nearly $30,000 in a savings account at Farmers National Bank,the bank failed and filed for bankruptcy.Because the Farmers National Bank participates in the FDIC,Bill and Jillian:

A) should be okay because their account is fully insured by the FDIC.
B) can recover up to $20,000,but they will probably lose the rest since their deposits exceed the maximum coverage offered by the FDIC.
C) will lose their savings because the FDIC only insures business deposits.
D) will be eligible to recover 80 percent of the value of their deposit,less a $2,500 deductible.

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Question 133

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Mini-Case The Bank of Bramblewood survived the Great Depression through the dedication,hard work,and conservative practices of its first president,Red E.Kash.Indeed,Red's personal drive and business skills helped the Bank of Bramblewood thrive during his 50-year tenure as president.After his retirement his granddaughter,Patty,took a position with the bank.Patty inherited her grandfather's business skills and by 1994 she had risen to become the second member of the Kash family to head the bank. Patty admits she owes a great deal to her grandfather's leadership and advice,but she also quickly points out that the banking industry has changed significantly since Red retired.Patty graduated from college with a degree in finance,and also holds several certifications with the American Institute of Banking."What Granddad achieved during his era was truly remarkable," Patty points out."But times have changed,and banking regulations and bank competitors have certainly changed.If we hope to prosper in this century we have to adjust to new competition,learn to work with new technologies,and take advantage of new opportunities.The Bank of Bramblewood has always operated for the benefit of our customers and we will continue to do so.But we must serve them more efficiently and creatively than in the past." -Since the Great Depression and still today,the Bank of Bramblewood has the FDIC designation.This means:

Commercial banks,savings and loan associations,and credit unions:

As a response to a rise in savings and loan failures,the federal government no longer insures holders of accounts in savings and loan associations.

Recently,the Fed announced a reduction in the discount rate and the reserve requirement.These actions clearly suggest that the Fed intends to decrease the money supply.

The Fed has just reduced the reserve requirement from 14% to 12%.Commerce Bank holds $650 million in deposits.It will need to become more conservative with its lending procedures because it now must hold $91 million in reserves.

The FDIC traditionally protects depositors up to $100,000 per account.Temporarily,the amount was increased to $250,000 per account through December 2009.

When a customer purchases an item with a debit card:

________ persuaded Congress to establish the first central bank in the United States.

Credit unions represent nonprofit,member-owned financial cooperatives that offer the full variety of banking services to their members.

Traditionally,banks provide loans to individuals and companies according to the recipient's _____________.

Depositors represent a bank's primary responsibility,while borrowing customers are secondary.

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

The Federal Reserve that was established in 1907 was to be a "lender of last resort," loans money to small businesses that are unable to obtain loans through private banks.

The M-1 definition of the money supply includes travelers' checks.

Historically,there was ________ a central bank in the U.S.

A(n) __________ accepts savings and checking account deposits and provides home mortgage loans.

The strength of the U.S.dollar relative to other currencies depends mainly on:

The IMF's goal is to maintain a global monetary system.