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

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Question 111

True/False

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Everything else held constant, an international bank based in San Francisco would prefer to loan money to an efficient firm operating in Amsterdam, Holland, than an inefficient firm operating in New York.

A) True
B) False

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Question 112

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A major cause of the recent banking crisis was the neglect of banks to seriously scrutinize loan applicants for creditworthiness.

A) True
B) False

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Question 113

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The National Credit Union Administration provides coverage up to $250,000 per individual depositor at each credit union.

Identify and discuss the tools and products that electronically transfer funds.

Many S&Ls failed due to the inflation of the 1970s, deregulation, regulatory failure, and fraud.

During the Civil War, gold and silver coins were hoarded not because of their currency value, but because they were worth more than currency.

The electronic transfer of money increases the Federal Reserve's check-clearing operations.

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

Jared read an article that showed a dramatic increase in money market accounts and certificates of deposit in the last quarter. The story reported that all other major components of the U.S. money supply remained unchanged. Based on this information, Jared can conclude that for the past quarter

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

While an electronic funds transfer represents a faster and more flexible method of making payments than writing checks, it is more expensive for banks.

The World Bank provides funding for

The Federal Reserve System enabled the U.S. economy to avoid serious banking problems during the Great Depression.

Prior to the establishment of the Federal Reserve System in 1913, the United States had no experience with a central bank.

Many employers offer direct deposit as a convenient and cost-saving method of distributing employee pay each month.

The ________ primarily provides for the financing of economic development projects throughout the world.

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." -Under Patty's leadership the Bank of Bramblewood would like to increase its loans to customers, but its resources are currently limited by a high reserve rate. As a Federal Reserve member bank, it will borrow additional funds from the Fed and charge its customers an interest rate that is higher than the

Enrico banks at a commercial bank that advertises its membership in the FDIC. This means that

________ represents the most commonly used category of the money supply.

When the value of the dollar falls, foreign goods become less expensive for American consumers.