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

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Question 71

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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:

A) Bank of Bramblewood is a member of a consortium of banks that can pool funds to make loans too big for any single bank to finance.
B) bank gives preference to veterans.
C) the depositors of the bank are also its owners.
D) individual accounts at Bank of Bramblewood are insured by an independent agency of the federal government.

E) A) and C)
F) All of the above

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Question 72

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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) both the M-1 and M-2 money supplies were stable.
B) the M-1 money supply has increased,but the M-2 money supply was stable.
C) the M-2 money supply has increased,but the M-1 money supply was stable.
D) both the M-1 and the M-2 money supplies have increaseD.

E) A) and D)
F) A) and C)

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Question 73

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The Fed bought several billion dollars worth of U.S.government securities.The purpose of this action is to:

By reducing the reserve requirement,the Fed intends to increase the money supply.

Next month,Commerce Bank plans to increase the amount of new loans it makes.As a member bank of the Federal Reserve,Commerce can borrow from the Fed.Commerce will charge the customer an interest amount greater than the discount rate.

Compare and contrast the functions of the World Bank and the International Monetary Fund.

Efficient monetary systems eliminate the use of barter.

__________ are nonprofit,member-owned financial cooperatives that offer a full variety of banking services such as accepting deposits and making loans.

The U.S.government has done its best to create dollar bills that are easily duplicated.

Which of the following institutions primarily finances economic development projects in less-developed countries?

Brokerage firms now compete with commercial banks by offering high-yield combination savings and checking accounts.

Xavier deposited $75,000 in various individual accounts at his local credit union.He and his wife also have a joint savings account worth $34,500.What portion of these deposits is insured?

Thomas Jefferson proposed the establishment of the first central bank in the United States.

If the Fed increases interest rates in the U.S.relative to other nations,

Describe and compare the three major types of organizations that make up the U.S.banking system: commercial banks,savings and loan associations,and credit unions.

A banker's acceptance represents a promise that a bank will pay a specified amount at a specified time if certain conditions are met.

To reduce inflation,the Federal Reserve increases the discount rate.

By the time of the Civil War,the U.S.banking system operated:

The Connecting with Small Business box tells a story about a relatively new business in Austin,TX,called the Mango Store.Customers can cash paychecks and utilize a number of electronic methods such as debit cards and ATM machines to manage their funds.The popularity of this business is due to an ongoing need.Which of the following describes the situation?

Andrea has three types of deposits at her credit union.She has a checking account in her own name worth $32,000,a joint savings account with her husband,which currently holds $95,000,and an IRA account worth $125,449.Her deposits are at risk because they exceed the $250,000 limit on insurance coverage by NCUA.