Question 1

Importers Direct arranged to have a French winery ship a large quantity of fine wine to the United States. By signing a(n)  ________, Importers Direct authorized its bank to make full payment to the French winery if and when the wine arrives at the Importers Direct warehouse in Philadelphia.

Accepted Answer

A)   letter of credit
B)   certificate of deposit
C)   trade agreement
D)   banker's acceptanceE) B) and C)
F) A) and C)

Question 2

Due to federal regulations limiting their investment opportunities, pension funds play a minor role in U.S. financial markets.

Accepted Answer

A) True 
 B)False

Question 3

Savings and loan associations, also known as thrift institutions, were created to promote consumer thrift and home ownership.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A)   Mutual thrift associations
B)   Credit unions
C)   Commercial banks
D)   Mutual fund companiesE) B) and C)
F) A) and D)

Question 5

The World Bank primarily finances projects to protect the environment.

Accepted Answer

A) True 
 B)False

Question 6

Ryan works at a community college and the college requires all employees to contribute to a pension fund. At this time, he is not too worried about the safety of this contribution because

Accepted Answer

A)   the pensions fund's investments are always backed by the full faith and credit of the U.S. government.
B)   pension funds are provided by nonbanks so they are not going to take this money and lend it to others.
C)   he is considered a state employee, and as such, he is protected from this fund going bankrupt.
D)   pension funds usually make conservative investments.E) B) and D)
F) None of the above

Question 7

When the Fed increases the reserve requirement, banks

Accepted Answer

A)   must increase the dollar volume of loans they make to customers.
B)   must pay more to borrow from the Fed.
C)   have fewer funds available for lending.
D)   will find their balance sheets temporarily out of balance.E) B) and D)
F) B) and C)

Question 8

The problem with barter exchanges is that it is too difficult to find people to exchange your good with.

Accepted Answer

A) True 
 B)False

Question 9

Companies are now developing ways to send money across international boundaries using e-money.

Accepted Answer

A) True 
 B)False

Question 10

While Federal Reserve actions impact domestic investors, they have little effect on decisions made by international investors.

Accepted Answer

A) True 
 B)False

Question 11

Traditionally, life insurance companies, pension funds, and brokerage firms are known as

Accepted Answer

A)   nonbanks.
B)   thrift institutions.
C)   bond companies.
D)   federally chartered banks.E) B) and C)
F) A) and B)

Question 12

When Alex in Quince Orchard, MD, uses a check to buy a tractor from Steven in Austin, TX, ________ different banks are involved in the transaction.

Accepted Answer

A)   4
B)   12
C)   15
D)   noE) A) and B)
F) B) and D)

Question 13

When a customer purchases an item with a debit card,

Accepted Answer

A)   they actually are taking out a short-term loan with 30 days to pay before any interest is charged.
B)   the payment flows first through an electronic clearinghouse which then sends the customer a bill.
C)   the transaction duplicates the process of a credit card.
D)   the funds are automatically transferred from the customer's account to the store's account.E) A) and D)
F) C) and D)

Question 14

The three basic tools the Fed uses to manage the money supply are reserve requirements, open-market operations, and the discount rate.

Accepted Answer

A) True 
 B)False

Question 15

Online banks offer customers better interest rates and lower fees because these businesses avoid the costs of constructing and maintaining a bank building.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A)   decrease the size of the national debt.
B)   improve its financial position by investing in relatively safe interest-earning assets.
C)   stimulate the economy by increasing the amount of money in circulation.
D)   drive up interest rates to cool off inflationary pressures.E) None of the above
F) B) and C)

Question 17

The World Bank primarily finances projects to improve the productivity and standard of living in less-developed nations.

Accepted Answer

A) True 
 B)False

Question 18

________ represent money set aside by corporations, nonprofit organizations, or unions to cover part of the retirement needs of their members.

Accepted Answer

A)   Annuity accounts
B)   Pension funds
C)   Individual retirement accounts
D)   Term-life retirement fundsE) None of the above
F) All of the above

Question 19

From a bank's point of view, debit cards and credit cards are treated in identical ways.

Accepted Answer

A) True 
 B)False

Question 20

A ________ represents an unconditional agreement by a bank to pay a specified amount at a particular time.

Accepted Answer

A)   certified trade acceptance
B)   banker's acceptance
C)   letter of credit
D)   guaranteed funds agreementE) B) and C)
F) A) and D)

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

While Federal Reserve actions impact domestic investors, they have little effect on decisions made by international investors.

Correct AnswerverifiedShow Answer

The problem with barter exchanges is that it is too difficult to find people to exchange your good with.

Correct AnswerverifiedShow Answer

Due to federal regulations limiting their investment opportunities, pension funds play a minor role in U.S. financial markets.

Correct AnswerverifiedShow Answer

When a customer purchases an item with a debit card,

Correct AnswerverifiedShow Answer

________ represent money set aside by corporations, nonprofit organizations, or unions to cover part of the retirement needs of their members.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Ryan works at a community college and the college requires all employees to contribute to a pension fund. At this time, he is not too worried about the safety of this contribution because

Correct AnswerverifiedShow Answer

When Alex in Quince Orchard, MD, uses a check to buy a tractor from Steven in Austin, TX, ________ different banks are involved in the transaction.

Correct AnswerverifiedShow Answer

When the Fed increases the reserve requirement, banks

Correct AnswerverifiedShow Answer

The three basic tools the Fed uses to manage the money supply are reserve requirements, open-market operations, and the discount rate.

Correct AnswerverifiedShow Answer

The World Bank primarily finances projects to protect the environment.

Correct AnswerverifiedShow Answer

The World Bank primarily finances projects to improve the productivity and standard of living in less-developed nations.

Correct AnswerverifiedShow Answer

Online banks offer customers better interest rates and lower fees because these businesses avoid the costs of constructing and maintaining a bank building.

Correct AnswerverifiedShow Answer

Companies are now developing ways to send money across international boundaries using e-money.

Correct AnswerverifiedShow Answer

Savings and loan associations, also known as thrift institutions, were created to promote consumer thrift and home ownership.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Traditionally, life insurance companies, pension funds, and brokerage firms are known as

Correct AnswerverifiedShow Answer

Importers Direct arranged to have a French winery ship a large quantity of fine wine to the United States. By signing a(n) ________, Importers Direct authorized its bank to make full payment to the French winery if and when the wine arrives at the Importers Direct warehouse in Philadelphia.

Correct AnswerverifiedShow Answer

A ________ represents an unconditional agreement by a bank to pay a specified amount at a particular time.

Correct AnswerverifiedShow Answer

From a bank's point of view, debit cards and credit cards are treated in identical ways.

Correct AnswerverifiedShow Answer

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