Question 1

Which of the following BEST describes what is called the "open-market operations" of the Federal Reserve System?

Accepted Answer

A)   The development of new financial opportunities for banks
B)   The minting of new money to disperse into the money market
C)   The control of interest rates among banks
D)   The maintenance of a well-functioning lending system among banks
E)   The buying and selling of securities by the Fed

Question 2

Which of the following statements BEST describes why an increase in the discount rate often results in a decrease in the money supply?

Accepted Answer

A)   An increase in the discount rate will lower the overall values of loans from the Federal Reserve Banks to individual banks.
B)   An increase in the discount rate will lower the overall values of loans from individual banks to other financial institutions.
C)   An increase in the discount rate will lower the overall number of banks issuing loans to individuals.
D)   An increase in the discount rate will lower the overall number of loans from the Federal Reserve Banks to individual banks.
E)   An increase in the discount rate will lower the overall number of loans from the Federal Reserve Banks to individuals.

Question 3

How does an automated teller machine aid in the customer's ability to conduct transactions whenever needed?

Accepted Answer

A)   By processing payments in real time, electronically
B)   By allowing a customer to have a line of credit until business can be conducted within regular banking hours
C)   By taking deposits and making loans on demand
D)   By allowing electronic account-related activities every day of the week, 24 hours a day
E)   By transferring funds from the Reserve Bank to meet transaction needs

Question 4

When the value of a currency is strong in the international market,what happens to trade?

Accepted Answer

A)   Trade increases because the cost of the item is more affordable in the international market.
B)   Trade decreases because the cost of the item is more expensive in the international market.
C)   Trade increases because sales decrease, creating a more competitive market.
D)   Trade decreases because the manufacturers limit production of the item.
E)   Trade increases with a slower revenue growth.

Question 5

The international payments process that moves money between buyers and sellers on different continents is subject to worldwide policy systems.

Accepted Answer

A) True 
 B)False

Question 6

The Federal Reserve System has been instrumental in providing interbank clearing of electronic payments for the nation's financial institutions.

Accepted Answer

A) True 
 B)False

Question 7

A check is an order to a bank to withdraw funds at any time.

Accepted Answer

A) True 
 B)False

Question 8

One of the daily responsibilities of the Federal Reserve System is to regulate the current federal funds rate.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following agencies guarantees the safety of all of its members' bank accounts?

Accepted Answer

A)   Internal Revenue Service
B)   Federal Open Market Committee
C)   Federal Reserve Bank
D)   Federal Deposit Insurance Corporation
E)   Federal Exchange Commission

Question 10

Which of the following is a consequence of the divisibility characteristic of money?

Accepted Answer

A)   Units of money do not expire after a certain time limit.
B)   Units of money can be accurately matched with the value of goods.
C)   Units of money are easily carried.
D)   Units of money have relatively stable value.
E)   Units of money of different nations are easily converted to other units of money.

Question 11

Which of the following represents a pool of managed funds that provide retirement income for members?

Accepted Answer

A)   Insurance companies
B)   Finance companies
C)   Securities investment dealers
D)   Nondeposit institutions
E)   Pension funds

Question 12

Which of the following affects the movement of funds between international buyers and sellers?

Accepted Answer

A)   Buyer's home country government trade policies
B)   Seller's home country government policies
C)   International government policies
D)   Currency exchange rates
E)   International payment process

Question 13

The Federal Deposit Insurance Corporation is the government agency that regulates American banks.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following terms refers to the percentage of its deposits a bank must hold,in cash or on deposit,with a Federal Reserve Bank?

Accepted Answer

A)   Discount rate
B)   Key rate
C)   Prime rate
D)   Federal insurance premium
E)   Reserve requirement

Question 15

Any object can serve as money if it is portable,divisible,durable,and stable.

Accepted Answer

A) True 
 B)False

Question 16

Why are savings accounts not considered a component of M-1,whereas checking accounts are?

Accepted Answer

M-1 comprises all currency in circulatio...

Question 17

Which of the following affects the value of money?

Accepted Answer

A)   How much currency is in circulation
B)   How many units the currency can be divided into
C)   How portable the form of currency is
D)   How durable the form of currency is
E)   How much currency has been saved

Question 18

Which of the following BEST describes the portability characteristic of money?

Accepted Answer

A)   If it wears out, it can be replaced.
B)   Units of money can be matched with the value of goods.
C)   It can be exchanged across national borders.
D)   It allows people to measure the relative value of goods and services.
E)   It is light and easy to handle.

Question 19

Why do exchange rates matter to companies?

Accepted Answer

A)   Strong exchange rates could stimulate sales in foreign markets.
B)   Inflation could be caused by an exchange rate that is too strong.
C)   Poor exchange rates can be offset by government contribution.
D)   Exchange rates indicate the strength of the overall economy.
E)   Exchange rates affect the prices of goods and services.

Question 20

What is the role of the International Monetary Fund?

Accepted Answer

A)   To provide long-term loans to member countries
B)   To provide a system of rules and procedures for member countries who trade with each other
C)   To limit the amount of loans available to member nations who have negative trade balances
D)   To encourage the development of a system for international payments
E)   To determine the value of currency and exchange rates for member nations

Exam 16: Understanding Money and the Role of Banking

Why do exchange rates matter to companies?

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Which of the following represents a pool of managed funds that provide retirement income for members?

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What is the role of the International Monetary Fund?

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The Federal Reserve System has been instrumental in providing interbank clearing of electronic payments for the nation's financial institutions.

Correct AnswerverifiedShow Answer

How does an automated teller machine aid in the customer's ability to conduct transactions whenever needed?

Correct AnswerverifiedShow Answer

When the value of a currency is strong in the international market,what happens to trade?

Correct AnswerverifiedShow Answer

Which of the following terms refers to the percentage of its deposits a bank must hold,in cash or on deposit,with a Federal Reserve Bank?

Correct AnswerverifiedShow Answer

Which of the following BEST describes what is called the "open-market operations" of the Federal Reserve System?

Correct AnswerverifiedShow Answer

The Federal Deposit Insurance Corporation is the government agency that regulates American banks.

Correct AnswerverifiedShow Answer

Which of the following affects the value of money?

Correct AnswerverifiedShow Answer

Which of the following is a consequence of the divisibility characteristic of money?

Correct AnswerverifiedShow Answer

The international payments process that moves money between buyers and sellers on different continents is subject to worldwide policy systems.

Correct AnswerverifiedShow Answer

Which of the following affects the movement of funds between international buyers and sellers?

Correct AnswerverifiedShow Answer

Which of the following statements BEST describes why an increase in the discount rate often results in a decrease in the money supply?

Correct AnswerverifiedShow Answer

Which of the following agencies guarantees the safety of all of its members' bank accounts?

Correct AnswerverifiedShow Answer

One of the daily responsibilities of the Federal Reserve System is to regulate the current federal funds rate.

Correct AnswerverifiedShow Answer

Any object can serve as money if it is portable,divisible,durable,and stable.

Correct AnswerverifiedShow Answer

Why are savings accounts not considered a component of M-1,whereas checking accounts are?

Correct AnswerverifiedM-1 comprises all currency in circulatio...View AnswerShow Answer

Which of the following BEST describes the portability characteristic of money?

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A check is an order to a bank to withdraw funds at any time.

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M-1 comprises all currency in circulatio...
View Answer

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