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

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Question 111

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Everything else held constant,an international bank based in New York would prefer to loan money to an efficient firm operating in San Paulo,Brazil than an inefficient firm operating in southern California.

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Question 112

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An electronic funds transfer system (EFT)is an electronic transaction system used for paying bills,making direct deposits of paychecks,and paying for a purchase.

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Question 113

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Barter involves the use of electronic payment systems,like Paypal.com,for online transactions.

Credit unions are for-profit cooperatives.

Economic growth and the creation of jobs depend on the availability of money.

A debit card is better than a credit card because it allows the purchaser to float a short-term loan,until the credit card company sends the bills at the end of the month.

Changes in the money supply produce little or no change in inflation,employment and economic growth.

An increase in the rate of inflation would likely result from a(n) :

When Mrs.Sweet exchanges her famous chocolate chip cookies for the lawn care services of her neighbor,she engages in a barter transaction.

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." -The Bank of Bramblewood would like to increase its loans to customers,but it is currently mandated 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 _______________.

Commercial banks,savings and loan associations,and credit unions all represent components of the American banking system.

Newspapers in the nation of St.Lunatic report a significant increase in money supply during the past few months.This information indicates that St.Lunatic may experience a serious recession in the near future.

Great news! The Fed just announced that the discount rate will rise by as much as 1% over the next three months.This will make it easier for Ben,the owner of a laser engraving business,to borrow money for that new piece of equipment he needs.

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

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

The Fed announces that it intends to implement policies to increase interest rates.Which of the following correctly identifies the most likely result of higher U.S.interest rates?

A significant increase in the money supply creates inflationary pressures in the economy.

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

Lower fees and better interest rates motivate customers to open accounts with Internet banks.However,the lack of personal service and concern for information security encourages some customers to return to a traditional bank.

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