Question 1

The overall value of the U.S. M-2 has grown considerably since 1979 due primarily to the increased use of credit cards and debit cards.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following terms refers to the interest level at which commercial banks lend reserves to each other, usually overnight?

Accepted Answer

A)  discount rate 
B)  key rate 
C)  prime rate 
D)  federal insurance premium 
E)  reserve requirement

Question 3

A senior manager argues that the negative perception associated with mounting credit card debt will affect StarMart. Which of the following would be the LEAST effective measure StarMart could take to address this potential problem?

Accepted Answer

A)  publicizing the company's policies in clear and easy-to-understand language 
B)  charging no more than the typical interest rate for month-to-month debt 
C)  ensuring that fees for exceeding credit limits are no higher than necessary 
D)  increasing the value of the promotional items that attract new credit card customers 
E)  offering free debt counseling to Axiom-Star customers

Question 4

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 5

Which of the following best describes two of the three primary functions of the Federal Reserve System?

Accepted Answer

A)  developing new financial markets and aiding banks in conducting their business 
B)  aiding banks in conducting business and managing the U.S. money supply and interest rates 
C)  managing the U.S. money supply and interest rates and monitoring interbank relationships 
D)  monitoring interbank relationships and acting as a bank for the federal government 
E)  acting as a bank for the federal government and developing new financial markets

Question 6

Which of the three functions of money does a time deposit account most exemplify?

Accepted Answer

The answer of Which of the three functions of money...

Question 7

What is a debit card?

Accepted Answer

The answer of What is a debit card?...

Question 8

Since late 2008, investors of certain banks have been prevented from having complete control over the sale of their banks' stocks.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements best explains how financial institutions create money?

Accepted Answer

A)  By opening new checking accounts and giving more people access to readily available cash, financial institutions expand the money supply. 
B)  By issuing money through government contracts, financial institutions expand the money supply. 
C)  By taking deposits and loaning out these funds, financial institutions expand the money supply. 
D)  By collecting interest on its accounts through investments, financial institutions expand the money supply. 
E)  By giving interest from its accounts to its clients, financial institutions expand the money supply.

Question 10

Which of the following statements is True?

Accepted Answer

A)  Since insurance companies generate the vast majority of revenue from investments of premium payments, market fluctuations will not affect one's health care benefits. 
B)  Since insurance companies generate the vast majority of revenue from premium payments, market fluctuations generally do not affect one's health insurance premium. 
C)  Since insurance companies also generate revenue from investments of premium payments, market fluctuations may affect one's health insurance premium. 
D)  Since insurance companies also generate revenue from investments of premium payments, market fluctuations may affect one's health care benefits. 
E)  Since insurance companies generate revenue from both premium payments and investments thereof, market fluctuations will not generally affect one's health insurance benefits.

Question 11

David has a savings account and a home mortgage with a financial institution. Each year, this institution sends him a dividend check based on his accounts. Which of the following financial institutions is David using here?

Accepted Answer

A)  commercial bank 
B)  savings institution 
C)  credit union 
D)  savings and loan association 
E)  mutual savings bank

Question 12

A senior manager argues that the negative perception associated with mounting credit card debt will affect StarMart. Which of the following would be the most effective measure StarMart could take to address this potential problem?

Accepted Answer

A)  offering to forgive all debt more than 90 days old 
B)  making it clear that StarMart is a different entity than Axiom-Star 
C)  pointing out the records and practices of the worst-behaved credit companies 
D)  extending the expiration date of StarMart reward points 
E)  extending credit only to those who are very likely to be able to pay their bills

Question 13

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 14

Which of the following, if True, most weakens the CEO's argument?

Accepted Answer

A)  Over the last ten years, investments in the yuan have only marginally outperformed investments in the euro. 
B)  Research shows that a vast majority of American voters approve of European governments and disapprove of the Chinese government. 
C)  The amount of capital the company currently has invested in the euro is significantly larger than the amount invested in the yuan. 
D)  In the past six months, Europe has shown signs of recovering from a financial crisis while China has shown signs of entering one. 
E)  A competing firm recorded record profits after shifting its investments from Japanese yen to U.S. dollars.

Question 15

What is Check 21?

Accepted Answer

The answer of What is Check 21?...

Question 16

The inquiry has discovered that the bank involved has been selling its riskiest mortgage accounts to the insurance company, which in turn has been selling these accounts packaged with other more stable loans at a sharply discounted price to other banks. Gavin asks his aides why this would be a beneficial relationship between the two institutions. What would his aides say?

Accepted Answer

The answer of The inquiry has discovered that the bank...

Question 17

Which of the following has a fixed term?

Accepted Answer

A)  demand deposits 
B)  time deposits 
C)  money market mutual funds 
D)  credit card accounts 
E)  savings accounts

Question 18

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

Accepted Answer

The answer of Why are savings accounts not considered a...

Question 19

Which of the following statements best describes how the Automated Clearing House Network (ACH) maintains its integrity as a processor of electronic payments?

Accepted Answer

A)  The ACH network is an institution within the Federal Bank System and is regulated by strict government standards. 
B)  The ACH network is a for-profit company and is regulated by its need to make a profit, which it can only do by strictly regulating itself. 
C)  The ACH network is a financial institution and is thus regulated by its obligations to its investors. 
D)  The ACH network is a not-for-profit association and is regulated by its independence from outside interests. 
E)  The ACH network is a professional organization to which all financial institutions are obligated to contribute resources and is regulated by the interests of these institutions.

Question 20

Why might nations decline International Monetary Fund funds?

Accepted Answer

The answer of Why might nations decline International Monetary Fund...

Exam 15: Money and Banking