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

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Question 91

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A series of bank failures and a cash shortage in 1907 led to the establishment of the Federal Reserve System in 1913.

A) True
B) False

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Question 92

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A major cause of the recent banking crisis was the neglect of banks to seriously scrutinize loan applicants for creditworthiness.

A) True
B) False

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Question 93

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Several European countries report a significant decrease in the level of jobs,income,and production of goods and services.The size and strength of the U.S.economy insulates U.S.businesses from the economic problems of other countries.

The World Bank's mission is to lend money to developing nations to help boost their economic development in various industries.Since its inception,the World Bank has taken significant criticism of its programs.Farmers in a cooperative in the developing nation of Urozil have benefited by World Bank loans.Most recently their processing facilities that employ several laborers are taking criticism from human rights organizations.After studying this chapter,which of the following is a common criticism of these groups?

The banking panic of 1907 and the resulting cash shortage led to the formation of the:

Certificates of deposit (CDs)represent demand deposits issued by banks.

Technically,a bank can require depositors to give prior notice before they withdraw funds from time deposits.

Louis owns an import business.After traveling to France on numerous occasions,he developed a taste for fine French wines.A radio report that he heard this morning indicated that the dollar has fallen sharply against the euro.Based on this information,Louis expects that:

The global money markets trade about $4 trillion every day.

The strength of the U.S.dollar relative to other currencies depends mainly on:

To decrease the money supply,the Federal Reserve sells U.S.government bonds in open-market operations.

The Federal Reserve fulfills its role as a "lender of last resort" when it loans funds to:

After the bank failures of the Great Depression,the U.S.government formed three organizations: the FDIC (Federal Deposit Insurance Corporation);the SAIF (Savings Association Insurance Fund);and,NCUA (National Credit Union Administration)to restore people's confidence and insure deposits.

Pension funds are monies put aside by corporations,non-profit organizations,or unions to fund the financial needs of their employees,upon retirement.

When the value of the dollar increases relative to the euro,the number of U.S.dollars needed to purchase a bottle of French wine decreases.

The wave of bank failures during the Great Depression prompted the government to establish federal deposit insurance to protect the public from bank failures.

The money supply represents the amount of money the Federal Reserve Bank makes available for people to buy goods and services.

A savings and loan association (S&L)is a financial institution that accepts both savings and checking deposits and provides home mortgage loans.

A __________ represents an agreement by a bank to pay a foreign company a given amount if certain conditions are met.

Open-market operations is the buying and selling of government securities by the Federal Reserve Board.