QUESTION How do lenders make money? What will be an ideal response? ANSWER Answer: The main way lenders make money is by charging interest on their loans. Explanation: Lenders make money by charging interest on their loans.
Date: September 3rd, 2020
QUESTION Which of the following is NOT true of the U.S. money supply? A) The Federal Reserve System makes it available. B) Its most common measurement is referred to as M2. C) It includes currency, traveler’s checks, and various bank checking account balances. D) Cash or currency makes up roughly 80 percent of it. E) […]
Date: September 3rd, 2020
QUESTION What does it mean to say that all commercial banks are chartered? A) They are not Fed members. B) All of their accounts are considered within the money supply by M1’s definition. C) They have received government permission to operate. D) They belong to a group of other local banks that pool funds. E) […]
Date: September 3rd, 2020
QUESTION What differentiates M1 from M2? A) M1 is a much broader definition of the money supply than M2. B) M2 includes only currency in its definition of the money supply. C) M1 is the much more commonly used measure of the money supply. D) M1 includes assets such as mutual funds and money market […]
Date: September 3rd, 2020
QUESTION Which of the following is TRUE of time deposits? A) They are bank funds that cannot be withdrawn without notice. B) They are only included in M1’s definition of the money supply. C) They are limited to $100,000 per depositor per bank. D) They can only be held in federal banks. E) They are […]
Date: September 3rd, 2020
QUESTION What percentage of a bank’s transaction account funds does the reserve requirement say must be kept as vault cash or in a Federal Reserve bank account? A) between 1% and 4% B) between 3% and 10% C) between 8% and 15% D) between 10% and 20% E) between 18% and 33% ANSWER Answer: […]
Date: September 3rd, 2020
QUESTION What happens when the Fed sells more bonds to the public? A) The money it takes in payment is withdrawn from circulation. B) The money supply increases. C) Government spending increases. D) The discount rate adjusts. E) Banks must put more of their money into the Fed. ANSWER Answer: A Explanation: A) When […]
Date: September 3rd, 2020
QUESTION The Federal Reserve is considering requiring banks to put a higher percentage of their money into the Fed. What’s the likely outcome? A) It reduces the money supply. B) Banks have more to lend to their customers. C) The Fed is able to spend more on government programs. D) Banks are allowed to reduce […]
Date: September 3rd, 2020
QUESTION What is the name for the rate at which the Federal Reserve makes short-term loans to member banks? A) federal rate B) discount rate C) interest rate D) primary rate E) reserve rate ANSWER Answer: B Explanation: B) The discount rate is the rate at which the Federal Reserve makes short-term loans to […]
Date: September 3rd, 2020
QUESTION What is another name sometimes given to a commercial bank? A) a local bank B) a state bank C) a federal bank D) a private bank E) a full-service bank ANSWER Answer: E Explanation: E) A commercial bank is sometimes called a full-service bank.
Date: September 3rd, 2020
