Banking and Finance: Chapter 1 & 2

The National Banking Act of 1864 established the office of the _____ of the Currency to issue charters to national banks.

Comptroller

A bank is a not-for-profit organization.

False

A loan company is not a financial intermediary because it does not receive deposits.

False

Generally speaking, banks offer customers fewer services today than they did 20 years ago.

False

It is illegal for banks to charge higher interest rates for loans than they pay depositors.

False

Return on equity is the ratio of net income to total assets.

False

The National Banking Act of 1864 founded an adaptable, flexible system of central banking for the United States.

False

The first Bank of the United States was a government institution.

False

Credit cards issued by banks is a form of lending.

True

Money is a medium of exchange for people to use to trade things of value.

True

Record keeping is an important part of securing your money in a bank.

True

The largest denomination of paper currency in the United States today is the a. one hundred dollar note b. five hundred dollar note c. one thousand dollar note d. ten thousand dollar note

a. one hundred dollar note

Which of the following is NOT a source of income for a bank? a. the interest earned by depositors b. investments c. loan income d. fees for services

a. the interest earned by depositors

A decline in total production lasting a minimum of two quarters defines a. stagflation b. a recession c. mortgage crisis d. all of the above

b. a recession

What was the most common medium of exchange in colonial America? a. paper money b. coins c. checks d. pieces of gold and silver

b. coins

Which of the following is a non depository intermediary? a. commercial bank b. insurance company c. savings and loan association d. credit union

b. insurance company

Which of the following is considered a liability for a bank? a. loans b. investments c. deposits d. none of the above; banks are prohibited by law from carrying liabilities

c. deposits

One big difference between a commercial bank and a mutual savings bank is that a. a commercial bank is a non depository intermediary b. a mutual savings bank is a not-for-profit organization c. a commercial bank is owned by depositors, not stockholders d. a mutual savings bank is owned by depositors, not stockholders

d. a mutual savings bank is owned by depositors, not stockholders

Banks move money between a. other banks b. banks and individual customers c. governments d. all of the above

d. all of the above

Check 21 allows a. anyone over the age of 21 to obtain a checking account b. a discount on account servicing fees if more than 21 checks are written during the month c. funds to remain in an account until 21 days after the check is written d. substitute checks to process checks electronically

d. substitute checks to process checks electronically

In the United States, banks and _____ work together to form the banking system and to ensure the money supply is adequate, appropriate, and trustworthy. a. consumers b. industry c. savings and loans d. the government

d. the government

People who put money into banks are called ____.

depositors

A bank is a financial ____ for the safeguarding, transferring, exchanging, or lending of money.

intermediary

A(n) ______ asset is anything that can readily be exchanged.

liquid

A bank ____ occurs when many people try to withdraw their money from a bank at once.

run