CHAPTER 16: UNDERSTANDING MONEY AND THE ROLE OF BANKING (721E85-2)

Which of the following is the number of the Fed's Board of Governors appointed by the president?

7

Other Depository Institutions.

Although many state-chartered banks, credit unions, and S&Ls do not belong to the Fed, they are subject to its regulations, pay deposit insurance premiums, and are covered by the FDIC.

Which of the following would be considered part of the M-1 money supply?

Cash

Which of the following is the interest rate at which member banks can borrow money from the Federal Reserve?

Discount

Which of the following is the federal agency that guarantees the safety of bank deposits?

FDIC.

The Bankers' Bank.

Individual banks that need money can borrow from the Fed and pay interest on the loans. In addition, the Fed provides storage for commercial banks, which are required to keep funds on reserve at a Federal Reserve Bank.

Which of the following is a common measure of money supply and includes currency, checks, and checking accounts?

M-1

The most reliable measure of money and is used by economists for economic planning

M-2

The management of the nation's economic growth by managing money supply and interest rates is known as which of the following?

Monetary policy

Member Banks.

National banks and some state banks are members of the Fed; depositor accounts in member banks are protected by FDIC.

Modern currency is light and easy to handle, thus meeting the criteria for which of the following?

Portability.

Which of the following is the percentage of its deposits a bank must hold, in cash or on deposit, with a Federal Reserve Bank?

Reserve requirement.

The Bank Secrecy Act

Secrecy requires financial institutions to formulate methods, such as monitoring and keeping records of customer transactions, to deter funding of crimes.

The Government's Bank.

The Fed produces the nation's currency and lends money to the government to finance the national deficit.

Open Market Committee.

The Federal Open Market Committee is responsible for formulating the Fed's monetary policies to promote economic stability and growth by managing the nation's money supply.

Reserve Banks.

There are twelve banks in the Fed that hold deposits from and set the discount rate for commercial banks in their respective regions; reserve banks also largely contribute to the country's check-clearing process.

The Board of Governors.

This group is comprised of seven members appointed by the president for 14-year terms; the board plays a major role in controlling the money supply through reserve requirements, discount rates, and open-market operations.

Which of the following funds national improvements by making loans to build roads and hospitals?

World Bank.

The international payments process

moves money between buyers and sellers on different continents..

The International Monetary Fund (IMF)

promotes the stability of exchange rates, provides temporary loans to member countries, encourages members to cooperate on international monetary issues, and encourages the development of a system for international payments.

The World Bank

provides only a very limited scope of services, such as funding national improvements by making loans to build roads, schools, power plants, and hospitals.

The USA Patriot Act

such of requires that financial institutions obtain and verify four pieces of information for every customer: name, address, date of birth, and social security number. A customer identification program (CIP) verifies identities, keeps records of customer activities and, for new customers, compares identities with government lists of terrorists.

Exchange rate

the value of one currency compared to the value of another.