Chapter 10 Test ECOn
A(n) ___________ is an account from which the funds can be converted to currency on demand and given to the person to whom the check is made payable.
Demand Deposit
Bank typically fund a loan by giving the borrower cash once the loan is approved
False
Banks borrow from the Fed, never from each other.
False
Banks hold on to most of the money deposited with them and lend a small portion of the remainder
False
Banks that are members of the Federal Reserve System are required to use their excess reserves to extend loans.
False
Credit cars are a form of money.
False
Even Fed checks can bounce.
False
If you receive a new $50 bill for your birthday and deposit it in your checking account, the money supply will decrease.
False
It is as likely for specialization to occur in a barter economy as in a money economy.
False
Some banks that have an affiliation with the Federal Reserve System are allowed to print currency.
False
The Fed prints paper money in Washington D.C., and then distributes the notes to the Federal Reserve district banks.
False
The United States is unique because it has a central bank in addition to commercial banks.
False
The central banking system in the United States has 14 federal district banks.
False
The first bankers were blacksmiths.
False
The _________ is the interest one bank charges another for a loan.
Federal Funds rate
The seven members of the __________ are each appointed to a 14-year term by the president of the United States.
Federal Reserve Board of Governors
In 1913 Congress passed legislation to set up the __________, which is the chief monetary authority in the United States.
Federal Reserve system
The official name of the paper money that is issued by the Federal Reserve System is
Federal reserve notes
____________ consists of currency, checking accounts, and traveler's checks.
M1
The percentage of a bank's checking account deposits that the Fed orders banks to hold, rather than loan out, is called
Required reserves
A bank's checking account with its Federal Reserve district bank is called a(n) ___________.
Reserve account
The principal components of the Federal Reserve System are the Federal Reserve Board of Governors and the
The federal reserve district banks
A subprime mortgage loan is considered a nontraditional loan.
True
Checking accounts are sometimes called demand deposits.
True
If the demand for a loan rises but the supply of loans remains constant, interest rates will rise.
True
Money has value only because other people will accept it in exchange for what they have.
True
One of the functions of money is serving as a store of value.
True
Raising the discount rate will cause the money supply to fall
True
The Fed requires each commercial bank that is a member of the system to maintain a reserve account with its Federal Reserve district bank.
True
The central bank provides check-clearing services to member banks.
True
The money supply is larger when the reserve requirement is the smallest.
True
The money supply will fall if the Fed conducts an open market sale.
True
Through the process of making loans, the banking system can actually "create" money.
True
When a bank receives new checking account deposits, the required reserves must be set aside and new loanable funds are available
True
In a(n) ______________ economy, trades are made in goods and services instead of money
barter
Both coins and paper money are considered ____________.
currency
The amount that the Fed charges a bank for a loan is called the
discount rate
Banks can make loans with their
excess reserves
The 12-member group in the Federal Reserve System that affects monetary policy by buying and selling government securities is the
federal open market committee
A banking arrangement in which banks hold only a portion of their deposits and lend out the remainder is called _______________.
fractional reserve banking
The central bank in the United States serves as the ___________ when it lends funds to a bank when no one else will.
lender of last resort
_____________ is any good that is widely accepted for the purposes of exchange and repayment of debts.
money
When the Fed buys or sells government securities it is called
open market operations
The Fed regulation that demands a bank keep a certain percentage of its deposits either in an account with the Fed or in its vault as vault cash is called the
reserve requirement
A(n) ____________ is an interest-earning account.
savings account
A bank's __________ is/are equal to its deposits in the reserve account at the Fed plus its vault cash.
total reserves
____________ are the costs associated with the time and effort necessary to search out, negotiate, and finalize an exchange.
transaction costs
Money functions as a(n) ______________ because it is a common measurement used to express values.
unit of account
