Quiz 20: Money, Financial Institutions, and the Federal Reserve
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Q 5Q 5
Barter involves the use of electronic payment systems, like Paypal.com, for online transactions.
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Q 8Q 8
A barter exchange is a system where you input into a system the goods and services that you are willing to trade, and receive trade credit.
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Q 16Q 16
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.
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Q 17Q 17
Real dollars are made with various lines of colors such as peach and blue. They have art work that is off-center, and there are other identifiable watermarks for the purpose of making replication quite easy.
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Q 18Q 18
The currencies of some countries, although durable and portable, are relatively unstable, which makes international exchanges difficult.
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Q 19Q 19
The problem with barter exchanges is that it is too difficult to find people to exchange your good with.
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Q 20Q 20
Trading internationally by using money appears easy and almost effortless, but the fact is there is a very complex banking system that makes it happen.
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Q 22Q 22
The U.S. production of the Sacagawea dollar coins provides greater durability than paper dollar bills.
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Q 23Q 23
The people living on the island nation of Wacki-ki readily accept a certain type of seashell as payment for the goods and services they trade. For Wackians (the name of Wacki-ki natives), seashells serve as money.
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Q 24Q 24
When Mrs. Sweet exchanges her famous chocolate chip cookies for the lawn care services of her neighbor, she engages in a barter transaction.
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Q 25Q 25
The money supply represents the amount of money the Federal Reserve Bank makes available for people to buy goods and services.
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Q 27Q 27
The M-1 money supply includes money in savings accounts, mutual funds, and money market accounts.
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Q 33Q 33
Changes in the money supply produce little or no change in inflation, employment and economic growth.
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Q 34Q 34
When the value of the dollar falls, foreign goods become less expensive for American consumers.
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Q 35Q 35
The strength of the U.S. dollar depends on the strength of the U.S. economy relative to the economies of other nations.
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Q 37Q 37
Theoretically, with the proper monetary policy, the U.S. economy can continue to grow without causing inflation.
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Q 40Q 40
Open-market operations is the buying and selling of government securities by the Federal Reserve Board.
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Q 41Q 41
The reserve requirement represents the interest rate charged by the Federal Reserve for government-guaranteed student loans.
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Q 42Q 42
The reserve requirement represents the Fed's most powerful tool for conducting monetary policy.
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Q 44Q 44
When the Federal Reserve wants to increase the money supply, they decrease the reserve requirement.
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Q 49Q 49
The three basic tools the Fed uses to manage the money supply are reserve requirements, open-market operations, and the discount rate.
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Q 52Q 52
The goal of Federal Reserve monetary policy is to affect the level of competition in the U.S. banking system.
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Q 53Q 53
When the value of the euro increases compared to the U.S. dollar, the price of U.S. exports to Europe will decrease.
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Q 54Q 54
If you are trying to sell your state-of-the-art bicycles into the Japanese market, you are likely to sell more bicycles if the dollar has strength against the Japanese yen.
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Q 55Q 55
To decrease the money supply, the Federal Reserve sells U.S. government bonds in open-market operations.
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Q 56Q 56
When the Fed increases the reserve requirement it forces banks to increase the number of loans they make.
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Q 57Q 57
To decrease the money supply, the Federal Reserve sells U.S. government bonds in open-market operations.
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Q 62Q 62
Newspapers in the nation of St. Lunatic report a significant increase in money supply during the past few months. This information indicates that St. Lunatic may experience a serious recession in the near future.
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Q 63Q 63
The government is concerned about inflationary pressures that seem to be building within the nation. Restricting the growth of money supply provides an effective strategy to reduce these inflationary pressures.
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Q 64Q 64
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.
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Q 65Q 65
Springfield National Bank holds $200 million in deposits from their customers. If the Fed sets the reserve requirement at 12 percent, Springfield must hold $24 million in cash at the bank or in non-interest-bearing deposits at the local Federal Reserve district bank.
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Q 66Q 66
The Fed has just reduced the reserve requirement from 14% to 12%. Commerce Bank holds $650 million in deposits. It will need to become more conservative with its lending procedures because it now must hold $91 million in reserves.
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Q 67Q 67
Next month, Commerce Bank plans to increase the amount of new loans it makes. As a member bank of the Federal Reserve, Commerce can borrow from the Fed. Commerce will charge the customer an interest amount greater than the discount rate.
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Q 68Q 68
Recently, the Fed announced a reduction in the discount rate and the reserve requirement. These actions clearly suggest that the Fed intends to decrease the money supply.
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Q 69Q 69
Yesterday it was reported that the U.S. is clearly experiencing an economic downturn. A strategy the Fed may enact if the nation is facing recession is to buy government securities in open-market operations.
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Q 70Q 70
Great news! The Fed just announced that the discount rate will rise by as much as 1% over the next three months. This will make it easier for Ben, the owner of a laser engraving business, to borrow money for that new piece of equipment he needs.
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Q 71Q 71
When the U.S. was still a colony of Great Britain, land banks were created to lend money to farmers.
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Q 72Q 72
The United States first established a central bank in 1913 by establishing the Federal Reserve System.
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Q 75Q 75
Early in our nation's history, people generally accepted the importance of a central bank authority.
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Q 79Q 79
A series of bank failures and a cash shortage in 1907 led to the establishment of the Federal Reserve System in 1913.
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Q 80Q 80
By the time of the Civil War, the efficient banking system of the United States was the envy of the rest of the world.
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Q 83Q 83
Created during the Great Depression, the federal deposit insurance program resulted in a large number of bank failures.
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Q 84Q 84
In the 1930s, during the Great Depression, the government started an insurance program to protect the public from bank failures.
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Q 88Q 88
Prior to the establishment of the Federal Reserve System in 1913, the United States had no experience with a central bank.
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Q 89Q 89
The Federal Reserve, which was established in 1907 was to be a "lender of last resort," loans money to small businesses that are unable to obtain loans through private banks.
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Q 90Q 90
The Federal Reserve System enabled the U.S. economy to avoid serious banking problems during the Great Depression.
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Q 91Q 91
The wave of bank failures during the Great Depression prompted the government to establish federal deposit insurance to protect the public from bank failures.
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Q 92Q 92
During the Civil War, gold and silver coins were hoarded not because of their currency value, but because they were worth more than currency.
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Q 93Q 93
Commercial banks, savings and loan associations, and credit unions all represent components of the American banking system.
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Q 95Q 95
Depositors represent a bank's primary responsibility, while borrowing customers are secondary.
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Q 97Q 97
Commercial banks attempt to profit by using funds deposited by customers to make interest-bearing loans to borrowers.
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Q 100Q 100
Typically, banks impose a service charge for check-writing privileges or demand a minimum deposit.
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Q 103Q 103
Technically, a bank can require depositors to give prior notice before they withdraw funds from time deposits.
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Q 105Q 105
The Federal Reserve requires that ATM machines be located within 100 yards of a commercial bank.
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Q 106Q 106
A growing trend today is mobile banking. In fact, nearly two-thirds of the nation's biggest banks now let customers make deposits by taking a photo of the check.
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Q 107Q 107
Banks focus on the creditworthiness of the borrower when determining whether to grant a loan.
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Q 108Q 108
A major cause of the recent banking crisis was the neglect of banks to seriously scrutinize loan applicants for creditworthiness.
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Q 109Q 109
A savings and loan association (S&L) is a financial institution that accepts both savings and checking deposits and provides home mortgage loans.
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Q 111Q 111
Savings and loan associations, also known as thrift institutions, were created to promote consumer thrift and home ownership.
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Q 112Q 112
Many S&Ls failed due to the inflation of the 1970s, deregulation, regulatory failure, and fraud.
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Q 113Q 113
Credit unions represent nonprofit, member-owned financial cooperatives that offer the full variety of banking services to their members.
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Q 116Q 116
Pension funds are monies put aside by corporations, nonprofit organizations, or unions to fund the financial needs of their employees, upon retirement.
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Q 117Q 117
Nonbanks accept deposits, but do not offer lending services, brokerage services, or insurance services.
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Q 119Q 119
Pension funds invest monies contributed by employers and/or employees for the benefit of their members' retirement.
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Q 121Q 121
Commercial and consumer finance companies specialize in making low-interest loans to individuals and businesses with strong credit ratings.
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Q 122Q 122
Brokerage firms now compete with commercial banks by offering high-yield combination savings and checking accounts.
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Q 123Q 123
The interest paid on time deposits, today, represents the main difference between time and demand deposits.
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Q 124Q 124
The ability to access funds without a penalty helps to explain why certificates of deposit (CDs) have gained popularity among conservative investors and savers.
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Q 125Q 125
Today's consumers have fewer options and less flexibility as a result of increased regulation of the banking industry.
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Q 126Q 126
Due to federal regulations limiting their investment opportunities, pension funds play a minor role in U.S. financial markets.
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Q 127Q 127
Because they charge higher interest rates, commercial and consumer finance companies often fail to attract borrowers.
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Q 128Q 128
According to the Spotlight on Small Business box, merchant cash advance providers often charge much lower interest rates than traditional banks.
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Q 129Q 129
After years of banking with Quality Bank and Trust, Saul decided to switch to a competing institution. Thanks to changes in government regulation, his search will uncover a variety of options; however, he will also learn that banks and nonbanks have merged in order to be more competitive in the banking and financial services industries, which may or may not increase his options.
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Q 130Q 130
Last week Dave was looking for a place to deposit a $30,000 inheritance from his Great Aunt Martha, who passed away three months ago. He does not plan to spend his money frivolously. He will need part of the funds from time to time for his college education, which he promised Great Aunt Martha he would complete. After speaking with several sales consultants in banking and nonbank institutions, he likes the fact that he can open a stock brokerage account and a money-market account at Goodman Stacks Investment Company (a nonbank company), and will be issued checks for paying bills. You remind him that with the recent mergers between banking and nonbank institutions, he may be able to find a company that provides (both) the convenience of banking services (ATM, cash availability) and low-risk/high-risk securities products.
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Q 131Q 131
The U.S. government's lack of regulation alone caused the banking crisis and collapse of banks that had been in business for several decades.
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Q 132Q 132
In the early 2000s, banks took the mortgages that they owned, created mortgage-backed securities out of them, and sold them as safe investments.
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Q 133Q 133
Due to the fact that investors did not individually purchase MBSs (mortgage-backed securities) in their investment accounts, they remained unaffected when the value of some of these investments became worthless.
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Q 134Q 134
One thing is for certain, the average borrower's risk-averse behavior did not contribute to the problems that spiraled out of control and caused the recent banking crisis.
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Q 135Q 135
Fortunately, the Troubled Assets Relief Program (TARP) took care of the looming bankruptcy problems of major financial services institutions, and taxpayers were not hit with additional bailouts.
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Q 136Q 136
Persons with deposits less than $100,000 in banks, savings and loans, and credit unions run the risk of losing their money in an economic downturn.
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Q 140Q 140
As a response to a rise in savings and loan failures, the federal government no longer insures holders of accounts in savings and loan associations.
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Q 141Q 141
The Savings Association Insurance Fund insures the holders of accounts in savings and loan associations.
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Q 142Q 142
The National Credit Union Administration provides coverage up to $250,000 per individual depositor at each credit union.
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Q 143Q 143
They say "hindsight is 20/20," meaning you can usually see things more clearly, with a much better understanding, after events have occurred. We can say the same for the recent banking crisis. The practices of several participants (for-profit companies, government regulators, and customers) came together to create the crisis that caused the collapse of several banks, financial services companies, and corporations.
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Q 144Q 144
There is much speculation that prior to the recent banking crisis, the Fed (Federal Reserve System) and the SEC (Securities and Exchange Commission) were not enforcing the regulations they were charged to enforce.
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Q 145Q 145
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.
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Q 146Q 146
Cory worries that his $7,537 in a checking account at the Lottadoe National Bank could be lost if the bank fails. Lottadoe is a FDIC (Federal Deposit Insurance Corporation) member bank, which insures Cory's account up to $250,000.
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Q 147Q 147
Andrea has three types of deposits at her credit union. She has a checking account in her own name worth $32,000, a joint savings account with her husband, which currently holds $95,000, and an IRA account worth $125,449. Her deposits are at risk because they exceed the $250,000 limit on insurance coverage by NCUA.
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Q 148Q 148
Existing regulations prohibit online banking activities unless the bank also operates a traditional brick-and-mortar facility.
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Q 149Q 149
An electronic funds transfer system (EFT) is an electronic transaction system used for paying bills, making direct deposits of paychecks, and paying for a purchase.
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Q 150Q 150
A debit card is better than a credit card because it allows the purchaser to float a short-term loan, until the credit card company sends the bills at the end of the month.
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Q 151Q 151
A newer product is the payroll debit card. It is cheaper for employers to load your paycheck on a debit card than to cut a check. This is convenient for customers who do not qualify for a regular debit or credit card, because they can use it to pay bills, do online purchasing and even get cash from an ATM machine.
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Q 152Q 152
High start-up costs cause Internet banks to have higher operating costs than traditional banks.
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Q 153Q 153
Internet banks offer customers better interest rates and lower fees because these businesses avoid the costs of constructing and maintaining a bank building.
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Q 154Q 154
Although there are many features about online banking that customers do not care for, they are seldom concerned with security due to continued assurances by the banking industry.
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Q 155Q 155
In an electronic funds transfer (EFT) system, the information of a transaction is communicated from one computer to another.
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Q 156Q 156
Electronic funds transfer (EFT) tools include debit cards, smart cards, direct deposit, direct payments, and electronic check conversion.
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Q 157Q 157
Many employers offer direct deposit as a convenient and cost-savings method of distributing employee pay each month.
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Q 159Q 159
Both checks and debit cards will immediately transfers funds from the customer's account to the seller's account.
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Q 160Q 160
Smart cards contain a microprocessor chip that stores information about the user, such as driver's license data and bank balance.
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Q 161Q 161
Smart cards can allow the user to access secure areas within buildings or buy gas with the swipe of the card.
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Q 163Q 163
Although there are many new ways to perform electronic funds transfer, legally, the only way that an employer can pay an employee is by writing a check.
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Q 164Q 164
Lower fees and better interest rates motivate customers to open accounts with Internet banks. However, the lack of personal service and concern for information security encourages some customers to return to a traditional bank.
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Q 165Q 165
While an electronic funds transfer represents a faster and more flexible method of making payments than writing checks, it is more expensive for banks.
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Q 166Q 166
Tim travels extensively on business. Most of the hotels where he stays provide him with a card that unlocks his room. The card is keyed to the particular lock that matches the lock on the assigned room, and also contains information about Tim. The type of card that Tim is using is a smart card.
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Q 167Q 167
Damian has played supporting roles in a number of movies and is passionate about his craft to the point where he created a home theatre inside his house. He has satellite where he receives an unlimited number of movies, and he also has an online account with Netflix. For added convenience, he has set up direct payment to these companies. This means when his statement arrives each month, he will get online and tell his bank how much to pay these vendors.
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Q 168Q 168
A letter of credit represents a promise that a bank will disburse a specified amount of funds at a particular time if certain conditions are met.
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Q 169Q 169
Banks help businesses operate in other countries by exchanging the currency of one nation for the currency of another.
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Q 170Q 170
A banker's acceptance represents a promise that a bank will pay a specified amount at a specified time if certain conditions are met.
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Q 171Q 171
When traveling in other countries, tourists can use their MasterCard or Visa bankcards to obtain foreign currencies at ATMs.
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Q 172Q 172
More than ever, the American economy operates as a distinctly separate entity from the international economy.
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Q 175Q 175
International bankers make loans wherever they can get the maximum return for their money.
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Q 176Q 176
While Federal Reserve actions impact domestic investors, they have little effect on decisions made by international investors.
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Q 178Q 178
The World Bank primarily finances projects to improve the productivity and standard of living in less-developed nations.
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Q 182Q 182
Given the size and strength of the U.S. economy and the widespread use of the dollar, the Federal Reserve essentially regulates international monetary markets.
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Q 183Q 183
When the Federal Reserve pursues policies that increase interest rates, the amount of foreign funds flowing into the United States also increases.
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Q 184Q 184
Abdul Industries wants to import some heavy machinery from a producer located in the Czech Republic. To facilitate payment to the Czech firm, Abdul arranged for its bank to issue a banker's acceptance. Under this arrangement, the bank pays the exporter after the equipment passes inspection.
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Q 185Q 185
As a relatively poor nation, Liberia wants to obtain funds for a project to improve the availability of water and electricity. Liberia should contact the International Monetary Fund.
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Q 186Q 186
Chipper's Golf Resort plans to carry an inventory of golf clubs-irons, drivers, and woods-from a German manufacturer. The manufacturer has promised delivery in four weeks, which will be just in time for the beginning of Chipper's golf season at its Chicago course. In order to prudently watch cash flow, you have recommended that Chipper's Resort sign a letter of credit with an international bank asking the bank to disburse payment when the clubs arrive at the Chicago course and after they are inspected.
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Q 187Q 187
Everything else held constant, an international bank based in New York would prefer to loan money to an efficient firm operating in San Paulo, Brazil, than an inefficient firm operating in southern California.
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Q 188Q 188
__________ includes anything that people generally accept as payment for goods and services. A. An intangible asset
B) Money
C) A commodity
D) A barter good
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Multiple Choice
Q 189Q 189
__________ occurs when goods are traded directly for other goods. A. Barter
B) Direct exchange
C) Direct marketing
D) Credit
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Multiple Choice
Q 190Q 190
Which of the following is not a favorable characteristic of money? A. Barterability
B) Divisibility
C) Portability
D) Durability
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Multiple Choice
Q 191Q 191
Which of the following represents a benefit of coins over paper money? A. Improved portability
B) Increased divisibility
C) Enhanced stability
D) Improved durability
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Multiple Choice
Q 192Q 192
The redesign of and new colors added to U.S. paper money are intended to: A. make the currency more difficult to counterfeit.
B) increase the use of the barter system.
C) improve the durability of our monetary system.
D) increase the portability of our money.
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Multiple Choice
Q 193Q 193
The problem with bartering is: A. one person in the trade does not feel he/she got a fair shake.
B) there is a significant amount of corruption in the process, and things get stolen before they are traded.
C) it is not an easy process, and often cumbersome to carry goods to the place of trade.
D) it has no place in today's international trading operations.
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Multiple Choice
Q 194Q 194
Today, a regular _____________ is a system where you can exchange goods for other goods. You submit your goods and you receive trade credit that you can use to buy other goods. A. world market
B) barter exchange
C) world trade center
D) trading post
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Multiple Choice
Q 195Q 195
Kimberly trades some of her homegrown tomatoes to her neighbor, Ron, for some green peppers fresh from Ron's garden. This type of trade represents an example of: A. barter.
B) e-commerce.
C) direct exchange.
D) tax avoidance.
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Multiple Choice
Q 196Q 196
The Fed Chairman is in control of: A. the world's money supply.
B) the U.S. money supply.
C) fiscal policy.
D) the IMF.
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Multiple Choice
Q 197Q 197
The ______ category of money supply includes money that is quickly and easily accessed. A. e-cash
B) M-3
C) M-2
D) M-1
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Multiple Choice
Q 198Q 198
__________ represents the most commonly used category of the money supply. A. M-1
B) M-2
C) M-3
D) L
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Multiple Choice
Q 199Q 199
A rapid increase in the money supply may lead to a(n): A. increase in the rate of inflation.
B) recession.
C) decrease in interest rates.
D) decrease in spending by consumers and businesses.
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Multiple Choice
Q 200Q 200
When the value of the U.S. dollar increases relative to other currencies: A. the rate of inflation increases.
B) the size of the national debt decreases.
C) foreign goods become less expensive to U.S. consumers.
D) U.S. goods become less expensive to foreign buyers.
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Multiple Choice
Q 201Q 201
The strength of the U.S. dollar relative to other currencies depends mainly on: A. the rate of inflation in the United States.
B) the performance of the U.S. economy relative to other economies.
C) how much gold backs the money supply.
D) exchange rate decisions made by the International Monetary Fund.
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Multiple Choice
Q 202Q 202
The organization responsible for conducting monetary policy in the United States is the: A. Federal Trade Commission.
B) Council of Economic Advisors.
C) Federal Reserve System.
D) Federal Monetary Control Authority.
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Multiple Choice
Q 203Q 203
The Federal Reserve System consists of ________ Federal Reserve banks. A. 5
B) 9
C) 12
D) 14
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Multiple Choice
Q 204Q 204
The board of governors of the Federal Reserve System determines: A. exchange rates.
B) U.S. monetary policy.
C) inflows and outflows of gold reserves to ensure a stable money supply.
D) how much money the U.S. will loan to foreign governments.
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Multiple Choice
Q 205Q 205
The Fed uses ________ to regulate the money supply. A. stock market investments
B) the deposit requirement
C) the political negotiation process
D) the discount rate
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Multiple Choice
Q 206Q 206
The ___________ represents one of the Fed's most powerful monetary policy tools. A. reserve requirement
B) discount rate
C) margin requirement
D) working capital requirement
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Multiple Choice
Q 207Q 207
Open-market operations involve: A. monitoring the reserve requirement.
B) the buying and selling of bonds.
C) increasing and decreasing interest rates.
D) participating with the IMF.
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Multiple Choice
Q 208Q 208
________ involve(s) the Fed buying and selling U.S. government securities to increase or decrease the money supply. A. Discounting
B) Reserve requirements
C) Deficit funding
D) Open-market operations
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Multiple Choice
Q 209Q 209
The ___________ rate represents the interest rate charged by the Fed when loaning funds to member banks. A. discount
B) prime
C) federal funds
D) reserve
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Multiple Choice
Q 210Q 210
The ___________ plays a role in making certain that checks clear and sellers get paid. A. National Check Register
B) Federal Reserve System
C) Uniform Commercial Check Processors
D) paypal.com network
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Multiple Choice
Q 211Q 211
Which of the following is included in the M-2 definition of the money supply but not the M-1 definition? A. Currency
B) Checking account deposits
C) Traveler's checks
D) Savings account deposits
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Multiple Choice
Q 212Q 212
Which of the following is not included in the M-1 or M-2 definitions of the money supply? A. Savings account deposits
B) Gold
C) Checking account deposits
D) Currency
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Multiple Choice
Q 213Q 213
Which of the following statements best summarizes the difference between M-1 and M-2? A. The M-1 definition of the money supply includes only domestic currencies while the M-2 definition includes foreign currencies.
B) The M-1 definition consists of "hard" currencies which are backed by gold and silver, while M-2 consists of "soft" currencies which are not backed by gold and silver.
C) The M-2 definition includes everything in the M-1 definition, plus additional components such as money in savings accounts, money market accounts, and certificates of deposit.
D) The M-1 money supply consists only of the currency (coins and paper money) that circulates in our economy, while the M-2 includes traveler's checks and funds in demand deposits.
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Multiple Choice
Q 214Q 214
An increase in the rate of inflation would likely result from a(n): A. decrease in spending by the federal government.
B) rise in the unemployment rate.
C) rise in interest rates.
D) increase in the supply of money in circulation.
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Multiple Choice
Q 215Q 215
A significant decrease in the money supply tends to: A. reduce the supply of gold held by the federal government.
B) create shortages that would cause prices of goods and services to rise.
C) send the economy into a recession.
D) reduce the size of the federal government's deficit.
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Multiple Choice
Q 216Q 216
When the Fed increases the reserve requirement, banks: A. must increase the dollar volume of loans they make to customers.
B) must pay more to borrow from the Fed.
C) have fewer funds available for lending.
D) will find their balance sheets temporarily out of balance.
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Multiple Choice
Q 217Q 217
When the Fed increases the discount rate, banks: A. must purchase more government securities.
B) must pay a higher rate when they borrow from the Fed.
C) will lower the rate they charge to borrowers.
D) must hold a greater amount of funds in reserve against deposits.
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Multiple Choice
Q 218Q 218
Which of the following represents one way the Fed increases the amount of money in circulation? A. Reduce taxes
B) Raise the discount rate
C) Buy government securities
D) Increase the reserve requirement
Free
Multiple Choice
Q 219Q 219
When the Fed buys U.S. government securities, the: A. size of the federal deficit falls.
B) discount rate rises.
C) money supply increases.
D) banking system loses reserves.
Free
Multiple Choice
Q 220Q 220
Bob read a newspaper story that indicated a dramatic increase in money market accounts and certificates of deposit during the last three months. The story reported that all other major components of the U.S. money supply remained unchanged. Based on this information, Bob can conclude that for the past quarter: A. both the M-1 and M-2 money supplies were stable.
B) the M-1 money supply has increased, but the M-2 money supply was stable.
C) the M-2 money supply has increased, but the M-1 money supply was stable.
D) both the M-1 and the M-2 money supplies have increased.
Free
Multiple Choice
Q 221Q 221
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: A. American goods will become more expensive in France.
B) French wines will become more expensive in the United States.
C) French wines will become less expensive in the United States.
D) the French government will place an embargo on American exports.
Free
Multiple Choice
Q 222Q 222
Chipper's Golf Resort plans to use famous Kauri wood from New Zealand for parts of the interior of the magnificent club house at its new golf resort near Portland, OR. According to the importer, each ten-foot slab will cost Chipper's approximately $5,000. Looking at the exchange rates, Chipper's finance director noted that $500 US dollars = $738 NZ dollars. The importer will order directly from his source in New Zealand. Chipper's finance director has determined that: A. it's not a good time to buy the wood.
B) it's a good time to buy the wood.
C) there will be a shortage of the wood.
D) it will cost less when the exchange rate of U.S. dollars to NZ dollars is just about equal.
Free
Multiple Choice
Q 223Q 223
President Dude, the leader of the island nation of Jaylo, refuses to raise taxes, but wants to expand many government services and increase the size of the Jaylo armed forces. He plans to pay for all of the desired expenditures by printing more money. If President Dude carries out his plan by rapidly increasing the supply of money, Jaylo will likely experience: A. a severe recession.
B) reduced private sector spending.
C) widespread surpluses of goods and services.
D) an increase in the rate of inflation.
Free
Multiple Choice
Q 224Q 224
The Megabux National Bank currently has deposits of $200 million. If the Fed establishes a reserve requirement of 12 percent, Megabux National must hold reserves of _______ against its deposits. A. $12 million
B) $24 million
C) $176 million
D) $200 million
Free
Multiple Choice
Q 225Q 225
The Fed bought several billion dollars worth of U.S. government securities. The purpose of this action is to: A. decrease the size of the national debt.
B) improve its financial position by investing in relatively safe interest-earning assets.
C) stimulate the economy by increasing the amount of money in circulation.
D) drive up interest rates to cool off inflationary pressures.
Free
Multiple Choice
Q 226Q 226
The Fed plans to raise the discount rate to 6%. This indicates that: A. banks borrowing funds from the Fed will now pay 6% on the amount they borrow.
B) banks must hold funds in their vault or on deposit with the Fed equal to at least 6% of their deposits.
C) the Fed will pay 6% on any securities issued by the federal government during the current time period.
D) the amount of money in circulation can be no more than 6% greater than the amount of gold held in reserve by the government.
Free
Multiple Choice
Q 227Q 227
News reports indicate that the Fed plans to announce its third increase in the discount rate in the past five months. Additional reports suggest that the Fed may also increase the reserve requirement in the near future. Apparently the Fed perceives the number one problem facing the economy is: A. the size of the federal deficit.
B) unemployment.
C) excessively high interest rates.
D) inflation.
Free
Multiple Choice
Q 228Q 228
When Mr. Smith in Quince Orchard, MD, uses a check to buy a tractor from Mr. Brown in Austin, TX, __________ different banks are involved in the transaction. A. 4
B) 12
C) 15
D) no
Free
Multiple Choice
Q 229Q 229
Early settlers of the New World relied heavily on barter because: A. they found barter more convenient than the use of money.
B) strict laws limited the number of coins that could be brought into the colonies.
C) money had not yet evolved.
D) they wanted to protest against British control of the banking system.
Free
Multiple Choice
Q 230Q 230
________ persuaded Congress to establish the first central bank in the United States. A. Benjamin Franklin
B) David Farragaut
C) Franklin Roosevelt
D) Alexander Hamilton
Free
Multiple Choice
Q 231Q 231
Historically, there was ________ a central bank in the U.S. A. very little resistance to
B) resistance to
C) insufficient funding of
D) disinterest in
Free
Multiple Choice
Q 232Q 232
By the time of the Civil War, the U.S. banking system operated: A. as an efficient model that many other countries copied.
B) under the control of the first Federal Reserve System.
C) inefficiently with different banks issuing different types of currencies.
D) much the same as it does today.
Free
Multiple Choice
Q 233Q 233
The banking panic of 1907 and the resulting cash shortage led to the formation of the: A. Federal Reserve System.
B) Comptroller of the Currency.
C) gold standard for currency, and the establishment of a gold repository at Fort Knox.
D) FDIC.
Free
Multiple Choice
Q 234Q 234
Under the Federal Reserve Act of 1913: A. membership in the Federal Reserve System was made voluntary for all banks.
B) federally chartered banks were required to join the Federal Reserve System.
C) membership in the Federal Reserve System was required of all banks that had deposits of more than $1 million.
D) all banks were required to hold reserves equal to at least 50 percent of their deposits.
Free
Multiple Choice
Q 235Q 235
As a response to the bank failures of the ________, a system of federal deposit insurance was established to strengthen the banking system. A. Civil War
B) wildcat banking crisis of the 1880s
C) Great Depression
D) banking crisis of the early 1980s
Free
Multiple Choice
Q 236Q 236
Which of the following historical events motivated Congress to establish the Federal Reserve System? A. The significant outflow of gold during the Civil War
B) The collapse of the Second National Bank of the United States
C) The banking panic and cash shortage of 1907
D) The Great Depression
Free
Multiple Choice
Q 237Q 237
The Federal Reserve fulfills its role as a "lender of last resort" when it loans funds to: A. small businesses that are unable to obtain loans from other sources.
B) banks during banking emergencies.
C) major corporations that are on the verge of bankruptcy.
D) the federal government when deficits exceed borrowing limits set by Congress.
Free
Multiple Choice
Q 238Q 238
One of the most important aspects of the banking legislation passed during the 1930s was that it established: A. the Federal Reserve System.
B) the gold standard for currency.
C) the Comptroller of the currency.
D) federal deposit insurance.
Free
Multiple Choice
Q 239Q 239
Which of the following statements most accurately represents the history of U.S. banking? A. Although many technological changes have occurred, and banks have grown tremendously in size, the basic structure of banking in the United States has survived since the Revolutionary War.
B) A major trend in U.S. banking was a move from federal control during the 1800s and early 1900s to a system now controlled by individual states.
C) Although the early history of banking in the United States was very chaotic, the establishment of the Fed stabilized the banking system.
D) The U.S. banking system has experienced a great deal of change and instability throughout its history.
Free
Multiple Choice
Q 240Q 240
The Federal Reserve represents a "bankers' bank" because: A. it was created as a central clearinghouse for the transactions of the largest banks.
B) commercial banks compete with the Fed for business customers.
C) it lobbies Congress in support of banking reform legislation.
D) it holds the deposits of commercial banks and makes loans to banks that need additional funds.
Free
Multiple Choice
Q 241Q 241
A __________ is a profit-seeking organization that receives deposits from individuals and corporations and uses some of these deposits to make loans. A. credit union
B) Federal Reserve Bank
C) commercial bank
D) consumer finance company
Free
Multiple Choice
Q 242Q 242
Commercial banks primarily serve two types of customers: A. depositors and borrowers.
B) commercial clients and residential clients.
C) secured creditors and unsecured creditors.
D) short-term borrowers and long-term borrowers.
Free
Multiple Choice
Q 243Q 243
Which of the following represents the technical name for a checking account? A. Free deposit
B) Variable annuity
C) Demand deposit
D) Certificate of deposit
Free
Multiple Choice
Q 244Q 244
The technical name for a savings account is a: A. time deposit.
B) demand deposit.
C) deferred account.
D) retained income account.
Free
Multiple Choice
Q 245Q 245
A time deposit that earns interest is a _______________. A. certificate of deposit
B) passbook account
C) discount deposit
D) NOW account
Free
Multiple Choice
Q 246Q 246
Traditionally, banks provide loans to individuals and companies according to the recipient's ______________. A. future earnings potential
B) family history
C) volume of credit already established
D) creditworthiness
Free
Multiple Choice
Q 247Q 247
A(n) __________ accepts savings and checking account deposits and provides home mortgage loans. A. nonbank
B) insurance company
C) savings and loan association
D) commercial finance company
Free
Multiple Choice
Q 248Q 248
Savings and loan associations are sometimes known as: A. nonbanks.
B) thrift institutions.
C) credit unions.
D) bankers' banks.
Free
Multiple Choice
Q 249Q 249
__________ are nonprofit, member-owned financial cooperatives that offer a full variety of banking services such as accepting deposits and making loans. A. Mutual thrift associations
B) Credit unions
C) Commercial banks
D) Mutual fund companies
Free
Multiple Choice
Q 250Q 250
Traditionally, life insurance companies, pension funds, and brokerage firms are known as _________. A. nonbanks
B) thrift institutions
C) bond companies
D) federally chartered banks
Free
Multiple Choice
Q 251Q 251
____________ represent money set aside by corporations, nonprofit organizations, or unions to cover part of the retirement needs of their members. A. Annuity accounts
B) Pension funds
C) Individual retirement accounts
D) Term-life retirement funds
Free
Multiple Choice
Q 252Q 252
Commercial banks, savings and loan associations, and credit unions: A. specialize solely in loaning money for home mortgages.
B) operate as nonprofit organizations.
C) deposit their excess funds with the U.S. Treasury.
D) accept deposits and make loans.
Free
Multiple Choice
Q 253Q 253
Originally, savings and loan associations: A. offered brokerage services to small investors.
B) promoted consumer thrift and home ownership.
C) acted as a fiscal agent for the federal government, and issued and redeemed U.S. savings bonds.
D) handled the overflow of business from national and state banks.
Free
Multiple Choice
Q 254Q 254
Which of the following represents a nonbank? A. Life insurance companies
B) Savings and loan associations
C) Credit unions
D) Thrift institutions
Free
Multiple Choice
Q 255Q 255
During the early 1980s, the federal government responded to the severe problems plaguing savings and loan associations by: A. allowing S&Ls to offer a variety of financial services that made them more like commercial banks.
B) nationalizing the savings and loan industry, including more regulations.
C) providing interest-free loans to S&Ls that were short on reserves.
D) declaring a moratorium on S&L debt payments, and limiting the amount of funds depositors could withdraw from a S&L in any given 24-hour period.
Free
Multiple Choice
Q 256Q 256
Herb has $20,000 in an interest-bearing time deposit with the Applebottom Bank and Trust Company. While earning a relatively attractive rate of interest, Herb had to agree to not withdraw any of the funds until the end of a three-year period. Herb's investment represents a(n): A. passbook savings account.
B) negotiable order of withdrawal (NOW) account.
C) individual deferred earnings account (IDEA).
D) certificate of deposit (CD).
Free
Multiple Choice
Q 257Q 257
Pleased with the service provided by a national brokerage house when he bought and sold stocks and bonds, Ted would like to have this brokerage firm handle more of his financial needs. If Ted explores the services offered by such firms in more depth, he will find that: A. federal laws prohibit brokerage firms from competing with banks, savings and loan associations, and credit unions.
B) although brokerage firms can offer some banking services, they typically are less efficient at providing them than banks, because they specialize in buying and selling securities.
C) brokerage firms are becoming serious competitors for banks and other depository institutions by offering high-yield combination savings and checking accounts and money market accounts, as well as certain types of loans.
D) although brokerage firms offer attractive banking services, federal law prohibits individual investors from holding both a checking account and a securities account with the same firm.
Free
Multiple Choice
Q 258Q 258
The community college where Jake works requires all employees to contribute to a pension fund. At this time, he is not too worried about the safety of this contribution because: A. the pensions fund's investments are always backed by the full faith and credit of the U.S. government.
B) pension funds are provided by nonbanks so they are not going to take this money and lend it to others.
C) he is considered a state employee, and as such, he is protected from this fund going bankrupt.
D) pension funds usually make conservative investments.
Free
Multiple Choice
Q 259Q 259
Shana works as an investment specialist for the Teamsters Union Central States Pension Fund. Her job involves deciding how to invest the contributions paid into the fund. Which of the following statements about Shana's job are true? A. She works for a bank.
B) She will probably invest most of the pension's funds in safe corporate stocks and other conservative investments such as government securities.
C) In order to qualify for maximum tax benefits, the funds Shana invests all must be contributed by the companies who employ members of the Teamsters Union, rather than by the union members themselves.
D) The purpose of the investments Shana is making is to increase the current pay of union members.
Free
Multiple Choice
Q 260Q 260
Which of the following represent an independent agency of the U.S. government that insures bank deposits? A. National Deposit Assurance Cooperative
B) Federal Deposit Insurance Corporation
C) Insurance Corporation of America
D) Deposit Protection Fund
Free
Multiple Choice
Q 261Q 261
Tracing the causes of the recent banking crisis, which of the following organizations' activities is not in the news as having been a contributor to the crisis? A. The Federal Reserve suppressed interest rates which made it easier for prospective home owners and others to get loans.
B) Congress promoted questionable loans.
C) Banks dealt in MBSs (Mortgage Backed Securities) that were not as safe as assumed.
D) Pension funds invested in risky investments.
Free
Multiple Choice
Q 262Q 262
How did banks contribute to the recent financial crisis? A. They began to offer investment products other than demand and time deposits.
B) They provided loans higher than the discount rate.
C) They made risky loans and then created mortgage-backed securities from the assets they held.
D) They refused to sell anything other than fixed-rate mortgages.
Free
Multiple Choice
Q 263Q 263
The ________ insures holders of accounts in savings and loan associations. A. Savings Association Insurance Fund
B) Federal Savings Protection Agency
C) Savings and Loan Assurance Corporation
D) National Savings Deposit Insurance Cooperative
Free
Multiple Choice
Q 264Q 264
Designed to create more confidence in banking institutions, the FDIC was established: A. soon after the Civil War.
B) in 1908, as the result of the banking panic in 1907.
C) in 1917, as the nation entered World War I.
D) during the Great Depression of the 1930s.
Free
Multiple Choice
Q 265Q 265
The __________ insures deposits held in credit unions. A. Federal Credit Insurance Agency (FCIA)
B) Credit Union Insurance Fund (CUIF)
C) Federal Deposit Insurance Corporation (FDIC)
D) National Credit Union Administration (NCUA)
Free
Multiple Choice
Q 266Q 266
The Federal Deposit Insurance Corporation (FDIC) operates as a(n): A. department of the Federal Reserve System and sells insurance to mortgage holders.
B) independent agency of the U.S. government, and sells insurance to banks.
C) arm of the Department of the Treasury.
D) private nonprofit cooperative operated by member banks, offering insurance premiums for banking clients.
Free
Multiple Choice
Q 267Q 267
The purpose of creating the FDIC was to: A. restore confidence in banking institutions.
B) serve as clearinghouses for transactions involving commercial banks and savings and loans.
C) provide federally guaranteed insurance to small businesses at low cost.
D) help the Federal Reserve enforce reserve requirements.
Free
Multiple Choice
Q 268Q 268
Barry has $22,000 in a savings account with the Scott Credit Union. While economic conditions have caused financial institutions to struggle, Barry feels that his money is safe due to the fact that the credit union's accounts are protected by the: A. Federal Deposit Insurance Corporation (FDIC).
B) Credit Union Insurance Fund (CUIF).
C) National Alliance of Credit Union Underwriters (NACUU).
D) National Credit Union Administration (NCUA).
Free
Multiple Choice
Q 269Q 269
Alfredo banks at a commercial bank that advertises its membership in the FDIC. This means that: A. the bank guarantees it will pay the highest possible interest rate on his savings.
B) his money is insured by an independent agency of the federal government.
C) his money is automatically invested in securities issued by the federal government.
D) the bank is a member of a larger consortium of banks that will enable Alfredo to cash checks and obtain basic bank services in virtually any major city in the United States.
Free
Multiple Choice
Q 270Q 270
After Bob and Jillian deposited nearly $30,000 in a savings account at Farmers National Bank, the bank failed and filed for bankruptcy. Because the Farmers National Bank was an FDIC member bank, Bob and Jillian: A. should be protected because their account is fully insured by the FDIC.
B) can recover up to $20,000, but they will probably lose the rest since their deposits exceed the maximum coverage offered by the FDIC.
C) will lose their savings because the FDIC only insures business deposits.
D) will be eligible to recover 80 percent of the value of their deposit, less a $2,500 deductible.
Free
Multiple Choice
Q 271Q 271
Xavier deposited $75,000 in various individual accounts at his local credit union. He and his wife also have a joint savings account worth $34,500. What portion of these deposits is insured? A. $0, because the NCUA does not insure individual credit union deposits.
B) $73,220
C) $100,000
D) $109,500
Free
Multiple Choice
Q 272Q 272
For banks, check-processing activities: A. still represent the cheapest way to permit customers use of their funds.
B) are expensive and time consuming.
C) are not trustworthy and reliable.
D) are extremely efficient and have deterred customers from using other ways to access their funds.
Free
Multiple Choice
Q 273Q 273
Which of the following is a major difference between Internet banks and traditional banks? A. The government does not regulate Internet banks.
B) Traditional banks are prohibited from having ATMs.
C) Internet banks have lower overhead costs.
D) Traditional banks offer less personal care and attention to customers.
Free
Multiple Choice
Q 274Q 274
The ________ provides the same results as a check because it withdraws funds from a checking account. A. credit card
B) debit card
C) smart card
D) cashier's check
Free
Multiple Choice
Q 275Q 275
A(n) __________ allows money to be exchanged electronically more quickly and more economically than with paper checks. A. electronic check conversion (ECC)
B) electronic funds transfer system
C) virtual banking operation
D) telechecking system
Free
Multiple Choice
Q 276Q 276
___________ replace the typical magnetic strip on a credit or debit card with a microprocessor. A. Smart cards
B) Direct deposit cards
C) E-cards
D) Check conversions
Free
Multiple Choice
Q 277Q 277
Which of the following can include an embedded radio-frequency antenna that allows the holder to access secure areas in buildings or buy gas with the swipe of a card? A. smart cards
B) direct deposit cards
C) e-cards
D) check conversion cards
Free
Multiple Choice
Q 278Q 278
On payday, employers can designate their banks to electronically transfer funds from the business's checking account to the employees' checking account. This represents an example of a(n): A. debit card system.
B) check kiting system.
C) electronic check conversion.
D) direct deposit.
Free
Multiple Choice
Q 279Q 279
Payroll debit cards: A. are protected if lost or stolen.
B) have limited use because they can only act as a credit card, and the recipient does not have access to cash.
C) must go through the Federal Reserve's Automated Clearing House system.
D) can be issued to persons without bank accounts who can use them to pay bills online, or access cash from an ATM machine.
Free
Multiple Choice
Q 280Q 280
Which of the following explains why Internet banks often offer their customers better interest rates than traditional banks? A. Internet banks provide their customers a greater sense of security.
B) Traditional banks charge lower prices for financial services.
C) Internet banks have lower overhead costs.
D) Traditional banks offer the electronic transfer of customer funds.
Free
Multiple Choice
Q 281Q 281
When a customer purchases an item with a debit card: A. they actually are taking out a short-term loan with 30 days to pay before any interest is charged.
B) the payment flows first through an electronic clearinghouse which then sends the customer a bill.
C) the transaction duplicates the process of a credit card.
D) the funds are automatically transferred from the customer's account to the store's account.
Free
Multiple Choice
Q 282Q 282
Banks prefer that customers use an electronic funds transfer system rather than traditional methods of payment because: A. traditional payments are subject to regulation by the Fed and electronic transactions are not.
B) electronic funds are subject to a smaller reserve requirement than traditional funds.
C) electronic funds transfer is more efficient and less expensive for banks than traditional check-based payments.
D) the bank generates advertising revenue from its website.
Free
Multiple Choice
Q 283Q 283
As is common payroll procedure for most employers, Marissa's company _____________ her paycheck bi-monthly into her checking account. This is a paperless process and no check is issued to the employee. By logging into her personnel system, Marissa has record of the net pay that was deposited into her personal checking account and an account of how much was taken out for taxes, Medicare, social security (FICA) and other deductions. Marissa's company has adopted an efficient _________ system. A. debits; enterprise funds transfer
B) debits; electronic funds transfer
C) direct deposits; electronic funds transfer
D) markets; smart card
Free
Multiple Choice
Q 284Q 284
Chad travels extensively for his company. He stays at hotels that provide him with a(n) ____________ that is imbedded with his personal information as well as a code to unlock his hotel room. A. smart card
B) RFID tag
C) credit card
D) automatic key
Free
Multiple Choice
Q 285Q 285
Juan has an authorized work permit issued by the U.S. government to work in the U.S. Each day, Juan travels from Mexico to El Paso, TX, to work in the construction trade. At the time that he was first employed, his U.S. employer issued him a(n) ___________ . Each week, the employer scans his work stipend onto it. Juan can purchase with it, access cash through an ATM with it, and transfer funds with it. The risk for Juan is _________ . A. paycheck; if the check is stolen, he is out the money.
B) payroll debit card; it serves as a credit card, so if stolen he is out the money and any money he had left from the previous pay date.
C) payroll debit card; if it is lost or stolen and someone successfully uses it to make purchases, he has no recourse-he is simply out the money.
D) ETF voucher; minimal because funds are transferred directly from the employer's account to the employee's account.
Free
Multiple Choice
Q 286Q 286
John searched for a new bank prior to filling out his direct deposit form at his new employer. He noted that Twenty/Four/Seven E-Bank, Inc., offered better interest rates on savings accounts and money market accounts; and it offered other amenities such as online banking and funds transfer that many traditional banks offer. What is the most logical reason that Twenty/Four/Seven can compete for customers by offering higher interest rates? A. Twenty/Four/Seven probably cannot compete this way, for long. In order to build its market share, it is offering this as a one-time promotion.
B) Its bank reserve requirement is less, due to the fact that the assets it is holding are not as substantial as bigger, traditional banks.
C) Twenty/Four/Seven has no buildings and locations. Due to low overhead, it is able to share the savings it realizes with its customers.
D) Twenty/Four/Seven pay its employees less than other banks.
Free
Multiple Choice
Q 287Q 287
Which of the following is a bank service provided to help companies conduct business in other countries? A. Transaction letters
B) Certificates of deposit
C) Banker's depositories
D) Currency exchange
Free
Multiple Choice
Q 288Q 288
A __________ represents an agreement by a bank to pay a foreign company a given amount if certain conditions are met. A. certificate of deposit
B) banker's acceptance
C) callable option
D) letter of credit
Free
Multiple Choice
Q 289Q 289
A __________ represents an unconditional agreement by a bank to pay a specified amount at a particular time. A. certified trade acceptance
B) banker's acceptance
C) letter of credit
D) guaranteed funds agreement
Free
Multiple Choice
Q 290Q 290
If the Fed increases interest rates in the U.S. relative to other nations: A. foreign investors are likely to transfer funds to U.S. investments.
B) foreign investors are likely to reduce their investment in U.S. securities.
C) foreign governments will likely reduce their interest rates further, to remain complementary to what the U.S. is doing.
D) foreign investors will see this as a sign of a looming recession and redirect their funds to time deposits.
Free
Multiple Choice
Q 291Q 291
The __________ primarily provides for the financing of economic development projects throughout the world. A. International Monetary Fund
B) International Reserve Bank
C) World Bank
D) World Development Authority
Free
Multiple Choice
Q 292Q 292
The World Bank provides funding for: A. the developed nations in Europe and Asia.
B) firms that want to participate in international trade but lack foreign exchange.
C) multinational corporations that have a strong credit rating.
D) projects to improve the standard of living in less-developed nations.
Free
Multiple Choice
Q 293Q 293
Which of the following helps to provide for the smooth flow of money between nations? A. International Monetary Fund
B) Foreign Exchange Bank
C) World Bank
D) International Exchange Center
Free
Multiple Choice
Q 294Q 294
Critics of the World Bank charge the organization with: A. financially supporting the military of oppressive leaders.
B) financing projects that damage the ecosystem.
C) lending most of its money to poor nations.
D) a wide array of computer security violations.
Free
Multiple Choice
Q 295Q 295
When comparing a letter of credit and a banker's acceptance for financing international business transactions, a letter of credit: A. provides payment anywhere in the world. A banker's acceptance pays in areas in which the bank has a branch.
B) pays a specified amount if certain conditions are met. Conversely, a banker's acceptance represents an unconditional promise to pay.
C) requires both the buyer and seller to deal in the same currencies. A banker's acceptance provides for currency exchange.
D) provides financing directly between buyers and sellers in different countries. A banker's acceptance provides an arrangement in which a bank serves as a broker taking title to the goods.
Free
Multiple Choice
Q 296Q 296
__________ currently provides for regulating international banking and finance practices. A. The Federal Reserve System
B) The World Bank
C) The International Monetary Fund
D) No organization
Free
Multiple Choice
Q 297Q 297
Which of the following institutions monitors the monetary policies of member nations to ensure a global monetary system that works best for all nations? A. The International Monetary Fund
B) The World Bank
C) The International Development Administration
D) The International Reserve Bank
Free
Multiple Choice
Q 298Q 298
Which of the following institutions primarily finances economic development projects in less-developed countries? A. The International Monetary Fund
B) The World Bank
C) The International Development Administration
D) The International Reserve Bank
Free
Multiple Choice
Q 299Q 299
H & Q Importers arranged to have a French winery ship a large quantity of fine wine to the United States. By signing a(n) ______________ H & Q authorized its bank to make full payment to the French winery if and when the wine arrives at the H & Q warehouse in Boston. A. letter of credit
B) certificate of deposit
C) trade agreement
D) banker's acceptance
Free
Multiple Choice
Q 300Q 300
Alan works as a loan officer for a major U.S. commercial bank, specializing in international loans. When considering loans to governments and businesses in other nations, Alan: A. must be aware of federal limits on the total amount of U.S. funds his bank can lend to foreign borrowers.
B) can only make loans if his bank has funds in excess of those sought by American firms.
C) is likely to approve loans to foreign borrowers if the return is high enough to justify the risk.
D) must be careful to get approval from the International Monetary Fund.
Free
Multiple Choice
Q 301Q 301
The Fed announces that it intends to implement policies to increase interest rates. Which of the following correctly identifies the most likely result of higher U.S. interest rates? A. More money will flow into the United States from foreign investors.
B) The economy will experience an increase in business investment spending.
C) The value of the dollar will fall relative to other currencies.
D) The rate of inflation will increase.
Free
Multiple Choice
Q 302Q 302
It's no secret these days that the People's Bank of China is fat with cash from the increasing rate of Chinese exporting. As a smart player on the global stage, which of the following strategic decisions will the People's Bank of China probably make on a daily basis? A. Invest its free cash in the securities of other nations whose interest rates remain at a low and acceptable rate, for a long period of time.
B) Limit its global investment of free cash, and continue to invest in the construction trade in China, to build more factories, while providing its clientele with the highest possible interest rates.
C) Invest its free cash in the securities of other nations that do not participate in the same type of industries such as soft goods and electronics.
D) Invest its free cash in the securities of other nations where it can get the highest available interest rate, for the shortest period of time.
Free
Multiple Choice
Q 303Q 303
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, however, 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? A. The loans are too small, for all practical purposes. Farmers are spending their funds on sustainability measures rather than producing the most they can from each crop.
B) Working conditions in the processing plant are unacceptable, similar to sweatshop conditions.
C) Urozil is most likely not paying back its loans, and still asking for the World Bank to raise its debt ceiling.
D) Farmers who own the cooperative are not vaccinating their workers against AIDS, even though the World Bank partners with pharmaceutical firms who provide free AIDS medications.
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Multiple Choice
Q 304Q 304
Describe and compare the three major types of organizations that make up the U.S. banking system: commercial banks, savings and loan associations, and credit unions.
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Essay
Q 305Q 305
Discuss the methods the Fed uses to enact monetary policy and provide an explanation of the effects these methods have on the supply of money.
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Essay
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Essay
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Essay
Q 308Q 308
Mini-Case
The Bank of Bramblewood survived the Great Depression through the dedication, hard work, and conservative practices of its first president, Red E. Kash. Indeed, Red's personal drive and business skills helped the Bank of Bramblewood thrive during his 50-year tenure as president. After his retirement his granddaughter, Patty, took a position with the bank. Patty inherited her grandfather's business skills and by 1994 she had risen to become the second member of the Kash family to head the bank.
Patty admits she owes a great deal to her grandfather's leadership and advice, but she also quickly points out that the banking industry has changed significantly since Red retired. Patty graduated from college with a degree in finance, and also holds several certifications with the American Institute of Banking. "What Granddad achieved during his era was truly remarkable," Patty points out. "But times have changed, and banking regulations and bank competitors have certainly changed. If we hope to prosper in this century we have to adjust to new competition, learn to work with new technologies, and take advantage of new opportunities. The Bank of Bramblewood has always operated for the benefit of our customers and we will continue to do so. But we must serve them more efficiently and creatively than in the past."
-During Red's time as head of the Bank of Bramblewood, the bank offered three services: time deposits, demand deposits, and home and business loans. Under Patty's leadership, the bank offers those same services, a variety of investment opportunities such as mutual funds and bonds, and ___________ through the Internet, which supports a number of services such as paying bills directly from customers' accounts, direct deposit, and transferring money.
A) demand deposits II
B) online banking
C) passbook banking
D) composite banking
Free
Multiple Choice
Q 309Q 309
Mini-Case
The Bank of Bramblewood survived the Great Depression through the dedication, hard work, and conservative practices of its first president, Red E. Kash. Indeed, Red's personal drive and business skills helped the Bank of Bramblewood thrive during his 50-year tenure as president. After his retirement his granddaughter, Patty, took a position with the bank. Patty inherited her grandfather's business skills and by 1994 she had risen to become the second member of the Kash family to head the bank.
Patty admits she owes a great deal to her grandfather's leadership and advice, but she also quickly points out that the banking industry has changed significantly since Red retired. Patty graduated from college with a degree in finance, and also holds several certifications with the American Institute of Banking. "What Granddad achieved during his era was truly remarkable," Patty points out. "But times have changed, and banking regulations and bank competitors have certainly changed. If we hope to prosper in this century we have to adjust to new competition, learn to work with new technologies, and take advantage of new opportunities. The Bank of Bramblewood has always operated for the benefit of our customers and we will continue to do so. But we must serve them more efficiently and creatively than in the past."
-Since the Great Depression and still today, the Bank of Bramblewood has the FDIC designation. This means:
A) the bank is a member of a consortium of banks that can pool funds to make loans too big for any single bank to finance.
B) the bank gives preference to veterans.
C) the depositors of the bank are also its owners.
D) individual accounts at the bank are insured by an independent agency of the federal government.
Free
Multiple Choice
Q 310Q 310
Mini-Case
The Bank of Bramblewood survived the Great Depression through the dedication, hard work, and conservative practices of its first president, Red E. Kash. Indeed, Red's personal drive and business skills helped the Bank of Bramblewood thrive during his 50-year tenure as president. After his retirement his granddaughter, Patty, took a position with the bank. Patty inherited her grandfather's business skills and by 1994 she had risen to become the second member of the Kash family to head the bank.
Patty admits she owes a great deal to her grandfather's leadership and advice, but she also quickly points out that the banking industry has changed significantly since Red retired. Patty graduated from college with a degree in finance, and also holds several certifications with the American Institute of Banking. "What Granddad achieved during his era was truly remarkable," Patty points out. "But times have changed, and banking regulations and bank competitors have certainly changed. If we hope to prosper in this century we have to adjust to new competition, learn to work with new technologies, and take advantage of new opportunities. The Bank of Bramblewood has always operated for the benefit of our customers and we will continue to do so. But we must serve them more efficiently and creatively than in the past."
-The Bank of Bramblewood promotes a sustainability initiative encouraging all transactions increasingly to be paperless. Each time the bank issues checks or sends out a paper statement, it includes a promotion asking customers to support methods that eliminate paperwork. The bank encourages customers to use debit cards, smart cards, direct deposit and direct payments, as well as online statement retrieval. All of these tools are used in conjunction with the bank's ________________.
A) electronic funds transfer system.
B) automated deposit system.
C) check clearinghouse system.
D) limited documentation checking program.
Free
Multiple Choice
Q 311Q 311
Mini-Case
The Bank of Bramblewood survived the Great Depression through the dedication, hard work, and conservative practices of its first president, Red E. Kash. Indeed, Red's personal drive and business skills helped the Bank of Bramblewood thrive during his 50-year tenure as president. After his retirement his granddaughter, Patty, took a position with the bank. Patty inherited her grandfather's business skills and by 1994 she had risen to become the second member of the Kash family to head the bank.
Patty admits she owes a great deal to her grandfather's leadership and advice, but she also quickly points out that the banking industry has changed significantly since Red retired. Patty graduated from college with a degree in finance, and also holds several certifications with the American Institute of Banking. "What Granddad achieved during his era was truly remarkable," Patty points out. "But times have changed, and banking regulations and bank competitors have certainly changed. If we hope to prosper in this century we have to adjust to new competition, learn to work with new technologies, and take advantage of new opportunities. The Bank of Bramblewood has always operated for the benefit of our customers and we will continue to do so. But we must serve them more efficiently and creatively than in the past."
-Under Patty's leadership the Bank of Bramblewood would like to increase its loans to customers, but its resources are currently limited by a high reserve rate. As a Federal Reserve member bank, it will borrow additional funds from the Fed and charge its customers an interest rate that is higher than the ________________.
A) reserve rate
B) federal funds rate
C) discount rate
D) prime rate
Free
Multiple Choice
Q 312Q 312
Mini-Case
The Bank of Bramblewood survived the Great Depression through the dedication, hard work, and conservative practices of its first president, Red E. Kash. Indeed, Red's personal drive and business skills helped the Bank of Bramblewood thrive during his 50-year tenure as president. After his retirement his granddaughter, Patty, took a position with the bank. Patty inherited her grandfather's business skills and by 1994 she had risen to become the second member of the Kash family to head the bank.
Patty admits she owes a great deal to her grandfather's leadership and advice, but she also quickly points out that the banking industry has changed significantly since Red retired. Patty graduated from college with a degree in finance, and also holds several certifications with the American Institute of Banking. "What Granddad achieved during his era was truly remarkable," Patty points out. "But times have changed, and banking regulations and bank competitors have certainly changed. If we hope to prosper in this century we have to adjust to new competition, learn to work with new technologies, and take advantage of new opportunities. The Bank of Bramblewood has always operated for the benefit of our customers and we will continue to do so. But we must serve them more efficiently and creatively than in the past."
-As the bank has grown and expanded to other towns in its region, several of its business customers are participating in global trade. Which of the following services provided by the bank would help companies conduct international business?
A) Letters of credit
B) Banker's transactions
C) Certificates of deposit
D) Trade exchange letters
Free
Multiple Choice