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Exam 20: Money, Financial Institutions, and the Federal Reserve

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Question 121

Multiple Choice

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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.

E) A) and B)
F) A) and C)

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Question 122

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The M-3 includes M-1 money, but not M-2 money.

A) True
B) False

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Question 123

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The interest paid on time deposits, today, represents the main difference between time and demand deposits.

Aaron 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 subscriptions to Netflix, Hulu, and all the premium cable channels. 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.

Eric is looking for a place to deposit a $30,000 inheritance from his Great Aunt Clementine, who passed away three months ago. He is not planning to spend his money fast and frivolously. He will need part of the funds from time to time for his college education, which he promised his aunt. 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 Securitas 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 and low-risk/high-risk securities products.

Both the M-1 and M-2 definitions of money include coins and paper money.

When the Fed buys U.S. government securities, the

The Federal Reserve consists of seven Federal Reserve districts.

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.

Large pension funds represent a powerful force in U.S. financial markets.

A banker's acceptance represents a promise that a bank will pay a specified amount at a specified time if certain conditions are met.

Citizens of the island nation of Winstone readily accept a specific type of seashell as payment for the goods and services they trade. For Winstonians, seashells serve as money.

To decrease the money supply, the Federal Reserve sells U.S. government bonds in open-market operations.

The president of the U.S. is in control of the money supply in the U.S.

Critics of the World Bank charge the organization with

Typically, banks impose a service charge for check-writing privileges or demand a minimum deposit.

The IMF's goal is to maintain a global monetary system.

Which of the following represents one way the Fed increases the amount of money in circulation?

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?

The U.S. production of the Sacagawea dollar coins provides greater durability than paper dollar bills.