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Question 1An organization that provides loans directly to consumers and businesses or aid individuals in obtaining financing for durable goods is called a (n)Answer[removed]commercial bank[removed]investment bank[removed]savings and loan[removed]finance company2 pointsQuestion 2The holding-company device to control two or more commercial banks:Answer[removed]has diminished in importance in recent years[removed]has increased in importance in recent years[removed]is limited to state chartered banks[removed]is sometimes described as chain banking2 pointsQuestion 3The item on the assets side of a bank’s balance sheet that represents the largest proportion of bank assets is:Answer[removed]deposits[removed]owner’s capital[removed]securities[removed]loans2 pointsQuestion 4Capital notes:Answer[removed]are subject to reserve requirements[removed]are assets of the banks that issue them[removed]are always subordinated to the claims of bank depositors[removed]reflect short-term borrowing on the part of the bank2 pointsQuestion 5During the colonial period in the nation’s history, banks depended on:Answer[removed]their own issue of paper money[removed]foreign sources for their loanable funds[removed]deposits of foreign currency such as the Spanish dollar[removed]the investment of their own stockholders2 pointsQuestion 6Legislation that provided for the separation of commercial banking and investment banking activities in the United States is calledAnswer[removed]Garn–St. Germain Depository Institutions Act[removed]Glass-Steagall Act[removed]Hunt Commission legislation[removed]Depository Institutions Deregulation and Monetary Control Act2 pointsQuestion 7Primary reservesAnswer[removed]include the cash assets of the firm under the heading “cash and balances due from depository institutions.[removed]are short term securities held by banks that are quickly converted into cash at little cost to the banks.[removed]reflects the bank’s ability to meet depositor withdrawals.[removed]reflects the bank’s ability to keep the value of a bank’s assets greater than its liabilities.2 pointsQuestion 8The principal assets of banks do not include:Answer[removed]cash[removed]loans[removed]time deposits[removed]securities owned2 pointsQuestion 9Our system of national banks:Answer[removed]was designed to destroy state banking[removed]was an integral part of the Federal Reserve Act[removed]was replaced by Federal Reserve banking[removed]came into existence during the Civil War2 pointsQuestion 10Commercial banks obtain the bulk of their loanable funds from:Answer[removed]depositors[removed]the issue of certificates of deposit[removed]sale of bank stock[removed]sale of subordinated debenture bonds2 pointsQuestion 11The Fed shares its depository examining functions with:Answer[removed]the Federal Savings and Loan Insurance Corporation[removed]the FDIC, Comptroller of the Currency, and state agencies[removed]only the Comptroller of the Currency[removed]National Credit Union administration and the FDIC2 pointsQuestion 12The Federal Open Market Committee:Answer[removed]typically buys and sells long-term corporate bonds[removed]is the most powerful and flexible monetary policy tool of the Fed[removed]works out of Washington D.C.[removed]deals with most of the commercial banks of the nation2 pointsQuestion 13The dynamic actions of the Federal Reserve System:Answer[removed]contribute to the smooth everyday functioning of the economy[removed]are designed to meet the credit needs of individuals and institutions[removed]support depositories and other institutions[removed]stimulate or repress the level of prices or economic activity2 pointsQuestion 14The banking system of the United States is a ___________ reserve system because banks are required by the Fed to hold reserves equal to a specified percentage of their deposits.Answer[removed]required[removed]fractional[removed]proportional[removed]multiplicative2 pointsQuestion 15The Truth in Lending Act:Answer[removed]prohibits discrimination in the granting of credit on the basis of sex, race, color, and religion[removed]limits liability on lost or stolen credit cards[removed]prohibits unfair or deceptive acts or practices on the part of banks[removed]requires prompt correction of errors on a revolving charge account2 pointsQuestion 16The Federal Reserve Banks are owned by:Answer[removed]commercial banks[removed]the U.S. Treasury[removed]national member banks of the Federal Reserve System[removed]member banks of the Federal Reserve System2 pointsQuestion 17The primary function of the Federal Reserve System is to:Answer[removed]issue currency to member banks[removed]regulate the growth of the money supply[removed]serve as a fiscal agent for the U.S. government[removed]regulate and conduct bank examinations2 pointsQuestion 18__________________ become the most important and effective means of monetary and credit control.Answer[removed]Changing reserve requirements has[removed]Changing the discount rate has[removed]Open market operations has[removed]Changing the Treasury bill rate has2 pointsQuestion 19The central bank in the United Kingdom is the:Answer[removed]Bank of Britain[removed]British Fed[removed]British Bank[removed]Bank of England2 pointsQuestion 20The members of the Fed Board of Governors are:Answer[removed]elected by the member banks[removed]appointed by the President of the United States with the advice and consent of the Senate[removed]appointed by the Secretary of the Treasury[removed]appointed by each of the Federal Reserve banks

 

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