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

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Question 161

Multiple Choice

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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)

E) All of the above
F) B) and C)

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Question 162

Multiple Choice

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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.

E) B) and C)
F) All of the above

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Question 163

True/False

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Early in our nation's history, people generally accepted the importance of a central bank authority.

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.

Commercial and consumer finance companies specialize in making low-interest loans to individuals and businesses with strong credit ratings.

Which of the following is NOT included in the M-1 or M-2 definitions of the money supply?