Name:
Class:
Date:
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Page 1
1. An increase in money supply and incomes often causes prices to go up as well.
a.
True
b.
False
ANSWER:
True
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.2.3 – LO: 3.2.3
2. By law, every bank in the United States must be part of the Federal Reserve System.
a.
True
b.
False
ANSWER:
False
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.1.1 – LO: 3.1.1
3. One of the main functions of the Federal Reserve is to serve as a bank for other banks.
a.
True
b.
False
ANSWER:
True
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.1.2 – LO: 3.1.2
4. Almost all economists agree that the federal government can effectively regulate the economy by raising or lowering
taxes and expenditures.
a.
True
b.
False
ANSWER:
False
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.2.2 – LO: 3.2.2
5. The Truth in Lending Act prohibits bill collectors from using deceptive or abusive tactics.
a.
True
b.
False
ANSWER:
False
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.3.1 – LO: 3.3.1
6. Janet Yellen began her term as chair of the Federal Reserve in 2014.
a.
True
b.
False
ANSWER:
True
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.1.1 – LO: 3.1.1
7. The Uniform Bank Performance Report is an annual report issued to summarize the performance of international banks
Name:
Class:
Date:
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Page 2
operating within the United States.
a.
True
b.
False
ANSWER:
False
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.4.1 – LO: 3.4.1
8. A fixed exchange rate ties the monetary value of one country’s currency to the valuation of another country’s currency.
a.
True
b.
False
ANSWER:
True
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.5.1 – LO: 3.5.1
9. The Strength of Support Assessment (SOSA) report is a quarterly report filed by U.S. banks to summarize how each of
the bank’s branches is performing.
a.
True
b.
False
ANSWER:
False
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.5.1 – LO: 3.5.1
10. The International Monetary Fund (IMF) works to promote economic growth among member countries.
a.
True
b.
False
ANSWER:
True
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.5.3 – LO: 3.5.3
11. Which of the following is NOT a function of the Federal Reserve?
a.
levying a high tax on state bank notes
b.
conducting bank examinations
c.
handling the government’s central banking function
d.
determining whether banks can borrow money from the Federal Reserve
ANSWER:
a
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.1.2 – LO: 3.1.2
12. The rate of interest the Federal Reserve charges banks for short-term loans is called the
a.
discount rate.
b.
federal funds rate.
c.
reserve requirement rate.
d.
prime rate.
ANSWER:
a
Name:
Class:
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Page 3
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.2.1 – LO: 3.2.1
13. If the government restricts the flow of cash into the economy too severely,
a.
businesses will have more money to invest.
b.
consumers cannot afford to borrow.
c.
employment will rise dramatically.
d.
all of the above are true.
ANSWER:
b
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.2.3 – LO: 3.2.3
14. Which of the following attempts to protect the information that credit bureaus may collect?
a.
Fair Debt Collection Act
b.
Fair Credit Reporting Act
c.
Truth in Lending Act
d.
Equal Credit Opportunity Act
ANSWER:
b
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.3.1 – LO: 3.3.1
15. Which of the following statements is NOT true?
a.
Credit bureaus may not report information more than one year old.
b.
A creditor may not use receipt of public assistance as a factor in determining creditworthiness.
c.
If there is a billing dispute, creditors may not take adverse action until the dispute is resolved.
d.
Bill collectors may not call debtors at odd hours.
ANSWER:
a
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.3.1 – LO: 3.3.1
16. Which of the following is NOT an example of an agency that is focused on making banking safe and mutually
beneficial across international borders?
a.
International Monetary Fund
b.
President’s Working Group on Financial Markets
c.
Asia Pacific Economic Cooperation
d.
Bank for International Settlement
ANSWER:
b
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.1.2 – LO: 3.1.2
17. The “a” in CAMELS stands for
a.
adverse feedback loop
b.
annuity
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Class:
Date:
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Page 4
c.
asset transformation
d.
asset adequacy
ANSWER:
d
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.4.2 – LO: 3.4.2
18. Which of the following is NOT part of the ongoing organizational structure of the Federal Reserve?
a.
Primary Dealer Credit Facility
b.
District Reserve Banks
c.
Member Banks
d.
Board of Governors
ANSWER:
a
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.1.1 – LO: 3.1.1
19. The Fair Debt Collection Practices Act includes which principals?
a.
Third-party collectors may not use deceptive or abusive tactics as they try to collect overdue bills.
b.
Collectors may not call debtors in a harassing manner.
c.
Collectors may not reveal collection actions to employers of debtors.
d.
b and c only
e.
a and b only
f.
a and c only
g.
a, b, and c are correct.
ANSWER:
g
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.3.1 – LO: 3.3.1
20. ____________________ policy involves adjusting budgetary deficits or surpluses to achieve desired economy goals.
ANSWER:
Fiscal
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.2.2 – LO: 3.2.2
21. The main goals of the Federal Reserve’s ____________________ policy are to maintain economic growth, to stabilize
prices, and to keep international payments flowing smoothly.
ANSWER:
monetary
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.2.1 – LO: 3.2.1
22. The policy of “priming the pump,” or cutting taxes to add jobs and stimulate business during an economic downturn is
often referred to as ____________________ economics.
ANSWER:
Keynesian
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.2.2 – LO: 3.2.2
Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 5
23. ____________________ laws require that the details of lending agreements be specified in writing.
ANSWER:
Disclosure
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.1.1 – LO: 3.1.1
24. The right of ____________________ allows a consumer to change his or her mind about a loan until midnight of the
third business day following the signing of papers.
ANSWER:
rescission
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.3.1 – LO: 3.3.1
25. How many District Banks are in the Federal Reserve?
ANSWER:
twelve
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.1.1 – LO: 3.1.1
26. The ____________________ is the group that makes discount rate decisions.
ANSWER:
Federal Open Market Committee (FOMC)
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.2.1 – LO: 3.2.1
27. A(n) ___________________ enables a currency to fluctuate based on market conditions.
ANSWER:
flexible exchange rate
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.5.1 – LO: 3.5.1
28. The Federal Reserve Bank of Chicago sponsors ____________________ to provide a cross section of ideas regarding
issues that cut across many aspects of international banking.
ANSWER:
International Banking Seminars
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.5.3 – LO: 3.5.3
29. The ____________________, established in 1988, was responsible for communicating across agencies to help ensure
a healthy stock market that inspired investor confidence.
ANSWER:
President’s Working Group on Financial Markets (PWG)
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.1.3 – LO: 3.1.3
30. ____________________ are a select group of 20 dealers that the Fed works with to buy and sell securities.
ANSWER:
Primary dealers
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.2.1 – LO: 3.2.1
31. The auditing arm of Congress that helps ensure that federal laws and policies are implemented properly is called the
____________________.
Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 6
ANSWER:
Government Accounting Office (GAO)
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.3.2 – LO: 3.3.2
32. If 1 euro = 1.4955 $US, how many euros will 750 $US buy?
ANSWER:
501.50 euro
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.5.1 – LO: 3.5.1
33. If an Australian dollar is worth 0.8815 $US, how many Australian dollars would 900 $US buy?
ANSWER:
1020.99 $ Australian
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.5.1 – LO: 3.5.1
34. In general, what is the goal of fiscal policies?
ANSWER:
Fiscal policies attempt to smooth economic ups and downs by manipulating the federal
budget to create enough demand for goods to keep people working but not so much as to
cause inflation.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.2.2 – LO: 3.2.2
35. Briefly explain the term balance of payments.
ANSWER:
It is a record of all of the exchanges of goods and services that occur between two countries
for a specified period of time.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.5.1 – LO: 3.5.1
36. Name the three tools developed by the Fed in 2007 to help manage monetary policy and deal with the financial crisis.
ANSWER:
Term Auction Facility (TAF), Term Securities Lending Facility (TSLF), Primary Dealer
Credit Facility (PDCF)
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.2.1 – LO: 3.2.1
37. Name four characteristics that the Equal Credit Opportunity Act prohibits considering when determining the
creditworthiness of a consumer.
ANSWER:
Answers may include any four of the following characteristics: race, color, religion, national
origin, marital status, age, receipt of public assistance, or exercise of any consumer right
against a lender.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.3.1 – LO: 3.3.1
38. How does the Fed try to keep consumers educated regarding their rights?
ANSWER:
A wide variety of brochures on various topics is available on the Fed’s website. Many
brochures are available in Spanish.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.3.1 – LO: 3.3.1
Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 7
39. What is a charter and why is it important to banks?
ANSWER:
A charter is a legal approval to operate a business as a bank. The agency that issues a charter
is the agency that is responsible for regulating a bank.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.4.1 – LO: 3.4.1
40. What agency issues a CAMELS rating and what is the purpose of the rating?
ANSWER:
After an on-site review is completed, the Fed issues a CAMELS rating to a bank to rate the
bank’s level of safety and soundness.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.4.2 – LO: 3.4.2
41. What is sterilization and why is it significant?
ANSWER:
The Fed seeks to maintain a steady balance of Federal Reserve balances. When the Fed sells
foreign currency, it sterilizes the impact of the sale by purchasing an equivalent amount of
U.S. currency. Sterilization is necessary to maintain the federal funds rate at the target set by
the FOMC.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.5.2 – LO: 3.5.2
42. What is the Taylor rule?
ANSWER:
The Taylor rule provides ideas for how to use short-term interest rates to achieve the goals of
a central bank.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.2.1 – LO: 3.2.1
43. Name three functions performed by the Federal Reserve in its role as the government’s bank.
ANSWER:
Answers may include any three of the following: Handling IRS tax payments, making
payments to government employees, making payments to Social Security recipients, making
payments to military personnel, making payments for other government expenses, and selling
and redeeming various government securities.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.1.2 – LO: 3.1.2
44. Describe how the Fed increases and decreases its reserves using open market operations.
ANSWER:
When the Fed wants to increase reserves, it buys securities. When it wants to decrease
reserves, it sells them.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.2.1 – LO: 3.2.1
45. The Federal Reserve Board shares enforcement of consumer protection laws with a number of other agencies. List
three of the agencies.
ANSWER:
Answers may include any three of the following agencies: the Federal Deposit Insurance
Agency (FDIC), the Securities and Exchange Commission (SEC), the Office of Thrift
Supervision (OTS), the Federal Trade Commission (FTC), the National Credit Union
Administration (NCUA), the Office of the Comptroller of Currency (OCC), the Consumer
Name:
Class:
Date:
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Page 8
Financial Protection Bureau (CFPB), and the Commodity and Futures Trading Commission.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.3.2 – LO: 3.3.2
46. How does the Federal Reserve derive its income? Is any money appropriated to the Federal Reserve by the United
States government?
ANSWER:
The Federal Reserve derives its income from financial services and interest on loans to its
member banks. The U.S. government does not provide funds for the operation of the Federal
Reserve.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.1.1 – LO: 3.1.1
47. Briefly explain why the government might cut spending or raise taxes during a time when the economy is prospering.
ANSWER:
When the economy is prospering, demand can exceed supply. This causes prices to increase
and can lead to inflation, when rising prices decrease the value of money. Under these
conditions, the government might cut spending or raise taxes. This causes consumers and
businesses to have less money to spend, reducing demand and stabilizing prices.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.2.2 – LO: 3.2.2
48. Explain how the Board of Governors is selected, the length of each member’s term, and the purpose of the Board. Be
sure to distinguish between the terms of the chair, the vice-chair, and governors.
ANSWER:
The President of the U.S. selects members of the Board, subject to consent of the Senate. The
chair and vice-chair can serve an unlimited number of four-year terms. Each governor serves
a 14-year term. The Board of Governors is the policy-making arm of the Fed, and its
decisions control monetary policy.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.1.1 – LO: 3.1.1
49. Why is monetary policy easier to use than fiscal policy to prompt adjustments to the economy?
ANSWER:
It is easier for the Fed to change bank reserve requirements than to go through the
fairly cumbersome process of changing legislation to alter taxes. It is quicker for the Fed to
adjust the amount of money flowing into the economy by buying or selling dollars on the
open market than by altering the level of taxes.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.2.3 – LO: 3.2.3
50. If monetary policy restricts the flow of money into an economy too severely, businesses may not be able to afford to
borrow. What are the usual economic results of this?
ANSWER:
A decline in spending and investment leading to failure to sell products, especially “big
ticket” items such as new homes, automobiles, and appliances.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 3.2.3 – LO: 3.2.3