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57. To decrease the money supply, the Federal Reserve sells U.S. government bonds in open-
market operations.
58. An increase in the discount rate produces a decrease in money supply.
59. To reduce inflation, the Federal Reserve increases the discount rate.
60. By reducing the reserve requirement, the Fed intends to increase the money supply.
61. When the Fed sells U.S. government securities, the U.S. money supply increases.
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.
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.
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.
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.
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.
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.
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.
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.
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.
71. When the U.S. was still a colony of Great Britain,
land banks
were created to lend money
to farmers.
72. The United States first established a central bank in 1913 by establishing the Federal
Reserve System.
73. A central bank allows individual banks to deposit and to borrow funds.
74. Thomas Jefferson proposed the establishment of the first central bank in the United
States.
75. Early in our nation's history, people generally accepted the importance of a central bank
authority.
76. Alexander Hamilton persuaded Congress to create a central bank.
77. Prior to the Civil War, the United States had two unsuccessful attempts at a central bank.
78. In the early 1800s, the United States allowed banks to issue different kinds of currencies.
79. A series of bank failures and a cash shortage in 1907 led to the establishment of the
Federal Reserve System in 1913.
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.
81. The Federal Reserve System was designed to prevent a repeat of the 1907 banking crisis.
82. Thanks in part to the Federal Reserve System, few banks failed during the Great
Depression.
83. Created during the Great Depression, the federal deposit insurance program resulted in a
large number of bank failures.
84. In the 1930s, during the Great Depression, the government started an insurance program
to protect the public from bank failures.
85. All federally chartered banks are members of the Federal Reserve.
86. The Federal Reserve is the "bankers' bank."
87. Bank crises tend to correlate with economic recessions.
88. Prior to the establishment of the Federal Reserve System in 1913, the United States had
no experience with a central bank.
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.
90. The Federal Reserve System enabled the U.S. economy to avoid serious banking
problems during the Great Depression.
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.
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.
93. Commercial banks, savings and loan associations, and credit unions all represent
components of the American banking system.
94. Commercial banks offer services to depositors and borrowers.
95. Depositors represent a bank's primary responsibility, while borrowing customers are
secondary.
96. Commercial banks operate as nonprofit institutions.
97. Commercial banks attempt to profit by using funds deposited by customers to make
interest-bearing loans to borrowers.
98. A savings account represents a demand deposit.
99. A demand deposit is the technical name for a checking account.
100. Typically, banks impose a service charge for check-writing privileges or demand a
minimum deposit.
101. A more recent product of banks is checking accounts that pay interest to depositors.
102. A saving account is also known as a time deposit.
103. Technically, a bank can require depositors to give prior notice before they withdraw funds
from time deposits.
104. Certificates of deposit (CDs) represent demand deposits issued by banks.
105. The Federal Reserve requires that ATM machines be located within 100 yards of a
commercial bank.
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.
107. Banks focus on the creditworthiness of the borrower when determining whether to grant a
loan.
