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

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Question 131

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The World Bank primarily finances projects to protect the environment.

A) True
B) False

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Question 132

Multiple Choice

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Chipper's Golf Resort plans to use famous Kauri wood from New Zealand for parts of the interior of the magnificent club house at its new golf resort near Portland,OR.According to the importer,each ten foot slab will cost Chipper's approximately $5,000.Looking at the exchange rates,Chipper's finance director noted that $500 US dollars = $738 NZ dollars.The importer will order directly from his source in New Zealand.Chipper's finance director has determined that:

A) it's not a good time to buy the wood.
B) it's a good time to buy the wood.
C) there will be a shortage of the wood.
D) it will cost less when the exchange rate of U.S.dollars to NZ dollars is just about equal.

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

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Question 133

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Discuss the methods the Fed uses to enact monetary policy and provide an explanation of the effects these methods have on the supply of money.

The Federal Reserve is the "bankers' bank."

When the Fed increases the reserve requirement,banks:

Most countries restrict the flow of money in and out of their borders.

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.

A saving account is also known as a time deposit.

The reserve requirement represents the Fed's most powerful tool for conducting monetary policy.

The ________ insures holders of accounts in savings and loan associations.

Commercial banks operate as nonprofit institutions.

The federal funds rate is the interest rate that banks charge each other.

Theoretically,with the proper monetary policy,the U.S.economy can continue to grow without causing inflation.

The problem with barter exchanges is that it is too difficult to find people to exchange your good with.

Money is anything people generally accept as payment for goods and services.

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

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.

Banks focus on the creditworthiness of the borrower when determining whether to grant a loan.

When traveling in other countries,tourists can use their MasterCard or Visa bankcards to obtain foreign currencies at ATMs.

A few retailers enable their customers to pay for gas by using a ________ card that electronically transmits information through an embedded radio-frequency antenna.