Question

1.)To which of the following does the Fed, as used in the United States, refer?

A.The country’s central bank

B.The federal government

C.The Treasury Department

D.The Federal Deposit Insurance Corporation

2.)If a bank’s assets and its liabilities are equal, the bank is said to be _______.

A.maximizing its profit

B.insolvent

C.fully utilizing its resources

D.in balance

3.)The possibility that borrowers will not be able to repay their loans on time or in full is known as ________ risk.

A.liquidity

B.credit

C.default

D.market

4.)Transaction deposits include which of the following?

A.Time deposits

B.Certificates of deposit

C.Saving deposits

D.Demand deposits

5.)Assets of commercial banks can include which of the following?

A.Net worth and bank borrowing

B.Cash, securities, and loans

C.Deposits, securities, and loans

D.Deposits and net worth

6.)On a balance sheet, if the value of assets increases then, other things equal, what will happen?

A.Equity will increase.

B.Liabilities will decrease.

C.Equity will decrease and net worth will increase.

D.Equity will not be affected.

7.)Which of the following is true of a balance sheet?

A.Liabilities appear on the right-hand side and net worth appears on the left-hand side.

B.Assets and net worth both appear on the right-hand side.

C.Assets appear on the right-hand side and net worth appears on the left-hand side.

D.Liabilities and net worth both appear on the right-hand side.

8.)The government agency that is responsible for regulating the banking system and carrying out the monetary policy of a country is referred to as

A.an oversight committee

B.a federal funds market

C.a shadow banking system

D.a central bank

9.)A central bank is a ____________ that is responsible for regulating the banking system and carrying out _________ policy.

A.private firm; monetary

B.private firm; fiscal

C.government agency; fiscal

D.government agency; monetary

10.)Bank-like institutions (such as ___________) that do not fall under the full regulations applied to depository institutions constitute the __________ banking system.

A.mutual savings banks; black market

B.mutual funds; black market

C.mutual savings banks; shadow

D.mutual funds; shadow

11.)According to the textbook, a bank is a financial institution whose principal business consists of which of the following?

A.Trading stock

B.Accepting deposits and selling securities

C.Accepting deposits and making loans

D.Buying and selling securities

12.)What does vault cash earn for commercial banks?

A.An interest rate equal to the market interest rate as determined by the federal funds rate

B.No interest at all

C.A comparatively low rate of interest

D.A comparatively high rate of interest

Answer 1

1. Option A. It is the central bank of the nation which works towards maintaining of economic stability of the nation through monetary policies.

2. Option D. Assets-liabilities = Balance

3. Option B. It is the possibility of a loss resulting from a borrowers failure to repay a loan

4. Option D. These can be withdrawn without any prior notice and can be used as cash

5. Option B

6. Option A

7. Option D

8. Option D

9. Option D

10. Option D. These are referred to non banking financial institutions

11. Option C

12. Option C. It is the cash kept by bank to maintain day to day needs