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

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Question 41

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The World Bank's mission is to lend money to developing nations to help boost their economic development in various industries. Since its inception, the World Bank has taken significant criticism of its programs. Farmers in a cooperative in the developing nation of Urozil have benefited by World Bank loans. Most recently, however, their processing facilities that employ several laborers are taking criticism from human rights organizations. After studying this chapter, which of the following is a common criticism of these groups?

A) The loans are too small, for all practical purposes. Farmers are spending their funds on sustainability measures rather than producing the most they can from each crop.
B) Working conditions in the processing plant are unacceptable, similar to sweatshop conditions.
C) Urozil is most likely not paying back its loans, and still asking for the World Bank to raise its debt ceiling.
D) Farmers who own the cooperative are not vaccinating their workers against AIDS, even though the World Bank partners with pharmaceutical firms who provide free AIDS medications.

E) A) and D)
F) None of the above

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Question 42

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The currencies of some countries, although durable and portable, are relatively unstable, which makes international exchanges difficult.

A) True
B) False

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Question 43

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Kimberly trades some of her homegrown tomatoes to her neighbor, Ron, for some green peppers fresh from Ron's garden. This type of trade represents an example of:

Commercial banks offer services to depositors and borrowers.

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." -The Bank of Bramblewood promotes a sustainability initiative encouraging all transactions increasingly to be paperless. Each time the bank issues checks or sends out a paper statement, it includes a promotion asking customers to support methods that eliminate paperwork. The bank encourages customers to use debit cards, smart cards, direct deposit and direct payments, as well as online statement retrieval. All of these tools are used in conjunction with the bank's ________________.

Which of the following represent an independent agency of the U.S. government that insures bank deposits?

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

Chipper's Golf Resort plans to carry an inventory of golf clubs-irons, drivers, and woods-from a German manufacturer. The manufacturer has promised delivery in four weeks, which will be just in time for the beginning of Chipper's golf season at its Chicago course. In order to prudently watch cash flow, you have recommended that Chipper's Resort sign a letter of credit with an international bank asking the bank to disburse payment when the clubs arrive at the Chicago course and after they are inspected.

Which of the following explains why Internet banks often offer their customers better interest rates than traditional banks?

Historically, coins and paper money complicated the exchange process.

As a response to the bank failures of the ________, a system of federal deposit insurance was established to strengthen the banking system

It's no secret these days that the People's Bank of China is fat with cash from the increasing rate of Chinese exporting. As a smart player on the global stage, which of the following strategic decisions will the People's Bank of China probably make on a daily basis?

Juan has an authorized work permit issued by the U.S. government to work in the U.S. Each day, Juan travels from Mexico to El Paso, TX, to work in the construction trade. At the time that he was first employed, his U.S. employer issued him a(n) ___________ . Each week, the employer scans his work stipend onto it. Juan can purchase with it, access cash through an ATM with it, and transfer funds with it. The risk for Juan is _________

When the U.S. was still a colony of Great Britain, land banks were created to lend money to farmers.

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.

Economic events in other nations seldom impact the powerful U.S. economy.

Payroll debit cards:

During the early 1980s, the federal government responded to the severe problems plaguing savings and loan associations by:

When the Fed increases the reserve requirement, banks:

Abdul Industries wants to import some heavy machinery from a producer located in the Czech Republic. To facilitate payment to the Czech firm, Abdul arranged for its bank to issue a banker's acceptance. Under this arrangement, the bank pays the exporter after the equipment passes inspection.