Banking and Financial Institutions Quiz

What is the primary function of a commercial bank?

• To manage government funds

• To lend money to businesses and individuals

• To control monetary policy

• To issue bonds and dividends and broker stocks and other securities

Which of the following is a type of financial institution that is owned and controlled by its members?

• Commercial Bank

• Credit Union

• Federal Reserve System

• Bond Market

What does a certificate of deposit (CD) represent?

• A government bond

• A deposit made with a fixed term and interest rate

• An unsecured loan

• A type of currency tied to the federal funds market

What are bank reserves?

• The amount of money that banks hold in reserve accounts with the government

• A loan from the Federal Reserve to a commercial bank

• The total assets held by a bank in cash and equivalents

• The deposits made by customers in their checking accounts

What is the dual mandate of The Federal Reserve?

• To regulate the stock market and currency exchange rates

• To control inflation and ensure maximum employment

• To determine the exchange rates between countries

• To issue money and control its value

What is the role of the Federal Reserve System (the Fed)?

• To act as the central bank of the United States

• To issue company bonds

• To regulate all private businesses

• To insure bank deposits

What is the Federal funds market?

• A marketplace where stocks are traded

• A market where commercial banks lend reserve balances to each other

• A market for exchanging government bonds

• A platform for buying and selling currency

The Federal funds rate is the interest rate charged by:

• The Federal Reserve on loans to commercial banks

• Commercial banks on home loans

• The government on treasury bills

• Banks on credit card balances

What is an interest rate?

• A fee charged by banks for checking accounts

• The amount a bank charges for the use of its reserves

• The rate it costs to borrowing money

• A tax paid by businesses on capital gains

Which term refers to the actions taken by the Federal Reserve to influence the economy?

• Monetary policy

• Fiscal policy

• Taxation

• Public spending