Federal Tax Forms Answers

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When does a bank earn interest?

A
when a consumer defaults on a loan
B
when a consumer opens a savings account
C
when a consumer makes a payment on a loan
D
when a consumer purchases an automobile with cash
5

Which of these scenarios best describes fractional reserve banking?

A
Maria makes a deposit of $20,000, and the bank loans $18,000 to Mark so he can buy a car
B
Jamir makes a $1,000 deposit and then withdraws it one week later.
C
Isabella splits her $5,000 deposit between two different banks.
D
A bank manager trades old, worn $20 bills for new currency issued by the Federal Reserve.
6

Why do banks keep some money in reserve rather than loaning out all of their deposits? Check all that apply.

A
to ensure they have money on hand to loan to wealthy corporations
B
because they are required to by law
C
because they have to meet the withdrawal requests made by customers
D
to ensure that bank runs will take place
E
to avoid loaning out funds whenever possible
7

What causes a bank run?

A
Too many people try to withdraw their deposits at the same time.
B
Banks refuse to loan out deposited funds.
C
The Federal Reserve conducts an inspection of a bank’s fractional reserve.
D
Interest rates fall too quickly.
8

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Federal Tax Forms Answers — FL-2102373-Personal…