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Banking and Financial Institutions Answers

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1
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How did the Mechanics and Farmers Bank of Durham, NC, differ from most other banks of the early 1900s?

A
It was established by Black businessmen to serve their community.
B
It was the first banking institution to charge interest for borrowing money.
C
It was established to service large corporations in the North Carolina area.
D
It was the first to be insured by the Federal Deposit Insurance Corporation.
2
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How does the Federal Deposit Insurance Company (FDIC) protect bank customers?

A
If customers can’t pay their bills, the FDIC provides them with short-term loans.
B
If customers lose their credit cards, the FDIC supplies them with replacements.
C
If a bank has a financial crisis, the FDIC safeguards its customers’ accounts.
D
If a bank can’t supply checkbooks, the FDIC can send them to customers.
3

What is the money supply of the United States?

A
the total amount of money in the US economy
B
the sum of all deposits being held by US banks
C
the profits made by banks from the interest payment on loans
D
the total amount of money deposited within the central bank
4

Read two excerpts from a speech by economist Ben Bernanke, former Chair of the Federal Reserve."Yet another striking feature of the Great Contraction [Depression] in the United States was the massive extent of banking panics and failures, culminating [resulting] in the Bank Holiday of March 1933, in which the entire US banking system was shut down. During the Depression decade, something close to half of all US commercial banks either failed or merged with other banks.”"The best thing that central bankers can do for the world is to avoid such crises by providing the economy with, in Milton Friedman’s words, a ‘stable monetary background.’. . .”—Ben Bernanke, 2002

A
Bank failures during the Depression were unavoidable no matter what the Fed did.
B
The Fed caused bank failures during the Depression by refusing to lower interest rates.
C
The Federal Reserve gains too much power whenever there are failing banks or other crises.
D
The Federal Reserve could have increased the money supply to help failing banks in the crisis.
5

Juana has been earning money by babysitting on weekends. She plans to go to college when she graduates from high school in three years, and she’s trying to save as much money as she can. Juana also received some cash gifts for her recent quinceañera, or 15th birthday celebration. Juana’s mother is going to take her to the local branch of their bank to learn what she can do with her money to help save for college.

A
The employee will advise Juana to open a checking account so she can easily pay her bills.
B
The employee will advise Juana to open a savings account to earn interest on her money.
C
The employee will advise Juana to get a debit card so she has money for college expenses.
D
The employee will advise Juana to apply for a loan so she can begin to pay for college.
6

Review the photograph.

Question illustration
A
When mortgage interest rates go down, banks stop making loans.
B
When mortgage interest rates go down, banks make more money.
C
It’s easier for people to buy a new home when mortgage interest rates are down.
D
It’s more difficult for people to buy a new home when mortgage interest rates are down.
7

Why did the US Congress create the Federal Reserve System in 1913?

A
to establish a central bank where American citizens could deposit their money
B
to establish a central bank to store the money used by the federal government
C
to establish a central bank that would help smaller banks survive during economic crises
D
to establish a central bank that would provide loans for people who were denied them at local banks
8

What does a bank’s interest rate measure?

A
the cost of depositing money in a bank
B
the cost of borrowing money from a bank
C
the cost of starting a new business
D
the cost of keeping a bank in business
9

Why does the Fed sometimes increase interest rates?

A
to help more people get loans and become borrowers
B
to speed up the economy and help it grow quickly
C
to prevent banks from making profits that are too large
D
to slow inflation by stopping the economy from growing too fast
10

Tran got a loan of $10,000 from the bank to help pay for his new car. He agreed to pay $800 in interest for the use of this money.

A
800 ÷ 10,000 = .08
B
10,000 ÷ 800 = 12.5
C
10,000 – 800 = 9,200
D
10,000 + 800 = 10,800

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