Banking Answers

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Which is the correct order of entities that benefit when banks make a profit?

A
employees, shareholders, and the economy
B
shareholders, shoppers, and the economy
C
employees, companies, and the economy
D
shareholders, companies, and the economy
3

The Federal Reserve Bank of the United States is also known as the

p
people’s bank.
c
central bank.
w
world bank.
r
retail bank.
4

What explains the difference between retail and commercial banking?

A
Commercial banks loan money to small businesses, while retail banks loan money to large corporations.
B
Retail banks loan money to small businesses, while commercial banks loan money to large corporations.
C
Commercial banks help small businesses make capital purchases, while retail banks help big businesses invest.
D
Retail banks help big businesses make capital purchases, while commercial banks help consumers invest.
5

best

I
Interest enables them to control the economy.
I
Interest helps them to satisfy customers.
I
Interest enables them to stockpile money.
I
Interest helps them cover business costs.
6

What types of investments do banks use to make a profit? Check all that apply.opening checking accountsstarting new businessesbuying stocks and bondsbuying several propertiesissuing loans to all customersbuying the rights to loans

A
opening checking accounts
B
starting new businesses
C
buying stocks and bonds
D
buying several properties
E
issuing loans to all customers
F
buying the rights to loans
8

The Federal Reserve manages the nation’s currency and money supply by

m
manipulating interest rates and acting as a lender to banks.
o
overseeing bank collections and payments on loans.
d
dictating criteria and setting loan terms for banks.
o
offering investment advice and adjusting interest rates.
9

Which example best describes how a bank injects money into the economy?

A
A bank opens a savings account for a customer.
B
A bank approves a loan for a customer.
C
A bank buys a company’s rapidly growing stock.
D
A bank buys property in a bustling business district.
11

The main role of banks in the nation’s economy is to

A
store, lend, and invest money.
B
store, lend, and borrow money.
C
store, lend, and distribute money.
D
store, lend, and approve money.
12

How do central banks govern the banking industry? Check all that apply.by deciding how much banks must keep in reserveby overseeing the nation’s payment systemby supervising the loan process at banksby printing money for distribution to banksby responding quickly to banking crises that occurby auditing banks based on current regulations

b
by deciding how much banks must keep in reserve
b
by overseeing the nation’s payment system
b
by supervising the loan process at banks
b
by printing money for distribution to banks
b
by responding quickly to banking crises that occur
b
by auditing banks based on current regulations
13

Bank deposits help the nation’s economy by

p
providing protection for consumers from theft.
g
giving banks the money to loan and invest.
p
providing protection for banks on investments.
g
giving consumers the ability to save money.
14

Which are the roles of a bank? Check all that apply.Storing and holding moneyMaking purchases to create profitsLending moneyInvesting in the economyCreating money for the economy

A
Storing and holding money
B
Making purchases to create profits
C
Lending money
D
Investing in the economy
E
Creating money for the economy
15

Banks pay interest to customers through a

A
savings account.
B
credit card account.
C
mortgage account.
D
401k account.
16

Which statement best describes the effects of low and high interest rates on the economy?

L
Low interest rates encourage consumers to borrow and spend, while high interest rates encourage saving.
H
High interest rates discourage consumers from investing, while low interest rates encourage investment.
H
High interest rates encourage consumers to borrow and spend, while low interest rates encourage saving.
L
Low interest rates encourage consumers to invest, while high interest rates discourage investment.
17

A responsibility the Federal Reserve has is to

A
loan money to banks during a crisis.
B
loan money to corporations for capital.
C
provide banking services to consumers.
D
provide financial services to corporations.
18

Read the graph about mortgage interest rates and housing starts between 1978 and 1983.A conclusion that can be drawn from both graphs by looking at 1983 is that interest rates

Question illustration
d
dropped, which led to more home starts.
p
peaked, while home starts bottomed out.
c
climbed, which led to fewer home starts.
b
bottomed out, while home starts peaked.
19

The Federal Reserve Bank of the United States is also known as the

A
people’s bank.
B
central bank.
C
world bank.
D
retail bank.
20

Which best explains why banks consider interest on loans to be important?

A
Interest enables them to control the economy.
B
Interest helps them to satisfy customers.
C
Interest enables them to stockpile money.
D
Interest helps them cover business costs.

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