Investing and Financial Markets Answers

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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.
3

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
4

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.
7

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
8

The Federal Reserve transfers profits from its twelve regional banks to

A
investment and commercial banks.
B
central banks in Europe and Asia.
C
the Department of Commerce.
D
the Department of the Treasury.
9

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.
10

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.
11

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.
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

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.

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