Question : 11.2   The Banking System 1) A commercial bank defined as A) any : 1227814

 

11.2   The Banking System

 

1) A commercial bank is defined as

A) any institution that accepts deposits.

B) a firm that is chartered to accept deposits and make loans.

C) the institution that sets regulations for commercial activities.

D) a firm that obtains funds by selling shares and then buys U.S. Treasury bills.

E) any institution that makes loans.

Answer:  B

Topic:  Commercial banks

Skill:  Level 1: Definition

Section:  Checkpoint 11.2

Status:  WM

2) Which statement is most correct about the types of deposits a commercial bank can accept?

A) A commercial bank accepts checking, savings and time deposits.

B) A commercial bank can only accept checking deposits from commercial enterprises.

C) A commercial bank accepts savings and time deposits, but not checking deposits.

D) A commercial bank does not accept deposits but sells shares.

E) A commercial bank can accept loan deposits, reserve deposits, and checkable deposits.

Answer:  A

Topic:  Commercial banks

Skill:  Level 2: Using definitions

Section:  Checkpoint 11.2

Status:  WM

 

3) The goal of a commercial bank is to

A) establish good regulations for commercial activities.

B) make only safe, no-risk loans.

C) maximize its stockholders’ wealth.

D) minimize its taxes paid to state governments.

E) accept only deposits made in money.

Answer:  C

Topic:  Banks’ profit

Skill:  Level 2: Using definitions

Section:  Checkpoint 11.2

Status:  WM

 

4) Banks earn a profit by

A) keeping as many reserves on hand as possible.

B) making loans at a lower interest rate than the rate that they offer on their deposits.

C) charging an interest rate on their depositors’ accounts.

D) making loans at a higher interest rate than the rates that they offer on their deposits.

E) not paying interest on their reserves.

Answer:  D

Topic:  Banks’ profit

Skill:  Level 3: Using models

Section:  Checkpoint 11.2

Status:  DMC

5) Which of the following are assets of commercial banks?

i.reserves

ii.loans

iii.deposits

A) i only

B) ii only

C) i and ii

D) ii and iii

E) i, ii, and iii

Answer:  C

Topic:  Banks’ assets

Skill:  Level 1: Definition

Section:  Checkpoint 11.2

Status:  CT

 

6) Banks generally earn the highest interest rate

A) on service charges on individuals’ checking accounts.

B) by making loans to business firms.

C) by making mortgage loans to individuals.

D) by making credit card loans.

E) by buying government securities.

Answer:  D

Topic:  Banks’ assets

Skill:  Level 1: Definition

Section:  Checkpoint 11.2

Status:  TPS

 

7) The largest category of commercial banks’ assets is

A) loans.

B) reserves.

C) currency.

D) securities.

E) checkable deposits.

Answer:  A

Topic:  Banks’ assets

Skill:  Level 1: Definition

Section:  Checkpoint 11.2

Status:  DMC

8) Which of the following is NOT held as an asset by banks?

A) reserves

B) loans

C) securities

D) currency in the banks’ vaults

E) checkable deposits

Answer:  E

Topic:  Banks’ assets

Skill:  Level 2: Using definitions

Section:  Checkpoint 11.2

Status:  NAU

 

9) Which of the following describe the “invention” of banking?

A) The British Empire created a banking system to fund its exploration of the New World.

B) Members of the New York Stock Exchange founded the Bank of America in the 1700s.

C) Goldsmiths in the sixteenth century issued gold receipts which entitled its owners to reclaim their gold on demand.

D) Clergy in the Renaissance created the banking system to help further the growth of the church.

E) The United States government founded the Federal Reserve in 1913.

Answer:  C

Topic:  Eye on the Past: The “Invention” of Banking

Skill:  Level 2: Using definitions

Section:  Checkpoint 11.2

Status:  CD new

 

10) When goldsmiths issued receipts to gold owners, and those gold receipts circulated while gold stayed in the goldsmiths’ safes,

A) the gold receipts were considered money because they were used as a means of payment.

B) an infant banking system developed in sixteenth century Europe.

C) fiat money was created.

D) money was invented.

E) Both A and B are correct.

Answer:  E

Topic:  Eye on the Past: The “Invention” of Banking

Skill:  Level 5: Critical thinking

Section:  Checkpoint 11.2

Status:  CD new