Banking 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

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.
4

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.
6

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.
7

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.
8

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
9

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.

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