Role Banks Play in the US Economy

Which best describes the difference between a commercial bank and a credit union?

• commercial banks offer lower interest rates for loans
•  credit union issue credit cards
• commercial banks only offer savings accounts
• credit unions offer services only to members based on set criteria

Getting cash at an ATM or using a debit card to purchase an item would be most similar to which of the following? 

•  counterfeiting currency’s
• using a credit card to purchase an item
• depositing currency into your saving account
• writing a check against your demand deposit account

What type of investment is similar to a basic savings account but has a specific, fixed term and usually offers a higher fixed interest rate?

• certificate of deposit
• stock
• money market deposit account
• mutual fund

Which is the primary role of the FDIC?

• Regulate saving and loans
• Advise the Secretary of Treasury
• Insure citizens’ deposits made at commercial banks
• Provide financial support for home mortgage borrowers

If the reserve requirement is 8 percent, how much of a $100 deposit must be kept by a customer's bank and not loaned to other customers? 

• $8.00
• $92.00
• $80.00
• $12.00

Which best describes the fractional reserve banking system?

• banks must keep gold in their vaults as reserves against their deposits
• banks hold only a part of their deposits in reserves
• reserves must exceed deposits
• banks are allowed to make loans, but do not take deposits

What would most likely happen to the money supply if banks lend some excess reserves to borrowers?

• money supply grows
• money supply stabilizes
• money supply is deflated
• money supply becomes volatile.

What would happen of a commercial bank decided to hold more than required reserves?

• decrease in checking accounts
• decrease the amount of potential loans made by the bank
• increase the interest rate offered by the bank
• decrease the reserve ratio of the banking system