Week 4_The Fed, Monetary Policy, and You

Key words that stood out to you after watching this video

What is the primary role of financial institutions in the economy?

• To store money securely

• To facilitate financial transactions and connect savers with borrowers

• To issue loans without interest

• To insure deposits

Which type of account is designed for frequent transactions?

• Savings Account

• Checking Account

• Investment Account

• Fixed Deposit Account

What is financial intermediation?

• The process of storing money in vaults

• Connecting savers and borrowers through banks

• Setting reserve requirements for banks

• Insuring deposits

What does fractional reserve banking allow banks to do?

• Keep all deposits as reserves

• Lend out a portion of deposits while keeping some as reserves

• Issue loans without interest

• Insure deposits

Who determines the reserve requirement for banks?

• The Federal Reserve

• Individual banks

• The FDIC

• The Department of Treasury

What is the cost of borrowing money called?

• Liquidity

• Interest

• Reserve Requirement

• Money Supply

Why is liquidity important for banks?

• It ensures banks can provide cash when customers request withdrawals

• It increases the interest rates on loans

• It reduces the reserve requirement

• It guarantees deposit insurance

What does the FDIC insure?

• Loans issued by banks

• Deposits up to a certain amount

• Interest earnings on savings accounts

• The money supply

What is a drawback of savings accounts compared to inflation?

• They do not offer interest earnings

• They lose purchasing power over time

• They are not insured by the FDIC

• They are designed for frequent transactions