WorksheetsCh 6.3 & 6.4 Fed Reserve
Total questions: 24
Worksheet time: 13mins
Priya, Hannah, and Liam are working in a bank as managers and they just received a notification that the Federal Reserve has changed the Discount Rate. What does this mean for their bank?
This is the amount of reserves that their bank is required to keep on hand.
This is the rate the Federal Reserve charges their bank for loans.
This is the interest rate that their bank charges other banks for loans.
These are the deposits that their bank keeps readily available as opposed to lending them out.
Luna, Evelyn, and Priya are economics students studying the Federal Reserve's influence on the economy. They are having a debate on the definition of Monetary Policy. According to you, what would be the correct definition?
The amount of reserves that banks like the one where Luna interned, are required to keep on hand.
The deposits that a bank, similar to the one where Evelyn's father works, keeps readily available as opposed to lending them out.
The process by which banks, such as the one Priya visited for her project, record whose account gives up money & whose account receives money as a result of a customer writing a check.
The actions that the Federal Reserve, which they are studying, takes to influence the level of real GDP and the rate of inflation in the economy.
Priya, Aria, and Mason are working on a school project about banking. They are trying to understand the concept of Reserve Requirement. What does it mean?
It refers to the deposits that their school bank keeps readily available as opposed to lending them out.
It is the amount of reserves that their school bank is required to keep on hand.
It is the interest rate that banks charge each other for those loans.
It is the rate the Fed charges for those loans.
Avery, Sophia, and Nora are working on a school project about banking. They approach you, their bank manager, and ask, 'What does the term 'Reserves' refer to in banking?'.
The actions that the Federal Reserve takes to influence the level of real GDP and the rate of inflation in the economy.
The amount of reserves that your bank is required to keep on hand.
The process by which your bank records whose account gives up money & whose account receives money as a result of a customer writing a check.
The deposits that your bank keeps readily available as opposed to lending them out.
John, Benjamin and Ethan's Check Clearing
The process John's bank uses to record whose account gives up money & whose account receives money when John, Benjamin and Ethan write a check.
The amount of reserves that John's bank is required to keep on hand.
A company that owns more than one bank, including John's.
The interest rate that banks, including John's, charge each other for loans.
Consider the scenario of a Bank Holding Company-
The rate the Federal Reserve charges for those loans.
The amount of reserves that banks like Chase or Wells Fargo are required to keep on hand.
The interest rate that banks like Bank of America and Citibank charge each other for those loans.
A company like JPMorgan Chase & Co. that owns more than one bank.
You are a financial analyst studying the impact of the Federal Reserve's policies on the economy. You come across the term 'Federal Funds Rate'. What does it refer to?
The rate the Federal Reserve charges for its loans
The process by which banks record the transfer of money as a result of a customer writing a check.
The interest rate that banks charge each other for loans.
The amount of deposits that a bank keeps readily available as opposed to lending them out.
Imagine you are studying the US economy. What does 'Money Supply' refer to in this context?
The amount you have to pay for borrowing money.
The interest rate set by the Federal Reserve for loans.
The term used to describe funds in checking accounts.
The total amount of money available in the US economy.
You are an investor and you want to sell your assets quickly. What term describes this situation?
Money Supply
All the money available in the US economy.
Liquidity
The ability of an asset to be converted into cash quickly
Demand Deposits
Funds that pool money from a large number of small savers to purchase short-term government and corporate securities.
Fractional
A banking system that keeps only a fraction of funds on hand and lends out the remainder.
You are a bank manager. Your bank follows the Fractional Reserve Banking system. What does this mean?
Your bank keeps only a fraction of funds on hand and lends out the remainder.
Your bank pools money from a large number of small savers to purchase short-term government and corporate securities.
Your bank charges other banks an interest rate for loans.
Your bank has borrowers that fail to pay back their loans.
John is unable to repay his loan. What is this situation called in banking terms?
Fractional
A banking system that keeps only a fraction of funds on hand and lends out the remainder.
Mortgage
A specific type of loan that is used to buy real estate.
Default
Borrowers that fail to pay back their loans
Money Market
Funds that pool money from a large number of small savers to purchase short-term government and corporate securities.
John wants to buy a house but doesn't have enough money. What financial instrument can he use?
Default
John can stop paying back his other loans.
Mortgage
John can take a specific type of loan that is used to buy real estate.
Principal
John can use the funds in his checking account.
Liquidity
John can sell an asset to convert it into cash quickly.
John borrowed some money to start his business. What is the term for the price he pays for using this borrowed money?
Principal
The initial amount that John borrowed to start his business.
Mortgage
A specific type of loan that John used to buy his office space.
Default
John, if he fails to pay back his business loan
Loan
The cost John incurs for using the borrowed money for his business
John borrowed some money from the bank. What is the term for the amount he borrowed?
Credit Card
The amount John paid for using the bank's money.
Default if he fails to pay back his loan.
The Principal amount that John borrowed.
M1
The funds in John's checking account.
John has to pay back a certain amount of money to his friend, Mike. In this scenario, who is the creditor?
Mike, because he is the person to whom money is owed.
John, because he uses his bank card to withdraw money from his account.
The amount that John borrowed from Mike.
The interest that John has to pay for borrowing the money.
John took a loan from the bank to start a small business with his friends Charlotte, Maya, and Evelyn
The amount that John, Charlotte, Maya, and Evelyn borrowed from the bank to start their business.
A specific type of loan that John, Charlotte, Maya, and Evelyn used to start their business.
John, Charlotte, Maya, and Evelyn failed to pay back their loan to the bank
The interest John, Charlotte, Maya, and Evelyn paid for the use of borrowed money
Ava, Isla, and Elijah are working on a school project about banking regulations. They are focusing on the Federal Reserve's rules. In their research, they come across the term 'Reserve Requirement'. What does this term refer to in this context?
The rate the Federal Reserve charges banks for loans.
A bank being a part of a larger company that owns more than one bank.
The interest rate that a bank charges other banks for loans.
The amount of money a bank is required to keep on hand as per Federal Reserve regulations.
Charlotte, Zoe, and Michael are working on a school project about banking systems. They decide to interview you, as you are a bank manager. They ask, 'Our bank follows the Fractional Reserve Banking system. Can you explain what it means?'
It means our bank keeps only a fraction of funds on hand and lends out the remainder.
It refers to the process by which we record whose account gives up money & whose account receives money as a result of a customer writing a check.
It's about the actions that the Fed takes to influence the level of real GDP and the rate of inflation in the economy.
It's the amount of reserves that we are required to keep on hand.
Ava, Aria, and Anika are investors and they want to sell some of their assets. In this scenario, which of the following best describes the term 'Liquidity'?
The ability of an asset to be converted into cash quickly.
A specific type of loan that is used to buy real estate.
Funds in checking accounts are also called this.
Borrowers that fail to pay back their loans
Ava, Avery, and Liam have recently started a finance study group. During their discussion, they came across the term 'Money Market Funds'. Can you help them understand what it means?
It refers to funds that pool money from a large number of small investors to purchase short-term government and corporate securities.
The ability of an asset to be converted into cash quickly.
All the money available in the US economy.
Deposits that a bank keeps readily available as opposed to lending them out.
James, Abigail, and Scarlett are studying about the Central Bank. They learned that it has three key functions. Can you identify them?
Supervising Banking Practices
Acting as lender of last resort
Managing Scarlett's Personal Checking Account
Check Clearing
Mason, Abigail, and Avery are participating in a quiz competition. They are asked a question about the USA's financial system: 'How many Federal Reserve Districts are there in the USA?'
14
11
13
12
Aiden, Scarlett, and Harper are studying for their economics exam. They are discussing the Federal Open Market Committee (FOMC). Aiden thinks the FOMC meets 12 times a year, Scarlett thinks it's only 2 times, and Harper believes it's 8 times. How many times does the FOMC actually meet per year?
12
2
8
1
Mason, Sophia, and Luna are studying about the Federal Reserve in their economics class. They learned that the Federal Reserve serves as the government's banker. Can you help them understand how it does so?
By clearing bank notes
By creating cash
By acting as the Lender of Last Resort
By lending money to the states
