1.The Depository Institutions Deregulation and Monetary Control Act of 1980 did

Question

1.The Depository Institutions Deregulation and Monetary Control Act of 1980 did not

a.require all commercial banks to join the Federal Reserve System

b.expand the use of Fed services to nonmember banks

c.increase FDIC and FSLIC insurance coverage

d.expand the availability of checking accounts

2.Stored value and smart cards are forms of electronic banking.

True or False

3.The First Bank of the United States was chartered by

a.the federal government

b.the state of New York

c.the city of New York

d.Suffolk County

4.The Financial Services Modernization Act of 1999 seeks to restrict competition between insurance companies and banks

True or False

5.Raising the reserve requirement or the discount rate always decreases the money supply.

True or Faslse

6.According to monetarists, the money supply ought to be changed

a.at the discretion of the Federal Reserve Board

b.at the discretion of the President

c.at a constant annual rate, regardless of economic conditions

d.never

7.Assume a reserve requirement of 10 percent. A commercial bank has total reserves of $100,000, excess reserves of $25,000, and total checkable deposits outstanding of $750,000) If the reserve requirement were increased to 15 percent,

a.total expansion of the money supply would be limited to $750,000

b.excess reserves would be decreased to $12,500

c.the bank would have no alternative but to decrease its checkable deposits

d.the bank would be $12,500 short of required reserves

8.The Federal Reserve currently exercises credit control over

a.stock market purchases

b.home financing

c.installment sales

d.automobile sales

9.If a commercial bank is short of reserves, it can obtain funds by

a.recalling loans

b.borrowing from another commercial bank

c.borrowing from its Federal Reserve Bank

d.all of the above

10.The most frequently used tool of U.S. monetary policy is

a.the discount rate

b.the reserve requirement

c.open-market operations

d.moral suasion

Explanation / Answer

(1) (c)

Insurance coverage did not come under purview of this act.

(2) True.

(3) (a)

It was chartered by US congress (government).

(4) False.

This act aims to partially deregulate the financial services industry.

(5) False.

Increase the bank rate or reserve requirement will decrease money supply, if and only if central bank does not engage in any other expansionary monetary olicy (like open market purchase of bonds).

(6) (c)

(7) ()

Further information required: The excess reserve of $25,000 is included in or excluded from $100,000 (total reserves)?

(8) (b)

Home loan mortgages are under Fed control.

(9) (d)

All the options mentioned are available to the bank.

(10) (c)

Open market sale or purchase of secuities is the easiest to implement, and so is most frequently used.

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