Title: Banks
Course: TEST Course

Q: Banks are financial intermediaries because they
- print money as needed for borrowers whether business, individual, or government entities.
- hold all the money in the economic system in currency form.
- link savers who deposit money and borrowers who seek loans.
A: link savers who deposit money and borrowers who seek loans.

Q: Why are banks considered financial intermediaries?
- Because banks assess the needs of borrowers whether business, individual, or government entities and print the necessary amount to meet those needs.
- Because all of the money (in currency form) in the economic system is held in banks.
- Because banks link borrowers of loans with savers who deposit money.
A: Because banks link borrowers of loans with savers who deposit money.

Q: A key function of a bank is
- own assets in the real estate market.
- create demand deposits for customers.
- to be an intermediary between savers and borrowers.
A: to be an intermediary between savers and borrowers.

Q: Identify one of the key functions of a bank.
- It invests and own assets in the real estate market.
- It offers demand deposits for customers.
- It serves as an intermediary between borrowers and savers.
A: It serves as an intermediary between borrowers and savers.

Q: Demand deposits are considered a(n) ________ to a bank.
- liability
- retained earning
- asset
A: asset

Q: From a banks perspective, demand deposits are considered a(n) ________.
- liability
- retained earning
- asset
A: asset

Q: Which is true about a certificate of deposit (CD)?
- It pays a lower interest rate than a savings account.
- The time frame to deposit money is variable.
- There is a penalty to withdrawal early.
A: There is a penalty to withdrawal early.

Q: Which one of the following statements about a certificate of deposit (CD) is correct?
- A savings account pays a higher interest rate than a CD.
- The time frame for depositing money varies.
- There is an early withdrawal penalty.
A: There is an early withdrawal penalty.

Q: Savings banks and credit unions are both examples of which of these?
- Federal Reserve
- U.S. government securities
- depository institutions
A: depository institutions

Q: What is true about savings banks and credit unions?
- they are nonprofits
- they are typically members only
- they are depository institutions
A: they are depository institutions

Q: Which type of depository institution is considered safest?
- savings banks
- investment banks
- credit unions
A: credit unions

Q: If you were looking to use the safest depository institution for your money, what type of institution would that be?
- savings bank
- investment bank
- credit union
A: credit union

Q: What is true about a credit union?
- It is typically for-profit.
- It is typically made up of diverse members.
- Its focus is to make loans to its members.
A: Its focus is to make loans to its members.

Q: Which of the following is a true statement about a credit union?
- It is typically a for-profit institution.
- Its members are usually a diverse mix of customers.
- Its main focus is to make loan funds to its members.
A: Its main focus is to make loan funds to its members.

Q: What is one of the main differences between a bank and a credit union?
- Typically a bank is owned and run by its members.
- A credit union has to be FDIC insured, but not banks.
- Typically a credit union is owned and run by its members.
A: Typically a credit union is owned and run by its members.

Q: If you were to identify one of the main differences between a bank and a credit union, what would it be?
- A bank is owned and run by its members.
- A credit union has to be FDIC insured, but not banks.
- A credit union is owned and run by its members.
A: A credit union is owned and run by its members.

Q: An asset in a bank’s T-account is ________.
- something the bank owes someone else
- how much the bank is worth
- something owned by the bank
A: something owned by the bank

Q: A bank’s T-account includes assets which are
- items of value the bank owes to someone else.
- the total of a banks worth.
- items of value owned by the bank.
A: items of value owned by the bank.

Q: A liability in a bank’s T-account is
- something owned by the bank.
- how much the bank is worth.
- something the bank owes someone else.
A: something the bank owes someone else.

Q: A bank’s T-account includes liabilities which are
- items of value owned by the bank.
- the total of a banks worth.
- items of value the bank owes to someone else.
A: items of value the bank owes to someone else.

Q: An example of a bank asset is ________.
- a demand deposit made by a customer
- a payment made for the electricity bill
- a loan made out to a customer
A: a loan made out to a customer

Q: Which of the following is an example of a bank asset?
- A customer’s demand deposit in the bank.
- A bank’s payment for its utility bill.
- A loan given to a customer by the bank.
A: A loan given to a customer by the bank.

Q: An example of a bank liability is ________.
- a loan made to a customer
- a fee made by a customer
- an interest payment made on a savings account
A: an interest payment made on a savings account

Q: Which of the following is an example of a bank liability?
- A customer loan made by the bank.
- A customer’s checking account fee.
- The savings account interest payment.
A: The savings account interest payment.

Q: Banks that go bankrupt have a ________ net worth.
- positive
- average
- negative
A: negative

Q: If a bank goes bankrupt, then its assets are worth ________ than its liabilities.
- more
- the same
- less
A: less

Q: A well-run bank will ________.
- assume all borrowers will pay their loans on time
- not factor in missing payment into its planning
- assume some borrowers will not repay their loans on time
A: assume some borrowers will not repay their loans on time

Q: A bank is operating well if it assumes ________.
- all borrowers will be punctual with their loan payments
- it will not need plan for missed payments
- there will be borrowers who will not repay their loans in a timely fashion
A: there will be borrowers who will not repay their loans in a timely fashion

Q: Loan defaults are when ________.
- customers pay back their loans early
- customers pay back their loans
- customers do not repay their loans
A: customers do not repay their loans

Q: What is meant by a bank if a loan defaults?
- The loan customers will often opt for paying off their loans early.
- The default mode of customers is to pay back their loans.
- There are customers who do not repay their loans.
A: There are customers who do not repay their loans.

Q: What is a step a bank can take to protect itself from loan defaults which can lead to recessions?
- A bank can plan for recessions by opening new branches and more ATMs.
- A bank can increase the same loans to build a larger pool of funds.
- A bank can diversify its loans.
A: A bank can diversify its loans.

Q: How can a bank strategize to protect itself from loan default levels that will potentially create recessions?
- A bank could plan for recessions by limiting the number of ATMs.
- A bank could increase the size of loans to build a larger pool of funds.
- A bank could diversify its loans by lending to a variety of customers.
A: A bank could diversify its loans by lending to a variety of customers.