ch02 - Chapter 2 Banks and Other Financial Intermediaries...

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Chapter 2 Banks and Other Financial Intermediaries TRUE-FALSE QUESTIONS T 1. The structure of the modern banking system includes commercial banks, savings and loans, mutual savings banks, and credit unions. F 2. Because of the Federal Reserve System, depository institutions play a small part in the management of the monetary system. F 3. An investment bank accepts deposits, makes loans, and issues checking accounts. F 4. Banks are not profit-motivated organizations. F 5. Commercial banks are aggressive and often assume large amounts of risk. T 6. Originally, the savings banks’ emphasis was on thrift and the safety of savings, while the emphasis of the savings and loan institutions was on home financing. T 7. Part of the reason that the Banking Act of 1933 was passed was in response to the large numbers of bank failures. T 8. A universal bank can engage in both commercial banking and investment banking activities. T 9. Credit unions are cooperative nonprofit organizations that exist primarily to provide member depositors with consumer credit. F 10. The National Banking Act of 1864 established a system of central banks. T 11. The National Banking Act of 1864 made it possible for banks to receive federal charters. T 12. Savings banks and savings and loans are examples of thrift institutions. F 13. Today, reserve requirements imposed by the Federal Reserve apply only to member banks.
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T 14. The principal assets of all depository institutions are cash, securities, and loans. F 15. A secured loan represents a general claim against the assets of the borrower. F 16. The prime rate is the interest rate charged by banks for long-term unsecured loans to their highest quality business customers. T 17. Savings and loans were first known as building societies. T 18. The emphasis of savings banks was on thrift and the safety of savings while the emphasis of the S&Ls was on home financing. F 19. Credit unions only provide consumer credit to member depositors, and do not make home mortgage loans. T 20. Deposits are the principal liabilities of all depository institutions. T 21. Branch banks are those banking offices that are controlled by a single parent bank. F 22. The bank holding company may not engage in direct banking activities. T 23. Credit unions are nonprofit organizations. F 24. Branch banking is permitted on an interstate basis by all state banks. T 25. Nonbank financial conglomerates are large corporations that offer various financial services, such as mortgage insurance, real estate management, and consumer finance. F 26. The Federal Reserve System was established under the National Banking Act. T 27. The main provisions of the Monetary Control Act of 1980 are deregulation and monetary control. T 28. Regulation Q established interest rate ceilings on time and savings deposits.
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