FBLA Banking and Financial Systems Practice Questions with Explanations
Questions
Anything generally accepted as payment for goods and services is:
- Money
- Barter
- Credit
- Collateral
The direct exchange of goods and services without using money is:
- Barter
- Credit
- Commerce
- Arbitrage
Money's function of allowing people to compare the value of different goods is as a:
- Unit of account
- Medium of exchange
- Store of value
- Standard of deferred payment
Money's function of being used to buy goods and services is as a:
- Medium of exchange
- Unit of account
- Store of value
- Standard of measure
Money's function of holding its value over time so it can be saved is as a:
- Store of value
- Medium of exchange
- Unit of account
- Medium of trade
Money that has value because the government declares it legal tender, not because it is backed by gold, is:
- Fiat money
- Commodity money
- Representative money
- Barter money
The United States ended the domestic convertibility of dollars into gold in 1933 and international convertibility in:
- 1971
- 1913
- 1945
- 1990
The narrowest measure of the money supply, including currency and checking deposits, is:
- M1
- M2
- M3
- GDP
The ease with which an asset can be converted to cash without losing value is:
- Liquidity
- Solvency
- Leverage
- Volatility
The process of moving money from savers to borrowers through financial institutions is:
- Financial intermediation
- Disintermediation
- Securitization
- Arbitrage
Businesses that collect money from savers and lend it to borrowers are:
- Financial intermediaries
- Stock exchanges
- Government agencies
- Retailers
The six characteristics of good money include durability, portability, divisibility, uniformity, acceptability, and:
- Limited supply
- Unlimited supply
- High weight
- Changing value
A general rise in the overall price level is:
- Inflation
- Deflation
- Recession
- Stagflation
The most commonly cited U.S. measure of consumer inflation, published by the Bureau of Labor Statistics, is the:
- Consumer Price Index
- Gross Domestic Product
- Prime rate
- Dow Jones Industrial Average
The Federal Reserve's long-run inflation target is:
- 2% per year
- 0% per year
- 5% per year
- 10% per year
A for-profit financial institution that accepts deposits and makes loans to individuals and businesses is a:
- Commercial bank
- Credit union
- Pension fund
- Mutual fund
A not-for-profit financial cooperative owned by its members is a:
- Credit union
- Commercial bank
- Investment bank
- Savings bond
Deposits at federally insured credit unions are insured by the:
- NCUA
- FDIC
- SEC
- OCC
A financial institution that historically focused on savings accounts and home mortgages is a:
- Savings and loan association
- Investment bank
- Brokerage firm
- Credit card company
A firm that helps companies raise money by underwriting and selling new securities is a(n):
- Investment bank
- Credit union
- Savings bank
- Finance company
A firm that buys and sells securities on behalf of investors is a:
- Brokerage firm
- Credit union
- Thrift
- Pawn shop
A company that pools money from many investors to buy a diversified portfolio of securities is a(n):
- Mutual fund
- Credit union
- Commercial bank
- Savings and loan
A business that makes loans to consumers and businesses but does not accept deposits is a:
- Finance company
- Commercial bank
- Credit union
- Savings bank
A bank that operates only online without physical branches is a(n):
- Online bank
- Credit union
- Central bank
- Investment bank
Technology companies that offer financial services such as mobile payments and lending apps are called:
- Fintech companies
- Thrifts
- Credit unions
- Central banks
A bank that is small, locally owned, and focused on its local area is a:
- Community bank
- Money center bank
- Central bank
- Investment bank
The central bank of the United States is the:
- Federal Reserve System
- U.S. Treasury
- FDIC
- Bank of America
The Federal Reserve was created in:
- 1913
- 1865
- 1933
- 1946
The Federal Reserve System has how many regional Federal Reserve Banks?
- 12
- 50
- 7
- 25
The Federal Reserve Board of Governors has how many members?
- 7
- 12
- 9
- 5
Members of the Federal Reserve Board of Governors serve terms of:
- 14 years
- 4 years
- 6 years
- Life
The Federal Reserve committee that sets monetary policy, including the target for the federal funds rate, is the:
- Federal Open Market Committee
- Board of Directors
- Senate Banking Committee
- Council of Economic Advisers
The Fed's dual mandate from Congress is to promote:
- Maximum employment and stable prices
- Higher stock prices and lower taxes
- A balanced federal budget and a strong dollar
- Bank profits and housing growth
Actions by the Federal Reserve to influence the money supply and interest rates are:
- Monetary policy
- Fiscal policy
- Trade policy
- Tax policy
Government decisions about taxing and spending are:
- Fiscal policy
- Monetary policy
- Open market operations
- Reserve requirements
The Fed's buying and selling of government securities to influence the money supply is:
- Open market operations
- Changing the reserve requirement
- Fiscal policy
- Changing the discount rate
When the Fed buys government securities from banks, the money supply generally:
- Increases
- Decreases
- Stays the same
- Is eliminated
The interest rate banks charge each other for overnight loans of reserves is the:
- Federal funds rate
- Discount rate
- Prime rate
- Mortgage rate
The interest rate the Federal Reserve charges banks for loans from its discount window is the:
- Discount rate
- Federal funds rate
- Prime rate
- Treasury yield
The interest rate banks charge their most creditworthy business customers is the:
- Prime rate
- Discount rate
- Federal funds rate
- Annual percentage yield
To fight high inflation, the Federal Reserve is most likely to:
- Raise interest rates
- Lower interest rates
- Print more currency
- Cut taxes
To stimulate a weak economy, the Federal Reserve is most likely to:
- Lower interest rates
- Raise interest rates
- Raise taxes
- Reduce government spending
In March 2020, the Federal Reserve reduced the reserve requirement for depository institutions to:
- 0%
- 10%
- 3%
- 20%
Large-scale purchases of longer-term securities by the central bank to lower long-term rates are called:
- Quantitative easing
- Fiscal stimulus
- Open-mouth policy
- Reserve tightening
The Fed serves as the "lender of last resort," meaning it:
- Provides emergency funds to banks during financial crises
- Lends directly to consumers who are denied credit
- Pays off the national debt
- Sets credit card rates
The agency that prints U.S. paper currency is the:
- Bureau of Engraving and Printing
- Federal Reserve Board
- U.S. Mint
- FDIC
The federal agency that insures deposits at banks and savings associations is the:
- FDIC
- SEC
- Federal Reserve
- CFPB
FDIC insurance covers deposits up to what amount per depositor, per insured bank, per ownership category?
- $250,000
- $100,000
- $500,000
- $1,000,000
Which product is NOT covered by FDIC insurance?
- Stocks and mutual funds bought through a bank
- Checking accounts
- Savings accounts
- Certificates of deposit
The FDIC was created in response to bank failures during the:
- Great Depression
- Civil War
- Panic of 1907
- 2008 financial crisis