[SOURCE] Prelims Flashcards by Rochelle Joy A. Macayan

[TRUE OR FALSE] A bank’s reserves consist of its vault cash and its deposits at the Bangko Sentral ng Pilpinas (BSP).

True

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[TRUE OR FALSE] Banking systems provide credit opportunities, facilitate fund flow into the economy, ensure financial generation for deVelopment and growth, and provide payment options.

TRUE

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[TRUE OR FALSE] When individuals withdraw cash from checking accounts, the money supply is unaffected.

FALSE

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[TRUE OR FALSE] Complying with the reserve requirement guarantees a bank’s solvency.

False

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[TRUE OR FALSE] The purpose of the banking system is to provide an easy way for people to pay for goods and services, save their money, transfer money between accounts.

TRUE

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[TRUE OR FALSE] A financial intermediary transfers funds from borrowers to lenders by creating claims on itself

FALSE

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[TRUE OR FALSE] Banks lend the money they receive from their depositors.

FALSE

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[TRUE OR FALSE] Some countries do not impose a minimum reserve requirement on their banks.

TRUE

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[TRUE OR FALSE] Banks create monetary base money when they issue loans.

FALSE

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[TRUE OR FALSE] A bank’s own money is at risk when it issues a loan.

TRUE

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Financial institutions that accept deposits and make loans are called

a. exchanges
b. banks
c. over-the-counter markets
d. finance companies

b. banks

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Financial intermediaries

a. provide a channel for linking those who want to save with those who want to invest.
b. produce nothing of value and are therefore a drain on society’s resources.
c. can hurt the performance of the economy.
d. hold very litte of the average American’s wealth
e. create inflation

a. provide a channel for linking those who want to save with those who want to invest.

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Checks:

a. are orders to depository institutions to transfer money to the party who received the check
b. may be safely sent in the mail
c. provide a record of payment
d. all of the above
e. none of the above

e. none of the above

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This account type is used to set aside finances for future use. Most of these accounts pay interest on the deposits over time and have no debit or credit cards. This accounts are opened as a better place to keep the money for use at a later date, separate one’s from everyday spending cash, and provide safety of finances.

a. Savings Account
b. Checking Account
c. Money Market Accounts (MMAs)
d. Certificate of Time Deposits (CTDs)

a. Savings Account

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Banks and other financial institutions engage in financial intermediation, which

a. can hurt the performance of the economy.
b. can benefit economic performance.
c. has no effect on economic performance.
d. involves borrowing from investors and lending to savers.

b. can benefit economic performance.

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A form of working account and is operated through the use of checks.

a. Demand Deposit
b. Time Deposits
c. Money Market and Mutual Funds
d. Savings Accounts

a. Demand Deposit

ATM means

a. Any Time Money
b. Auto Truck of Mahindra
c. Automated Teller Machine
d. None of above

c. Automated Teller Machine

What is the government instrumentality created in 1963 by virtue of Republic Act 3591 to insure deposits of all banks which are entitled to the benefits of insurance and considered as an attached agency of the Department of Finance?

a. Development Bank of the Phillppines (DBP)
b. Land Bank of the Phillipines (LBP)
c. Phllppine Deposit Insurance Corporation (PDIC)
d. Bangko Sentral ng Pilipinas (BSP)

c. Phllppine Deposit Insurance Corporation (PDIC)

What is the possible maximum deposit insurance coverage if a depositor has several valid single accounts in a closed bank?

a. P1,000,000.00
b. P500,000.00
c. P750,000.00
d. P1,500,000.00

b. P500,000.00

Non-interest bearing checking accounts are known as

a. Demand deposits
b. NOW accounts
c. Money market deposit accounts
d. money market mutual funds

a. Demand deposits

The system that allows people to buy and sell goods and services to each other.

a. Financial Institution
b. Financial Market
c. Financial Instrument
d. Financial Services
e. Financial Guidelines

b. Financial Market

This includes institutional and infrastructure arrangement and processes through which money is transferred from one party to another

a. Price stability
b. Financial stability
c. Efficient payment and settlement system
d. Efficient management of the Philippine Banking System

c. Efficient payment and settlement system

Which of the following is insured by PDIC?

a. Savings deposit
b. Demand draft
c. Telegraphic Notes
d. Telegram Notes

a. Savings deposit

A bank can make new loans as long as it has

a. excess reserves
b. required reserves
c. reserves
d. capital

a. excess reserves

Channeling funds from individuals with surplus funds to those desiring funds when the saver does not purchase the borrower's security Is known as a. Barter b. Redistribution c. Financial Intermediation d. Taxation

c. Financial Intermediation

A financial crisis is a. not possible in the nodern financial environment b. a major disruption in the financial markets. c. a feature of developing economies only. d. typically followed by an economic boom e. guarantee bankers act in an ethical manner

b. a major disruption in the financial markets.

A bank can create new money only when a. its reserves fall below the amount required by the Federal Reserve. b. it has excess reserves c. it has vault cash d. it is loaned up

b. it has excess reserves

Organization that offers financial services. a. Financial Institution b. Financial Market c. Financial Instrument d. Financial Services e. Financial Guidelines

b. Financial Market

The actual exchange of assets for goods or services. a. Financial Institution b. Financial Market c. Financial Transaction d. Financial Services e. Financial Guidelines

c. Financial Transaction

Bank regulations: a. can prevent bank failures. b. can eliminate economic risk for banks. c. serve as guldelines for sound operating policies. d. guarantee bankers will make sound management decisions. e. guarantee bankers act in an ethical manner.

c. serve as guldelines for sound operating policies.

Banks, savings and loan associations, mutual savings banks, and credit unions a. are no longer important players in financial intermediation. b. since deregulation now provides services only to small depositors are no longer important players in financial intermediation. B. since deregulation now provides services only to small depositors c. have been adept at innovating in response to changes in the regulatory environment. d. produce nothing of value and are therefore a drain on society's resources,

c. have been adept at innovating in response to changes in the regulatory environment.

Banks are important to the study of money and the economy because they a. channel funds from investors to savers. b. have been a source of rapid financial innovation c. are the only important financial institutions in the U.S. economy d. typically followed by an economic boom e. create inflation

b. have been a source of rapid financial innovation

What is the possible maximum deposit insurance coverage if a depositor has several valid single accounts and valid joint accounts in a closed bank? a. P1,000,000 b. P500,000 c. P750,000 d. P1,500,000

a. P1,000,000

Which of the following deposits in NOT insured by PDIC? a. Savings Deposit b. Special Savings Deposit c. Curent Deposit d. Certificate of Time Deposit e. Telegraphic Notes or Telegram Notes

e. Telegraphic Notes or Telegram Notes

Which of the following banking instruments has a fixed term and is intended to be held to maturity? a. Demand deposit b. Time deposit c. Money market and mutual funds d. Savings Accounts

b. Time deposit

The financial intermediaries that the average person interacts with most frequently are _____. a. exchanges b. banks c. over-the-counter markets d. finance companies

b. banks