Learn Mode

Banking System and Money Creation Quiz

#1

Which institution regulates the banking system in the United States?

Federal Reserve System
Explanation

Central authority overseeing US banking operations.

#2

What is the primary function of commercial banks?

Providing loans and accepting deposits
Explanation

Core activities: lending and deposit-taking.

#3

What is the term for the process of converting assets into cash?

Liquidation
Explanation

Converting holdings to cash.

#4

Which of the following is NOT a function of a central bank?

Providing loans to individuals
Explanation

Individual lending is not central bank role.

#5

What is the term for the interest rate that banks charge each other for overnight loans?

Federal funds rate
Explanation

Overnight interbank lending rate.

#6

Which of the following is NOT a function of money?

Unit of labor
Explanation

Money's role as labor measure.

#7

What is the term for the minimum amount of reserves that banks are required to hold by the central bank?

Required reserves
Explanation

Mandatory bank funds set by the central bank.

#8

What is the process by which banks create money through the issuance of loans?

Fractional reserve banking
Explanation

Money creation via lending from reserves.

#9

What is the term for the ratio of a bank's reserves to its total deposits?

Reserve requirement ratio
Explanation

Ratio governing bank reserve levels.

#10

Which of the following tools is used by central banks to control the money supply?

Reserve requirements
Explanation

Setting mandatory reserve levels.

#11

What is the term for the total value of all goods and services produced in a country within a given time period?

Gross domestic product (GDP)
Explanation

Aggregate economic output value.

#12

Which of the following is a tool of monetary policy used by central banks to influence the economy?

Open market operations
Explanation

Market activities for monetary control.

#13

What is the name for the interest rate at which the central bank lends money to commercial banks?

Discount rate
Explanation

Rate for central bank loans to banks.

#14

What is the term for the risk that a borrower may not repay a loan?

Credit risk
Explanation

Risk of loan non-repayment.

#15

What is the term for a situation where inflation rises rapidly, leading to a decrease in the purchasing power of money?

Hyperinflation
Explanation

Severe, rapid inflation occurrence.

#16

What is the term for a period of declining economic activity characterized by high unemployment and reduced production?

Recession
Explanation

Economic downturn phase.

#17

What is the term for the risk that an investment's value will decline due to factors specific to that investment?

Diversifiable risk
Explanation

Risk mitigated through portfolio diversification.

Test Your Knowledge

Craft your ideal quiz experience by specifying the number of questions and the difficulty level you desire. Dive in and test your knowledge - we have the perfect quiz waiting for you!