Questions and Answers
How do bank deposits help the nation's economy?
By giving banks the money to loan and invest.
Who mostly directly benefits when banks make a profit? (Select all that apply)
A fee banks charge in exchange for borrowing money is called _______
interest
What is one responsibility the Federal Reserve has?
Signup and view all the answers
An entrepreneur who needs money to create and distribute a new invention would most likely visit which type of banker?
Signup and view all the answers
Based on the diagram of banking in the financial sector, what example describes how a bank injects money into the economy?
Signup and view all the answers
Where does the Federal Reserve transfer profits from its twelve regional banks?
Signup and view all the answers
Banks pay interest to customers through a _______
Signup and view all the answers
What conclusion can be drawn from the graph about mortgage interest rates and housing starts between 1978 and 1983?
Signup and view all the answers
How do central banks govern the banking industry? (Select all that apply)
Signup and view all the answers
Study Notes
Bank Deposits and Economic Impact
- Bank deposits empower financial institutions to provide loans and make investments that stimulate the economy.
Benefits of Bank Profits
- Profits made by banks primarily benefit shareholders, companies, and the economy as a whole.
Borrowing Costs
- The fee charged by banks for lending money is known as interest.
Federal Reserve Responsibilities
- A key responsibility of the Federal Reserve is to lend money to banks in times of financial crises.
Funding for Entrepreneurs
- Entrepreneurs seeking funds to develop and distribute new inventions typically do not go to a commercial banker for financial assistance.
Banking and Circular Flow Model
- When a bank approves a mortgage for a customer, it serves as an example of how banking injects money into the economy within the circular flow model.
Federal Reserve Profit Transfers
- The Federal Reserve allocates profits from its twelve regional banks to the Department of the Treasury.
Customer Interest Payments
- Banks offer interest payments to customers through savings accounts, rewarding them for their deposits.
Mortgage Interest Rates and Housing Market
- Analyzing data from 1983 indicates that falling mortgage interest rates led to an increase in new home starts during that period.
Governance of the Banking Industry
- Central banks oversee the banking sector by managing reserve requirements, supervising the payment system, responding swiftly to banking crises, and conducting audits based on existing regulations.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your knowledge on banking concepts with these flashcards. Learn key terms related to bank deposits, profits, interest rates, and the Federal Reserve's responsibilities. Ideal for students studying finance or anyone interested in understanding banking better.
