Inside the Bank's Pool of Money: teacher key

How Banks Work, grade 9 edition, written for 9th grade. A bank takes in deposits and lends much of the money out. Interest, kinds of banks, bank runs, deposit insurance and the Federal Reserve all come into the story.

Read the book. Print this page for the key.

Questions and answers

1. What happens to a deposited bill at a bank?
   • It is kept in its own box
   • It is mixed with other cash (answer)
   • It is sent to the Fed
2. How does a bank make money from loans?
   • By paying savers more than borrowers pay
   • By charging borrowers more than it pays savers (answer)
   • By charging savers a fee for every deposit
3. When was the FDIC created by Congress?
   • In the Banking Act of 1933 (answer)
   • In the Federal Reserve Act of 1913
   • After the panic of 1907
4. What made even healthy banks fail before deposit insurance?
   • Banks had stopped lending to anyone
   • The Fed had cut its number of banks
   • Rumors made many people withdraw at once (answer)
5. A deposit that is insured is what?
   • Lent out to borrowers first
   • Protected if the bank fails (answer)
   • Kept in a box at the branch

Words

• deposit: money put in
• withdrawal: money taken out
• interest: extra money paid
• overdraft: spending beyond funds
• insured: protected