Question 1

Banks responded to their loss of borrowers to the commercial paper market by offering

Accepted Answer

A) standby letters of credit. 
B) negotiable certificates of deposit. 
C) NOW accounts. 
D) money market deposit accounts. 
A) standby letters of credit. 
B) negotiable certificates of deposit. 
C) NOW accounts. 
D) money market deposit accounts.

Question 2

An ATS account

Accepted Answer

A) converts a corporation's checking account balance at the end of the day into an overnight RP. 
B) is the name given to NOW accounts outside of New England. 
C) are negotiable certificates of deposit of less than $100,000. 
D) were used during the Great Depression by depositors who had lost faith in conventional checking accounts. 
A) converts a corporation's checking account balance at the end of the day into an overnight RP. 
B) is the name given to NOW accounts outside of New England. 
C) are negotiable certificates of deposit of less than $100,000. 
D) were used during the Great Depression by depositors who had lost faith in conventional checking accounts.

Question 3

Because of the bank failures of the early 1930s, many small and medium-sized businesses were

Accepted Answer

A) forced to move from bank loans to stock sales to raise funds. 
B) unable to obtain credit. 
C) forced to move from bank loans to bond sales to raise funds. 
D) forced to rely on government loans for credit. 
A) forced to move from bank loans to stock sales to raise funds. 
B) unable to obtain credit. 
C) forced to move from bank loans to bond sales to raise funds. 
D) forced to rely on government loans for credit.

Question 4

All of the following agencies share bank supervision EXCEPT

Accepted Answer

A) FSLIC. 
B) Office of Thrift Supervision. 
C) Federal Reserve. 
D) Comptroller of the Currency. 
A) FSLIC. 
B) Office of Thrift Supervision. 
C) Federal Reserve. 
D) Comptroller of the Currency.

Question 5

For a lender of last resort to be effective

Accepted Answer

A) it must operate in an economic environment of low interest rates. 
B) its promise to lend to banks during a crisis must be credible and carried out quickly. 
C) the banks it lends to cannot be illiquid. 
D) the economy must not experience periods of recession. 
A) it must operate in an economic environment of low interest rates. 
B) its promise to lend to banks during a crisis must be credible and carried out quickly. 
C) the banks it lends to cannot be illiquid. 
D) the economy must not experience periods of recession.

Question 6

What was the main reason Congress passed the Garn-St. Germain Act of 1982?

Accepted Answer

A) To phase out Regulation Q 
B) To pump additional funds into the FDIC 
C) To combat problems caused by the gradual demise of Regulation Q 
D) To strengthen the market for municipal bonds 
A) To phase out Regulation Q 
B) To pump additional funds into the FDIC 
C) To combat problems caused by the gradual demise of Regulation Q 
D) To strengthen the market for municipal bonds

Question 7

Why did the federal government until fairly recently put restrictions on interstate banking? Did those restrictions increase the stability of the banking system?

Accepted Answer

Fear of concentrated economic and financ

Question 8

The fourth stage in the regulatory process is

Accepted Answer

A) a banking crisis. 
B) response by the financial system. 
C) regulation. 
D) regulatory response. 
A) a banking crisis. 
B) response by the financial system. 
C) regulation. 
D) regulatory response.

Question 9

The third stage in the regulatory process is

Accepted Answer

A) a banking crisis. 
B) response by the financial system. 
C) regulation. 
D) regulatory response. 
A) a banking crisis. 
B) response by the financial system. 
C) regulation. 
D) regulatory response.

Question 10

In a repurchase agreement, a corporation

Accepted Answer

A) agrees to buy back previously issued stock. 
B) agrees to pay back a bank loan whenever the bank asks it to. 
C) purchases Treasury bills from a bank and the bank commits to repurchase them the next day. 
D) guarantees the quality of its goods by offering to buy them back if the customer is dissatisfied. 
A) agrees to buy back previously issued stock. 
B) agrees to pay back a bank loan whenever the bank asks it to. 
C) purchases Treasury bills from a bank and the bank commits to repurchase them the next day. 
D) guarantees the quality of its goods by offering to buy them back if the customer is dissatisfied.

Question 11

During the early 1980s, regulators kept many insolvent or nearly insolvent thrifts from being closed by

Accepted Answer

A) underestimating the value of goodwill that thrifts carried on their books as an asset. 
B) allowing many assets to be carried on the books at face value rather than market value. 
C) reducing the face value of many mortgages to current market value. 
D) allowing them to pay interest rates to depositors that were below the going market rates. 
A) underestimating the value of goodwill that thrifts carried on their books as an asset. 
B) allowing many assets to be carried on the books at face value rather than market value. 
C) reducing the face value of many mortgages to current market value. 
D) allowing them to pay interest rates to depositors that were below the going market rates.

Question 12

Regulation Q was intended to

Accepted Answer

A) maintain banks' profitability by limiting competition for funds. 
B) increase the reserves banks would hold against demand deposits. 
C) increase the reserves banks would hold against time deposits. 
D) eliminate the need for discount loans. 
A) maintain banks' profitability by limiting competition for funds. 
B) increase the reserves banks would hold against demand deposits. 
C) increase the reserves banks would hold against time deposits. 
D) eliminate the need for discount loans.

Question 13

What is the payments system?

Accepted Answer

A) The means of clearing transactions in the economy by check 
B) The system by which exchange rates between currencies are determined 
C) The means by which credit card companies calculate average daily balances for purposes of imposing finance charges 
D) The system for transmitting funds from the U.S. Treasury to local banks for the purpose of making purchases for the federal government 
A) The means of clearing transactions in the economy by check 
B) The system by which exchange rates between currencies are determined 
C) The means by which credit card companies calculate average daily balances for purposes of imposing finance charges 
D) The system for transmitting funds from the U.S. Treasury to local banks for the purpose of making purchases for the federal government

Exam 15: Banking Regulation: Crisis and Response

Banks responded to their loss of borrowers to the commercial paper market by offering

An ATS account

Because of the bank failures of the early 1930s, many small and medium-sized businesses were

All of the following agencies share bank supervision EXCEPT

For a lender of last resort to be effective

What was the main reason Congress passed the Garn-St. Germain Act of 1982?

Why did the federal government until fairly recently put restrictions on interstate banking? Did those restrictions increase the stability of the banking system?

The fourth stage in the regulatory process is

The third stage in the regulatory process is

In a repurchase agreement, a corporation

During the early 1980s, regulators kept many insolvent or nearly insolvent thrifts from being closed by

Regulation Q was intended to

What is the payments system?

Introducing Money and the Financial System

Money and the Payments System

Overview of the Financial System

Interest Rates and Rates of Return

The Theory of Portfolio Allocation

Determining Market Interest Rates

Risk Structure and Term Structure of Interest Rates

The Foreign-Exchange Market and Exchange Rates

Derivative Securities and Derivative Markets

Information and Financial Market Efficiency

Reducing Transactions Costs and Information Costs

What Financial Institutions Do

The Business of Banking

The Banking Industry

Banking in the International Economy

The Money Supply Process

Changes in the Monetary Base

Organization of Central Banks

Monetary Policy Tools

The Conduct of Monetary Policy

The International Financial System and Monetary Policy

The Demand for Money

Linking the Financial System and the Economy: the Is-Lm-Fe Model

Aggregate Demand and Aggregate Supply

Money and Output in the Short Run

Information Problems and Channels for Monetary Policy

Inflation: Causes and Consequences

Filters