Question 1

A distinguishing feature of German banking, compared with U.S. and Japanese banking, is

Accepted Answer

A) German banks may operate only a single branch. 
B) the German government closely regulates the interest rate German banks may charge. 
C) Germany allows universal banking. 
D) German banks may make no investments outside the country. 
A) German banks may operate only a single branch. 
B) the German government closely regulates the interest rate German banks may charge. 
C) Germany allows universal banking. 
D) German banks may make no investments outside the country.

Question 2

Bank holding companies are

Accepted Answer

A) banks that own nonfinancial companies. 
B) banks that are technically bankrupt but whose assets have not yet been sold off. 
C) nonbank banks. 
D) large companies that hold many different banks as subsidiaries. 
A) banks that own nonfinancial companies. 
B) banks that are technically bankrupt but whose assets have not yet been sold off. 
C) nonbank banks. 
D) large companies that hold many different banks as subsidiaries.

Question 3

Which of the following is NOT true of membership in the FDIC?

Accepted Answer

A) All commercial banks are members of the FDIC. 
B) All national banks are members of the FDIC. 
C) Most large state banks are members of the FDIC. 
D) Some state banks are not members of the FDIC. 
A) All commercial banks are members of the FDIC. 
B) All national banks are members of the FDIC. 
C) Most large state banks are members of the FDIC. 
D) Some state banks are not members of the FDIC.

Question 4

An important private arrangement to deal with bank runs during the pre-Federal Reserve period was called

Accepted Answer

A) the New York Clearing House. 
B) the Federal Funds Market. 
C) Check Clearing, Inc. 
D) the Bank Loan Fund. 
A) the New York Clearing House. 
B) the Federal Funds Market. 
C) Check Clearing, Inc. 
D) the Bank Loan Fund.

Question 5

During a banking panic, a lender of last resort will

Accepted Answer

A) purchase banks which are having difficulty but appear sound. 
B) make loans to solvent but illiquid banks. 
C) make loans to insolvent but liquid banks. 
D) make loans to any banks which request them. 
A) purchase banks which are having difficulty but appear sound. 
B) make loans to solvent but illiquid banks. 
C) make loans to insolvent but liquid banks. 
D) make loans to any banks which request them.

Question 6

When was the Free Banking Period?

Accepted Answer

A) 1791-1836 
B) 1836-1863 
C) 1863-1914 
D) 1914-1990 
A) 1791-1836 
B) 1836-1863 
C) 1863-1914 
D) 1914-1990

Question 7

About what percentage of depositors are fully insured under FDIC?

Accepted Answer

A) 1% 
B) 5% 
C) 50% 
D) 99% 
A) 1% 
B) 5% 
C) 50% 
D) 99%

Question 8

Geographic restrictions on banks

Accepted Answer

A) reduce their ability to take advantage of economies of scale. 
B) raise the costs of their providing risk-sharing, liquidity, and information services. 
C) reduce their exposure to credit risk. 
D) reduce the amount of local lending they undertake. 
A) reduce their ability to take advantage of economies of scale. 
B) raise the costs of their providing risk-sharing, liquidity, and information services. 
C) reduce their exposure to credit risk. 
D) reduce the amount of local lending they undertake.

Question 9

The main reason banks are prohibited from investing deposits in common stocks is that

Accepted Answer

A) the federal government does not want banks to provide competition for stockbrokers. 
B) worrying about fluctuations in stock prices might distract bank managers from their other activities. 
C) the existence of deposit insurance gives bank managers an incentive to make risky investments. 
D) common stocks are not very liquid investments. 
A) the federal government does not want banks to provide competition for stockbrokers. 
B) worrying about fluctuations in stock prices might distract bank managers from their other activities. 
C) the existence of deposit insurance gives bank managers an incentive to make risky investments. 
D) common stocks are not very liquid investments.

Question 10

The FDIC was created in

Accepted Answer

A) 1863. 
B) 1913. 
C) 1934. 
D) 1991. 
A) 1863. 
B) 1913. 
C) 1934. 
D) 1991.

Question 11

The CAMELS rating system

Accepted Answer

A) allows bank loan officers to assess the creditworthiness of borrowers. 
B) is part of the means by which regulators deal with moral hazard problems in banking. 
C) was phased out during the 1980s. 
D) applies to state-chartered banks, but not to federally-chartered banks. 
A) allows bank loan officers to assess the creditworthiness of borrowers. 
B) is part of the means by which regulators deal with moral hazard problems in banking. 
C) was phased out during the 1980s. 
D) applies to state-chartered banks, but not to federally-chartered banks.

Question 12

Which banks are members of the Federal Reserve System?

Accepted Answer

A) Only national banks 
B) Only state banks 
C) National banks and some state banks 
D) Only bank holding companies 
A) Only national banks 
B) Only state banks 
C) National banks and some state banks 
D) Only bank holding companies

Question 13

As of September 1995,

Accepted Answer

A) states could permit interstate mergers within their own borders. 
B) interstate mergers were banned. 
C) bank holding companies were prohibited from acquiring banks in other states. 
D) interest rates on bank loans were standardized across states. 
A) states could permit interstate mergers within their own borders. 
B) interstate mergers were banned. 
C) bank holding companies were prohibited from acquiring banks in other states. 
D) interest rates on bank loans were standardized across states.

Question 14

The failure of financially healthy banks is particularly likely to hurt

Accepted Answer

A) large corporations. 
B) sellers of corporate bonds. 
C) the federal government's attempts to sell its securities. 
D) households and small and medium-sized businesses. 
A) large corporations. 
B) sellers of corporate bonds. 
C) the federal government's attempts to sell its securities. 
D) households and small and medium-sized businesses.

Question 15

Federal deposit insurance for credit unions is provided by the

Accepted Answer

A) Office of Thrift Supervision. 
B) FDIC. 
C) National Credit Union Share Insurance Fund. 
D) Federal Reserve System. 
A) Office of Thrift Supervision. 
B) FDIC. 
C) National Credit Union Share Insurance Fund. 
D) Federal Reserve System.

Question 16

National banks are supervised by the

Accepted Answer

A) Office of the Comptroller of the Currency. 
B) Office of Bank Supervision. 
C) Securities and Exchange Commission. 
D) Office of Management and the Budget. 
A) Office of the Comptroller of the Currency. 
B) Office of Bank Supervision. 
C) Securities and Exchange Commission. 
D) Office of Management and the Budget.

Question 17

Compared to the banking systems in other major industrial countries, the banking system in the United States has

Accepted Answer

A) fewer banks and is more concentrated. 
B) more banks and is more concentrated. 
C) fewer banks and is less concentrated. 
D) more banks and is less concentrated. 
A) fewer banks and is more concentrated. 
B) more banks and is more concentrated. 
C) fewer banks and is less concentrated. 
D) more banks and is less concentrated.

Question 18

When the payoff method is used to handle a bank failure,

Accepted Answer

A) the bank is allowed to remain open. 
B) all depositors, insured and uninsured, receive their deposits back. 
C) insured depositors receive their deposits back only if the bank's assets can be sold for a sufficient amount. 
D) the bank is closed and all insured depositors receive their deposits back. 
A) the bank is allowed to remain open. 
B) all depositors, insured and uninsured, receive their deposits back. 
C) insured depositors receive their deposits back only if the bank's assets can be sold for a sufficient amount. 
D) the bank is closed and all insured depositors receive their deposits back.

Question 19

The Federal Reserve System was created in

Accepted Answer

A) 1836. 
B) 1863. 
C) 1913. 
D) 1945. 
A) 1836. 
B) 1863. 
C) 1913. 
D) 1945.

Question 20

Critics of allowing bank examiners too much discretion argue that doing so results in banks

Accepted Answer

A) charging higher interest rates on loans. 
B) being too conservative in making loans. 
C) having to pay bribes in order to receive favorable examiners' reports. 
D) declining to accept deposits from some depositors. 
A) charging higher interest rates on loans. 
B) being too conservative in making loans. 
C) having to pay bribes in order to receive favorable examiners' reports. 
D) declining to accept deposits from some depositors.

Exam 14: The Banking Industry

A distinguishing feature of German banking, compared with U.S. and Japanese banking, is

Bank holding companies are

Which of the following is NOT true of membership in the FDIC?

An important private arrangement to deal with bank runs during the pre-Federal Reserve period was called

During a banking panic, a lender of last resort will

When was the Free Banking Period?

About what percentage of depositors are fully insured under FDIC?

Geographic restrictions on banks

The main reason banks are prohibited from investing deposits in common stocks is that

The FDIC was created in

The CAMELS rating system

Which banks are members of the Federal Reserve System?

As of September 1995,

The failure of financially healthy banks is particularly likely to hurt

Federal deposit insurance for credit unions is provided by the

National banks are supervised by the

Compared to the banking systems in other major industrial countries, the banking system in the United States has

When the payoff method is used to handle a bank failure,

The Federal Reserve System was created in

Critics of allowing bank examiners too much discretion argue that doing so results in banks

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

Banking Regulation: Crisis and Response

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