Question 1

Why was the proposal by the FDIC to increase coverage of insured deposits to $200,000 greeted skeptically by most economists?

Accepted Answer

Most economists believed that

Question 2

The introduction of federal deposit insurance resulted in

Accepted Answer

A) more banking panics than had occurred previously. 
B) a decline in monitoring activities by depositors. 
C) an increase in monitoring activities by depositors. 
D) an increase in the interest rate paid on bank deposits. 
A) more banking panics than had occurred previously. 
B) a decline in monitoring activities by depositors. 
C) an increase in monitoring activities by depositors. 
D) an increase in the interest rate paid on bank deposits.

Question 3

Why did state banks begin to offer demand deposits?

Accepted Answer

A) They were prohibited by federal banking law from offering time deposits. 
B) They were prohibited by federal banking law from offering loans to small businesses. 
C) They were prohibited by federal banking law from offering loans to households. 
D) Federal banking law imposed a tax on state bank notes. 
A) They were prohibited by federal banking law from offering time deposits. 
B) They were prohibited by federal banking law from offering loans to small businesses. 
C) They were prohibited by federal banking law from offering loans to households. 
D) Federal banking law imposed a tax on state bank notes.

Question 4

During the 1980s and 1990s, the number of domestically chartered commercial banks in the United States

Accepted Answer

A) declined by more than one-third. 
B) more than doubled. 
C) more than tripled. 
D) declined by about 90%. 
A) declined by more than one-third. 
B) more than doubled. 
C) more than tripled. 
D) declined by about 90%.

Question 5

Briefly discuss the trend in recent years with respect to the relative importance for banks' earnings of traditional banking activities versus off-balance-sheet activities. Has this trend been unique to the United States? What are the consequences of this trend for bank regulation?

Accepted Answer

Since 1992, off-balance-sheet activities

Question 6

In 1998, in order to avoid contagion, the Fed

Accepted Answer

A) expanded the deposit insurance system. 
B) made substantial loans to three of the top ten U.S. banks. 
C) brought together the creditors of Long-Term Capital Management. 
D) raised interest rates. 
A) expanded the deposit insurance system. 
B) made substantial loans to three of the top ten U.S. banks. 
C) brought together the creditors of Long-Term Capital Management. 
D) raised interest rates.

Question 7

Interest rate risk

Accepted Answer

A) is currently a severe problem for banks. 
B) isn't currently much of a problem for banks. 
C) would be a very severe problem in the absence of deposit insurance. 
D) has been exacerbated by the increased use of flexible-rate financial securities. 
A) is currently a severe problem for banks. 
B) isn't currently much of a problem for banks. 
C) would be a very severe problem in the absence of deposit insurance. 
D) has been exacerbated by the increased use of flexible-rate financial securities.

Question 8

During the Free Banking Period

Accepted Answer

A) banks were not allowed to charge interest on loans. 
B) banks were not allowed to charge fees to depositors. 
C) banking was conducted with little government intervention. 
D) the Second Bank of the United States was in operation. 
A) banks were not allowed to charge interest on loans. 
B) banks were not allowed to charge fees to depositors. 
C) banking was conducted with little government intervention. 
D) the Second Bank of the United States was in operation.

Question 9

A national bank is subject to examination by which of the following?

Accepted Answer

A) Securities and Exchange Commission 
B) Office of the Comptroller of the Currency 
C) Federal Reserve 
D) FDIC 
A) Securities and Exchange Commission 
B) Office of the Comptroller of the Currency 
C) Federal Reserve 
D) FDIC

Question 10

As of 2006, about what percentage of U.S. banks have less than $100 million in assets?

Accepted Answer

A) 20% 
B) 46% 
C) 54% 
D) 98% 
A) 20% 
B) 46% 
C) 54% 
D) 98%

Question 11

Between 1934 and 1981 about how many banks failed per year in the United States?

Accepted Answer

A) 0 
B) 10 
C) 100 
D) 1000 
A) 0 
B) 10 
C) 100 
D) 1000

Question 12

States that restrict banks to having a single branch are said to require

Accepted Answer

A) mono banking. 
B) nonbank banking. 
C) unit banking. 
D) semi-banking. 
A) mono banking. 
B) nonbank banking. 
C) unit banking. 
D) semi-banking.

Question 13

Universal banking refers to

Accepted Answer

A) banks with branches in every state. 
B) banks involved in nonfinancial activities. 
C) banks with branches in foreign countries. 
D) banks which underwrite financial securities. 
A) banks with branches in every state. 
B) banks involved in nonfinancial activities. 
C) banks with branches in foreign countries. 
D) banks which underwrite financial securities.

Question 14

Between 1995 and 2000

Accepted Answer

A) the growth in size of foreign banks meant that the United States no longer had any banks among the 30 largest in the world. 
B) mergers resulted in two U.S. banks becoming among the ten largest in the world. 
C) mergers resulted in the ten largest banks in the world all being U.S. banks. 
D) mergers resulted in the 30 largest banks in the world all being U.S. banks. 
A) the growth in size of foreign banks meant that the United States no longer had any banks among the 30 largest in the world. 
B) mergers resulted in two U.S. banks becoming among the ten largest in the world. 
C) mergers resulted in the ten largest banks in the world all being U.S. banks. 
D) mergers resulted in the 30 largest banks in the world all being U.S. banks.

Question 15

When did the charter of the Second Bank of the United States expire?

Accepted Answer

A) 1791 
B) 1836 
C) 1863 
D) 1993 
A) 1791 
B) 1836 
C) 1863 
D) 1993

Question 16

Suppose a group of investors decide they want to establish a bank. How would they go about doing so?

Accepted Answer

To start a federally chartered bank, an

Question 17

A bank run involves

Accepted Answer

A) a failure by a bank to get the maximum return on its investments. 
B) large numbers of depositors withdrawing their deposits within a short period of time. 
C) a bank being forced out of business. 
D) fraud on the part of a bank's managers. 
A) a failure by a bank to get the maximum return on its investments. 
B) large numbers of depositors withdrawing their deposits within a short period of time. 
C) a bank being forced out of business. 
D) fraud on the part of a bank's managers.

Question 18

The McFadden Act of 1927

Accepted Answer

A) separated commercial banking from investment banking. 
B) put a tax on the issuance of bank notes by state banks. 
C) prohibited national banks from operating branches outside their home states. 
D) established the Federal Reserve System. 
A) separated commercial banking from investment banking. 
B) put a tax on the issuance of bank notes by state banks. 
C) prohibited national banks from operating branches outside their home states. 
D) established the Federal Reserve System.

Question 19

Currently, the FDIC insures deposits up to a limit of

Accepted Answer

A) $1000. 
B) $2500. 
C) $100,000. 
D) $1,000,000. 
A) $1000. 
B) $2500. 
C) $100,000. 
D) $1,000,000.

Question 20

For much of the post-World War II period, Japanese firms have depended greatly on bank loans because

Accepted Answer

A) most Japanese firms are owned by banks. 
B) interest on bank loans in Japan is deductible on the corporate income tax, while interest on corporate bonds is not. 
C) most investors found Japanese stock and bonds too risky. 
D) the Japanese government kept firms from issuing securities abroad or risky debt instruments at home. 
A) most Japanese firms are owned by banks. 
B) interest on bank loans in Japan is deductible on the corporate income tax, while interest on corporate bonds is not. 
C) most investors found Japanese stock and bonds too risky. 
D) the Japanese government kept firms from issuing securities abroad or risky debt instruments at home.

Exam 14: The Banking Industry

Why was the proposal by the FDIC to increase coverage of insured deposits to $200,000 greeted skeptically by most economists?

The introduction of federal deposit insurance resulted in

Why did state banks begin to offer demand deposits?

During the 1980s and 1990s, the number of domestically chartered commercial banks in the United States

Briefly discuss the trend in recent years with respect to the relative importance for banks' earnings of traditional banking activities versus off-balance-sheet activities. Has this trend been unique to the United States? What are the consequences of this trend for bank regulation?

In 1998, in order to avoid contagion, the Fed

Interest rate risk

During the Free Banking Period

A national bank is subject to examination by which of the following?

As of 2006, about what percentage of U.S. banks have less than $100 million in assets?

Between 1934 and 1981 about how many banks failed per year in the United States?

States that restrict banks to having a single branch are said to require

Universal banking refers to

Between 1995 and 2000

When did the charter of the Second Bank of the United States expire?

Suppose a group of investors decide they want to establish a bank. How would they go about doing so?

A bank run involves

The McFadden Act of 1927

Currently, the FDIC insures deposits up to a limit of

For much of the post-World War II period, Japanese firms have depended greatly on bank loans because

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

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