Question 1

A major difference between the British-style and Japanese banking systems is that ________.

Accepted Answer

A)  British-style banks are allowed to hold substantial equity stakes in commercial firms, whereas Japanese banks cannot 
B)  Japanese banks are allowed to hold substantial equity stakes in commercial firms, whereas British-style banks cannot 
C)  bank holding companies are illegal in British-style banks 
D)  Japanese banks are usually organized as bank holding companies 
A)  British-style banks are allowed to hold substantial equity stakes in commercial firms, whereas Japanese banks cannot 
B)  Japanese banks are allowed to hold substantial equity stakes in commercial firms, whereas British-style banks cannot 
C)  bank holding companies are illegal in British-style banks 
D)  Japanese banks are usually organized as bank holding companies

Question 2

Which of the following is a true statement concerning bank holding companies?

Accepted Answer

A)  Bank holding companies own few large banks. 
B)  Bank holding companies are an important advantage to circumvent restrictive branching regulations. 
C)  The McFadden Act has prevented bank holding companies from establishing branch banks. 
D)  Bank holding companies can own only banks. 
A)  Bank holding companies own few large banks. 
B)  Bank holding companies are an important advantage to circumvent restrictive branching regulations. 
C)  The McFadden Act has prevented bank holding companies from establishing branch banks. 
D)  Bank holding companies can own only banks.

Question 3

Banking consolidation in Canada will result in ________.

Accepted Answer

A)  an increased number of small banks 
B)  an increase in bank size 
C)  a reduction in bank size 
D)  elimination of small banks 
A)  an increased number of small banks 
B)  an increase in bank size 
C)  a reduction in bank size 
D)  elimination of small banks

Question 4

Money market mutual funds ________.

Accepted Answer

A)  function as interest-earning chequing accounts 
B)  are legally deposits 
C)  are subject to reserve requirements 
D)  have an interest-rate ceiling 
A)  function as interest-earning chequing accounts 
B)  are legally deposits 
C)  are subject to reserve requirements 
D)  have an interest-rate ceiling

Question 5

The process in which people take their funds out of the banking system seeking higher-yielding securities is called ________.

Accepted Answer

A)  capital mobility 
B)  loophole mining 
C)  disintermediation 
D)  deposit jumping 
A)  capital mobility 
B)  loophole mining 
C)  disintermediation 
D)  deposit jumping

Question 6

In a ________ banking system, commercial banks are allowed to hold equity stakes in commercial firms.

Accepted Answer

A)  British 
B)  German 
C)  Japanese 
D)  North American 
A)  British 
B)  German 
C)  Japanese 
D)  North American

Question 7

A debit card differs from a credit card in that ________.

Accepted Answer

A)  a debit card is a loan while for a credit card purchase, payment is made immediately 
B)  a debit card is a long-term loan while a credit card is a short-term loan 
C)  a credit card is a loan while for a debit card purchase, payment is made immediately 
D)  a credit card is a long-term loan while a debit card is a short-term loan 
A)  a debit card is a loan while for a credit card purchase, payment is made immediately 
B)  a debit card is a long-term loan while a credit card is a short-term loan 
C)  a credit card is a loan while for a debit card purchase, payment is made immediately 
D)  a credit card is a long-term loan while a debit card is a short-term loan

Question 8

The entry of GM and Walmart into the credit card business is an indication of ________.

Accepted Answer

A)  government's efforts to deregulate the provision of financial services 
B)  the rising profitability of credit card operations 
C)  the reduction in costs of credit card operations since 1990 
D)  the sale of unprofitable operations by Bank of America and Citicorp 
A)  government's efforts to deregulate the provision of financial services 
B)  the rising profitability of credit card operations 
C)  the reduction in costs of credit card operations since 1990 
D)  the sale of unprofitable operations by Bank of America and Citicorp

Question 9

The business term for economies of scope is ________.

Accepted Answer

A)  economies of scale 
B)  diversification 
C)  cooperation 
D)  synergies 
A)  economies of scale 
B)  diversification 
C)  cooperation 
D)  synergies

Question 10

Prior to 2008, a U.S. bank's cost of holding reserves equaled ________.

Accepted Answer

A)  the interest paid on deposits times the amount of reserves 
B)  the interest paid on deposits times the amount of deposits 
C)  the interest earned on loans times the amount of loans 
D)  the interest earned on loans times the amount on reserves 
A)  the interest paid on deposits times the amount of reserves 
B)  the interest paid on deposits times the amount of deposits 
C)  the interest earned on loans times the amount of loans 
D)  the interest earned on loans times the amount on reserves

Question 11

Describe how was the Eurocurrencies market created.

Accepted Answer

The most important of the Eurocurrencies

Question 12

Which of the following are true statements?

Accepted Answer

A)  Schedule I banks have more powers than Schedule II banks. 
B)  Widely held foreign banks can own 50 percent of a Canadian bank subsidiary. 
C)  A Schedule II bank may have a significant shareholder (more than 10 percent) for up to 10 years after chartering. 
D)  A Schedule III bank is a foreign bank is not allowed to branch directly into Canada. 
A)  Schedule I banks have more powers than Schedule II banks. 
B)  Widely held foreign banks can own 50 percent of a Canadian bank subsidiary. 
C)  A Schedule II bank may have a significant shareholder (more than 10 percent) for up to 10 years after chartering. 
D)  A Schedule III bank is a foreign bank is not allowed to branch directly into Canada.

Question 13

The experience of disintermediation in the banking industry illustrates that ________.

Accepted Answer

A)  more regulation of financial markets may avoid such problems in the future 
B)  banks are unable to remain competitive with other financial intermediaries 
C)  consumers no longer desire the services that banks provide 
D)  markets invent alternatives to costly regulations 
A)  more regulation of financial markets may avoid such problems in the future 
B)  banks are unable to remain competitive with other financial intermediaries 
C)  consumers no longer desire the services that banks provide 
D)  markets invent alternatives to costly regulations

Question 14

Automated teller machines ________.

Accepted Answer

A)  are more costly to use than human tellers, so banks discourage their use by charging more for use of ATMs 
B)  cost about the same to use as human tellers in banks, so banks discourage their use by charging more for use of ATMs 
C)  cost less than human tellers, so banks may encourage their use by charging less for using ATMs 
D)  cost nothing to use, so banks provide their services free of charge 
A)  are more costly to use than human tellers, so banks discourage their use by charging more for use of ATMs 
B)  cost about the same to use as human tellers in banks, so banks discourage their use by charging more for use of ATMs 
C)  cost less than human tellers, so banks may encourage their use by charging less for using ATMs 
D)  cost nothing to use, so banks provide their services free of charge

Question 15

The ability to use one resource to provide different products and services is ________.

Accepted Answer

A)  economies of scale 
B)  economies of scope 
C)  diversification 
D)  vertical integration 
A)  economies of scale 
B)  economies of scope 
C)  diversification 
D)  vertical integration

Question 16

________ is creating a marketable capital market instrument by bundling a portfolio of mortgage or auto loans.

Accepted Answer

A)  Diversification 
B)  Arbitrage 
C)  Computerization 
D)  Securitization 
A)  Diversification 
B)  Arbitrage 
C)  Computerization 
D)  Securitization

Question 17

Which of the following are true statements?

Accepted Answer

A)  Schedule I and Schedule II banks have different powers. 
B)  Widely held foreign banks can own 50 percent of a Canadian bank subsidiary. 
C)  Any widely held and regulated Canadian financial institution, other than a bank, may own 100 percent of a bank. 
D)  Schedule I banks have the same powers than Schedule II banks. 
A)  Schedule I and Schedule II banks have different powers. 
B)  Widely held foreign banks can own 50 percent of a Canadian bank subsidiary. 
C)  Any widely held and regulated Canadian financial institution, other than a bank, may own 100 percent of a bank. 
D)  Schedule I banks have the same powers than Schedule II banks.

Question 18

The Finance Act of 1914 required that ________.

Accepted Answer

A)  local banks be subject to the same regulations as national banks 
B)  national banks establish branches in large cities 
C)  the Department of Finance to act as a lender of last resort 
D)  the Bank of Canada to act as a lender of last resort 
A)  local banks be subject to the same regulations as national banks 
B)  national banks establish branches in large cities 
C)  the Department of Finance to act as a lender of last resort 
D)  the Bank of Canada to act as a lender of last resort

Question 19

Sweep accounts which were created to avoid reserve requirements became possible because of a change in ________.

Accepted Answer

A)  demand conditions 
B)  supply conditions 
C)  government rules 
D)  bank mergers 
A)  demand conditions 
B)  supply conditions 
C)  government rules 
D)  bank mergers

Question 20

Financial innovation has caused ________.

Accepted Answer

A)  banks to suffer declines in their cost advantages in acquiring funds, although it has not caused a decline in income advantages 
B)  banks to suffer a simultaneous decline of cost and income advantages 
C)  banks to suffer declines in their income advantages in acquiring funds, although it has not caused a decline in cost advantages 
D)  banks to achieve competitive advantages in both costs and income 
A)  banks to suffer declines in their cost advantages in acquiring funds, although it has not caused a decline in income advantages 
B)  banks to suffer a simultaneous decline of cost and income advantages 
C)  banks to suffer declines in their income advantages in acquiring funds, although it has not caused a decline in cost advantages 
D)  banks to achieve competitive advantages in both costs and income

Exam 10: Banking Industry: Structure and Competition

A major difference between the British-style and Japanese banking systems is that ________.

Which of the following is a true statement concerning bank holding companies?

Banking consolidation in Canada will result in ________.

Money market mutual funds ________.

The process in which people take their funds out of the banking system seeking higher-yielding securities is called ________.

In a ________ banking system, commercial banks are allowed to hold equity stakes in commercial firms.

A debit card differs from a credit card in that ________.

The entry of GM and Walmart into the credit card business is an indication of ________.

The business term for economies of scope is ________.

Prior to 2008, a U.S. bank's cost of holding reserves equaled ________.

Describe how was the Eurocurrencies market created.

Which of the following are true statements?

The experience of disintermediation in the banking industry illustrates that ________.

Automated teller machines ________.

The ability to use one resource to provide different products and services is ________.

________ is creating a marketable capital market instrument by bundling a portfolio of mortgage or auto loans.

Which of the following are true statements?

The Finance Act of 1914 required that ________.

Sweep accounts which were created to avoid reserve requirements became possible because of a change in ________.

Financial innovation has caused ________.

Why Study Money, Banking, and Financial Markets

An Overview of the Financial System

What Is Money

The Meaning of Interest Rates

The Behaviour of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Economic Analysis of Financial Regulation

Financial Crises

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory, Inflation, and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

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