Question 1

In the current U.S.economy,who plays the role of lender of last resort?

Accepted Answer

A)  The Securities and Exchange Commission 
B)  The Federal Deposit Insurance Corporation 
C)  The Federal Reserve System 
D)  The Social Security Administration 
A)  The Securities and Exchange Commission 
B)  The Federal Deposit Insurance Corporation 
C)  The Federal Reserve System 
D)  The Social Security Administration

Question 2

Bank capital can best be described as

Accepted Answer

A)  funds contributed by shareholder purchasers of a bank's stock plus the accumulated retained earnings. 
B)  the accumulated amount of reserves held by a bank. 
C)  the location of most of the major banks of a country. 
D)  another name for bank assets. 
A)  funds contributed by shareholder purchasers of a bank's stock plus the accumulated retained earnings. 
B)  the accumulated amount of reserves held by a bank. 
C)  the location of most of the major banks of a country. 
D)  another name for bank assets.

Question 3

In managing its liabilities to deal with liquidity problems,banks trade off

Accepted Answer

A)  credit risk against interest rate risk. 
B)  adverse selection against moral hazard. 
C)  the need for available funds to meet deposit outflows against the desire for greater profit. 
D)  present tax liabilities against future tax liabilities. 
A)  credit risk against interest rate risk. 
B)  adverse selection against moral hazard. 
C)  the need for available funds to meet deposit outflows against the desire for greater profit. 
D)  present tax liabilities against future tax liabilities.

Question 4

On a bank's balance sheet,bank capital is considered

Accepted Answer

A)  an asset. 
B)  a liability. 
C)  the difference between a firm's assets and it's shareholder's equity. 
D)  the total amount of funds banks have available to make loans. 
A)  an asset. 
B)  a liability. 
C)  the difference between a firm's assets and it's shareholder's equity. 
D)  the total amount of funds banks have available to make loans.

Question 5

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 6

Banks make use of the federal funds market in part to

Accepted Answer

A)  pay their tax liabilities. 
B)  manage liquidity risk. 
C)  deal with moral hazard. 
D)  deal with adverse selection. 
A)  pay their tax liabilities. 
B)  manage liquidity risk. 
C)  deal with moral hazard. 
D)  deal with adverse selection.

Question 7

If you deposit a $50 check in the bank,the immediate impact on your bank's balance sheet will be a

Accepted Answer

A)  $50 increase in reserves and a $50 increase in checkable deposits. 
B)  $50 decrease in reserves and a $50 increase in checkable deposits. 
C)  $50 increase in reserves and a $50 decrease in checkable deposits. 
D)  $50 decrease in liabilities and a $50 increase in checkable deposits. 
A)  $50 increase in reserves and a $50 increase in checkable deposits. 
B)  $50 decrease in reserves and a $50 increase in checkable deposits. 
C)  $50 increase in reserves and a $50 decrease in checkable deposits. 
D)  $50 decrease in liabilities and a $50 increase in checkable deposits.

Question 8

A bank's costs include all of the following EXCEPT

Accepted Answer

A)  the interest it pays to depositors. 
B)  the interest it pays on its loans or debt. 
C)  the cost of providing services. 
D)  the fees paid to maintain its reserves at the Federal Reserve. 
A)  the interest it pays to depositors. 
B)  the interest it pays on its loans or debt. 
C)  the cost of providing services. 
D)  the fees paid to maintain its reserves at the Federal Reserve.

Question 9

Which of the following statements about a checking deposit is TRUE?

Accepted Answer

A)  It is a liability for both households and banks. 
B)  It is an asset for both households and banks. 
C)  It is an asset for households but a liability for a bank. 
D)  It is a liability for households but an asset for a bank. 
A)  It is a liability for both households and banks. 
B)  It is an asset for both households and banks. 
C)  It is an asset for households but a liability for a bank. 
D)  It is a liability for households but an asset for a bank.

Question 10

Which of the following things do banks do with the funds they acquire from savers?

Accepted Answer

A)  invest in corporate stock 
B)  invest in corporate bonds 
C)  make loans to individuals 
D)  all of the above 
A)  invest in corporate stock 
B)  invest in corporate bonds 
C)  make loans to individuals 
D)  all of the above

Question 11

On a bank's balance sheet,liabilities are

Accepted Answer

A)  the uses of acquired assets. 
B)  the sources of acquired funds. 
C)  all those items of value owned by the bank. 
D)  by definition equal to the bank's assets. 
A)  the uses of acquired assets. 
B)  the sources of acquired funds. 
C)  all those items of value owned by the bank. 
D)  by definition equal to the bank's assets.

Question 12

Researchers at the Federal Reserve discovered that

Accepted Answer

A)  couples who have similar credit scores at the beginning of their relationship are more likely to stay together than are couples with very different scores. 
B)  couples who have very different credit scores at the beginning of their relationship are more likely to stay together than are couples with similar scores. 
C)  couples who have similar but low credit scores at the beginning of their relationship are more likely to stay together than are couples with similar but high scores. 
D)  the Federal Reserve has never wasted its time researching such a trivial subject. 
A)  couples who have similar credit scores at the beginning of their relationship are more likely to stay together than are couples with very different scores. 
B)  couples who have very different credit scores at the beginning of their relationship are more likely to stay together than are couples with similar scores. 
C)  couples who have similar but low credit scores at the beginning of their relationship are more likely to stay together than are couples with similar but high scores. 
D)  the Federal Reserve has never wasted its time researching such a trivial subject.

Question 13

Which asset is sometimes referred to as a bank's secondary reserves?

Accepted Answer

A)  vault cash 
B)  U.S. government securities 
C)  repurchase agreements 
D)  federal funds 
A)  vault cash 
B)  U.S. government securities 
C)  repurchase agreements 
D)  federal funds

Question 14

Which of the following is NOT a bank liability?

Accepted Answer

A)  checkable deposits 
B)  CDs 
C)  mortgage loans 
D)  borrowings from the Federal Reserve 
A)  checkable deposits 
B)  CDs 
C)  mortgage loans 
D)  borrowings from the Federal Reserve

Question 15

If you have $2 million in a CD at a commercial bank that is a member of the FDIC,how much of your funds are uninsured?

Accepted Answer

A)  $0 
B)  $1 million 
C)  $1.75 million 
D)  $2 million 
A)  $0 
B)  $1 million 
C)  $1.75 million 
D)  $2 million

Question 16

What is the largest category of bank assets?

Accepted Answer

A)  loans 
B)  reserves 
C)  securities 
D)  cash items in the process of collection 
A)  loans 
B)  reserves 
C)  securities 
D)  cash items in the process of collection

Question 17

The difference between a demand deposit and a NOW account is that

Accepted Answer

A)  checks may not be written against NOW account balances. 
B)  demand deposits pay no interest. 
C)  NOW accounts pay no interest. 
D)  checks may not be written against demand deposit balances. 
A)  checks may not be written against NOW account balances. 
B)  demand deposits pay no interest. 
C)  NOW accounts pay no interest. 
D)  checks may not be written against demand deposit balances.

Question 18

Banks use credit rationing rather than simply raising the interest rate charged to borrowers with higher default risks because

Accepted Answer

A)  of fear of adverse selection problems. 
B)  of interest rate ceilings in many states. 
C)  of fear of offending the loan applicants. 
D)  use of credit rationing is encouraged by the Federal Reserve. 
A)  of fear of adverse selection problems. 
B)  of interest rate ceilings in many states. 
C)  of fear of offending the loan applicants. 
D)  use of credit rationing is encouraged by the Federal Reserve.

Question 19

Bank capital will decline following an increase in interest rates if the value of its

Accepted Answer

A)  fixed-rate assets is greater than the value of its fixed-rate liabilities. 
B)  fixed-rate assets is less than the value of its fixed-rate liabilities. 
C)  fixed-rate assets is greater than the value of its variable-rate assets. 
D)  fixed-rate liabilities is greater than the value of its variable-rate liabilities. 
A)  fixed-rate assets is greater than the value of its fixed-rate liabilities. 
B)  fixed-rate assets is less than the value of its fixed-rate liabilities. 
C)  fixed-rate assets is greater than the value of its variable-rate assets. 
D)  fixed-rate liabilities is greater than the value of its variable-rate liabilities.

Question 20

What is the primary reason for the differences between the U.S.banking system and those in other major industrial countries?

Accepted Answer

A)  Economies of scale are greater in banking in the United States than in banking in other countries. 
B)  legislation that led to the development of state and national banks 
C)  the Federal Reserve System 
D)  the National Bank 
A)  Economies of scale are greater in banking in the United States than in banking in other countries. 
B)  legislation that led to the development of state and national banks 
C)  the Federal Reserve System 
D)  the National Bank

In the current U.S.economy,who plays the role of lender of last resort?

Bank capital can best be described as

In managing its liabilities to deal with liquidity problems,banks trade off

On a bank's balance sheet,bank capital is considered

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

Banks make use of the federal funds market in part to

If you deposit a $50 check in the bank,the immediate impact on your bank's balance sheet will be a

A bank's costs include all of the following EXCEPT

Which of the following statements about a checking deposit is TRUE?

Which of the following things do banks do with the funds they acquire from savers?

On a bank's balance sheet,liabilities are

Researchers at the Federal Reserve discovered that

Which asset is sometimes referred to as a bank's secondary reserves?

Which of the following is NOT a bank liability?

If you have $2 million in a CD at a commercial bank that is a member of the FDIC,how much of your funds are uninsured?

What is the largest category of bank assets?

The difference between a demand deposit and a NOW account is that

Banks use credit rationing rather than simply raising the interest rate charged to borrowers with higher default risks because

Bank capital will decline following an increase in interest rates if the value of its

What is the primary reason for the differences between the U.S.banking system and those in other major industrial countries?

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

Beyond Commercial Banks: Shadow Banks and Nonbank Financial Institutions

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I- the Aggregate Demand and Aggregate Supply Model

Monetary Theory Ii: the Is-Mp Model

Filters

Exam 10: The Economics of Banking

In the current U.S.economy,who plays the role of lender of last resort?

Bank capital can best be described as

In managing its liabilities to deal with liquidity problems,banks trade off

On a bank's balance sheet,bank capital is considered

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

Banks make use of the federal funds market in part to

If you deposit a $50 check in the bank,the immediate impact on your bank's balance sheet will be a

A bank's costs include all of the following EXCEPT

Which of the following statements about a checking deposit is TRUE?

Which of the following things do banks do with the funds they acquire from savers?

On a bank's balance sheet,liabilities are

Researchers at the Federal Reserve discovered that

Which asset is sometimes referred to as a bank's secondary reserves?

Which of the following is NOT a bank liability?

If you have $2 million in a CD at a commercial bank that is a member of the FDIC,how much of your funds are uninsured?

What is the largest category of bank assets?

The difference between a demand deposit and a NOW account is that

Banks use credit rationing rather than simply raising the interest rate charged to borrowers with higher default risks because

Bank capital will decline following an increase in interest rates if the value of its

What is the primary reason for the differences between the U.S.banking system and those in other major industrial countries?

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

Beyond Commercial Banks: Shadow Banks and Nonbank Financial Institutions

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I- the Aggregate Demand and Aggregate Supply Model

Monetary Theory Ii: the Is-Mp Model

Filters