Question 1

If banks were required to hold 100% reserves,this would

Accepted Answer

A)  put banks out of business. 
B)  put depositors at greater risk of losing their money. 
C)  prevent banks from making risky loans. 
D)  eliminate bank runs. 
A)  put banks out of business. 
B)  put depositors at greater risk of losing their money. 
C)  prevent banks from making risky loans. 
D)  eliminate bank runs. D

Question 2

Why do governments want to maintain the health of the banking system?

Accepted Answer

Banks reduce information costs in the financial system.

Question 3

When did Regulation Q finally disappear?

Accepted Answer

A)  1934 
B)  1945 
C)  1986 
D)  2000 
A)  1934 
B)  1945 
C)  1986 
D)  2000 C

Question 4

In October 2008,the Fed cut its target for the federal funds rate to

Accepted Answer

A)  less than 1%. 
B)  1.75% 
C)  2.25%. 
D)  2.75%. 
A)  less than 1%. 
B)  1.75% 
C)  2.25%. 
D)  2.75%.

Question 5

Banks have a maturity mismatch since

Accepted Answer

A)  they borrow long term, but lend short term. 
B)  they borrow short term, but lend long term. 
C)  some of their loans are short term while others are long term. 
D)  some of their borrowings are short term while others are long term. 
A)  they borrow long term, but lend short term. 
B)  they borrow short term, but lend long term. 
C)  some of their loans are short term while others are long term. 
D)  some of their borrowings are short term while others are long term.

Question 6

Which of the following is NOT an accurate description of the recession that accompanied the financial crisis of 2007-2009?

Accepted Answer

A)  GDP declined by more than twice the rate of the average recession. 
B)  Inflation rose at nearly twice the rate as the average recession. 
C)  It lasted just under twice as long as the typical recession. 
D)  Peak unemployment was about one-third higher than usual. 
A)  GDP declined by more than twice the rate of the average recession. 
B)  Inflation rose at nearly twice the rate as the average recession. 
C)  It lasted just under twice as long as the typical recession. 
D)  Peak unemployment was about one-third higher than usual.

Question 7

What happened to real interest rates during the early 1930s?

Accepted Answer

A)  They declined as nominal interest rates declined. 
B)  They rose as nominal interest rates rose. 
C)  They declined due to deflation. 
D)  They rose due to deflation. 
A)  They declined as nominal interest rates declined. 
B)  They rose as nominal interest rates rose. 
C)  They declined due to deflation. 
D)  They rose due to deflation.

Question 8

Disintermediation refers to the

Accepted Answer

A)  failure of financial intermediaries due to moral hazard problems. 
B)  failure of financial intermediaries due to adverse selection problems. 
C)  movement of savers and borrowers from banks to financial markets. 
D)  removal of government regulations of financial intermediaries. 
A)  failure of financial intermediaries due to moral hazard problems. 
B)  failure of financial intermediaries due to adverse selection problems. 
C)  movement of savers and borrowers from banks to financial markets. 
D)  removal of government regulations of financial intermediaries.

Question 9

Many economists believe

Accepted Answer

A)  the Fed could have reduced the severity of the Great Depression by raising interest rates. 
B)  the Fed could have reduced the severity of the Great Depression by encouraging banks to make fewer loans to insolvent businesses. 
C)  bank failures increased the severity of the Great Depression. 
D)  the severity of the Great Depression and the policies of the Fed were unrelated. 
A)  the Fed could have reduced the severity of the Great Depression by raising interest rates. 
B)  the Fed could have reduced the severity of the Great Depression by encouraging banks to make fewer loans to insolvent businesses. 
C)  bank failures increased the severity of the Great Depression. 
D)  the severity of the Great Depression and the policies of the Fed were unrelated.

Question 10

By how much did real investment decline between 1929 and 1933?

Accepted Answer

A)  18% 
B)  20% 
C)  27% 
D)  81% 
A)  18% 
B)  20% 
C)  27% 
D)  81%

Question 11

Losses in which holding resulted in BNP Paribas not allowing investors to redeem shares from three of its investment funds?

Accepted Answer

A)  mortgage-backed securities 
B)  Lehman Brothers 
C)  Bear Stearns 
D)  real estate investment trusts 
A)  mortgage-backed securities 
B)  Lehman Brothers 
C)  Bear Stearns 
D)  real estate investment trusts

Question 12

In what ways did the stock market crash of 1929 increase the severity of the downturn?

Accepted Answer

It reduced household wealth.It

Question 13

The original intention of the Fed's role as lender of last resort was to make loans to banks that were

Accepted Answer

A)  not illiquid nor insolvent. 
B)  illiquid, but not insolvent. 
C)  insolvent, but not illiquid. 
D)  both illiquid and insolvent. 
A)  not illiquid nor insolvent. 
B)  illiquid, but not insolvent. 
C)  insolvent, but not illiquid. 
D)  both illiquid and insolvent.

Question 14

Which investment bank avoided bankruptcy by being purchased by JP Morgan Chase in March 2008?

Accepted Answer

A)  Morgan Stanley 
B)  Lehman Brothers 
C)  Bear Stearns 
D)  Merrill Lynch 
A)  Morgan Stanley 
B)  Lehman Brothers 
C)  Bear Stearns 
D)  Merrill Lynch

Question 15

A stress test of banks,such as that undertaken in the Spring of 2009,is designed to

Accepted Answer

A)  ensure that banks have followed proper accounting standards. 
B)  make sure that banks are properly managed. 
C)  gauge how well banks would fare if the economy worsens. 
D)  estimate the impact of a bank panic on the overall economy. 
A)  ensure that banks have followed proper accounting standards. 
B)  make sure that banks are properly managed. 
C)  gauge how well banks would fare if the economy worsens. 
D)  estimate the impact of a bank panic on the overall economy.

Question 16

What is meant by senior debt?

Accepted Answer

A)  debt that has been around for the longest period of time 
B)  debt that must be paid before junior debt is paid 
C)  debt owed to the federal government 
D)  debt issued by the federal government as opposed to states or corporations 
A)  debt that has been around for the longest period of time 
B)  debt that must be paid before junior debt is paid 
C)  debt owed to the federal government 
D)  debt issued by the federal government as opposed to states or corporations

Question 17

What are the two most common reasons for a sovereign debt crisis?

Accepted Answer

Chronic government budget deficits that

Question 18

What are the primary reasons for and against a policy of "too big to fail."

Accepted Answer

The major argument in favor of such a po

Question 19

Negotiable certificates of deposit were developed in order to

Accepted Answer

A)  compete for loan business that had been going to the commercial paper market. 
B)  circumvent interest rate regulations on deposits. 
C)  increase assets that were acceptable as collateral for discount loans. 
D)  circumvent reserve requirements. 
A)  compete for loan business that had been going to the commercial paper market. 
B)  circumvent interest rate regulations on deposits. 
C)  increase assets that were acceptable as collateral for discount loans. 
D)  circumvent reserve requirements.

Question 20

The recession of 2007-2009 was

Accepted Answer

A)  most severe recession ever experienced in the United States. 
B)  the first recession since the 1930s to be accompanied by a financial crisis. 
C)  caused by a stock market crash. 
D)  limited to the economy of the United States. 
A)  most severe recession ever experienced in the United States. 
B)  the first recession since the 1930s to be accompanied by a financial crisis. 
C)  caused by a stock market crash. 
D)  limited to the economy of the United States.

If banks were required to hold 100% reserves,this would

Why do governments want to maintain the health of the banking system?

When did Regulation Q finally disappear?

In October 2008,the Fed cut its target for the federal funds rate to

Banks have a maturity mismatch since

Which of the following is NOT an accurate description of the recession that accompanied the financial crisis of 2007-2009?

What happened to real interest rates during the early 1930s?

Disintermediation refers to the

Many economists believe

By how much did real investment decline between 1929 and 1933?

Losses in which holding resulted in BNP Paribas not allowing investors to redeem shares from three of its investment funds?

In what ways did the stock market crash of 1929 increase the severity of the downturn?

The original intention of the Fed's role as lender of last resort was to make loans to banks that were

Which investment bank avoided bankruptcy by being purchased by JP Morgan Chase in March 2008?

A stress test of banks,such as that undertaken in the Spring of 2009,is designed to

What is meant by senior debt?

What are the two most common reasons for a sovereign debt crisis?

What are the primary reasons for and against a policy of "too big to fail."

Negotiable certificates of deposit were developed in order to

The recession of 2007-2009 was

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

The Economics of Banking

Beyond Commercial Banks: Shadow Banks and Nonbank Financial Institutions

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 12: Financial Crises and Financial Regulation

If banks were required to hold 100% reserves,this would

Why do governments want to maintain the health of the banking system?

When did Regulation Q finally disappear?

In October 2008,the Fed cut its target for the federal funds rate to

Banks have a maturity mismatch since

Which of the following is NOT an accurate description of the recession that accompanied the financial crisis of 2007-2009?

What happened to real interest rates during the early 1930s?

Disintermediation refers to the

Many economists believe

By how much did real investment decline between 1929 and 1933?

Losses in which holding resulted in BNP Paribas not allowing investors to redeem shares from three of its investment funds?

In what ways did the stock market crash of 1929 increase the severity of the downturn?

The original intention of the Fed's role as lender of last resort was to make loans to banks that were

Which investment bank avoided bankruptcy by being purchased by JP Morgan Chase in March 2008?

A stress test of banks,such as that undertaken in the Spring of 2009,is designed to

What is meant by senior debt?

What are the two most common reasons for a sovereign debt crisis?

What are the primary reasons for and against a policy of "too big to fail."

Negotiable certificates of deposit were developed in order to

The recession of 2007-2009 was

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

The Economics of Banking

Beyond Commercial Banks: Shadow Banks and Nonbank Financial Institutions

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