Question 1

Money market mutual funds

Accepted Answer

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

Question 2

Prior to 1863,all commercial banks in the United States

Accepted Answer

A) were chartered by the U.S.Treasury Department. 
B) were chartered by the banking commission of the state in which they operated. 
C) were regulated by the Federal Reserve. 
D) were regulated by the central bank. 
A) were chartered by the U.S.Treasury Department. 
B) were chartered by the banking commission of the state in which they operated. 
C) were regulated by the Federal Reserve. 
D) were regulated by the central bank. B

Question 3

Allowing bank branching across state lines gives banks greater ability to coordinate bank operations.This makes it easier for them to receive the benefits of

Accepted Answer

A) the dual banking system. 
B) economies of scale. 
C) disintermediation. 
D) interest-rate irregularities. 
A) the dual banking system. 
B) economies of scale. 
C) disintermediation. 
D) interest-rate irregularities. B

Question 4

Critics of nationwide banking fear

Accepted Answer

A) an elimination of community banks. 
B) increased lending to small businesses. 
C) cutthroat competition. 
D) banks with economies of scale problems. 
A) an elimination of community banks. 
B) increased lending to small businesses. 
C) cutthroat competition. 
D) banks with economies of scale problems.

Question 5

What financial innovations helped banks to get around the bank branching restrictions of the McFadden Act?

Accepted Answer

The introduction of the automated teller

Question 6

Financial innovations that grew out of the bank branching restrictions were

Accepted Answer

A) bank holding companies and automated teller machines. 
B) bank holding companies and securitization. 
C) automated teller machines and sweep accounts. 
D) automated teller machines and bank credit cards. 
A) bank holding companies and automated teller machines. 
B) bank holding companies and securitization. 
C) automated teller machines and sweep accounts. 
D) automated teller machines and bank credit cards.

Question 7

The most important developments that reduced banks' income advantages include

Accepted Answer

A) the increase in off-balance sheet activities. 
B) the growth of securitization. 
C) the elimination of Regulation Q ceilings. 
D) the competition from money market mutual funds. 
A) the increase in off-balance sheet activities. 
B) the growth of securitization. 
C) the elimination of Regulation Q ceilings. 
D) the competition from money market mutual funds.

Question 8

Banks responded to disintermediation by

Accepted Answer

A) supporting the elimination of interest rate regulations,enabling them to better compete for funds. 
B) opposing the elimination of interest rate regulations,as this would increase their cost of funds. 
C) demanding that interest rate regulations be imposed on money market mutual funds. 
D) supporting the elimination of interest rate regulations,as this would reduce their cost of funds. 
A) supporting the elimination of interest rate regulations,enabling them to better compete for funds. 
B) opposing the elimination of interest rate regulations,as this would increase their cost of funds. 
C) demanding that interest rate regulations be imposed on money market mutual funds. 
D) supporting the elimination of interest rate regulations,as this would reduce their cost of funds.

Question 9

Which of the following is NOT part of the shadow banking system?

Accepted Answer

A) the transformer 
B) the servicer 
C) the bundler 
D) the distributor 
A) the transformer 
B) the servicer 
C) the bundler 
D) the distributor

Question 10

The Second Bank of the United States was denied a new charter by

Accepted Answer

A) President Andrew Jackson. 
B) Vice President John Calhoun. 
C) President Benjamin Harrison. 
D) President John Q.Adams. 
A) President Andrew Jackson. 
B) Vice President John Calhoun. 
C) President Benjamin Harrison. 
D) President John Q.Adams.

Question 11

ATMs were developed because of breakthroughs in technology and as a

Accepted Answer

A) means of avoiding restrictive branching regulations. 
B) means of avoiding paying interest to corporate customers. 
C) way of concealing transactions from the SEC. 
D) increasing the competition from foreign banks. 
A) means of avoiding restrictive branching regulations. 
B) means of avoiding paying interest to corporate customers. 
C) way of concealing transactions from the SEC. 
D) increasing the competition from foreign banks.

Question 12

The FHLBS gives loans to S&Ls and thus performs a function similar to the ________ for commercial banks.

Accepted Answer

A) Federal Reserve 
B) U.S.Treasury 
C) Office of the Comptroller of the Currency 
D) U.S.Mint 
A) Federal Reserve 
B) U.S.Treasury 
C) Office of the Comptroller of the Currency 
D) U.S.Mint

Question 13

________ within the U.S.can make loans to foreigners but cannot make loans to domestic residents.

Accepted Answer

A) Edge Act corporations 
B) International Banking Facilities 
C) Universal banks 
D) Euro banks 
A) Edge Act corporations 
B) International Banking Facilities 
C) Universal banks 
D) Euro banks

Question 14

The driving force behind the securitization of mortgages and automobile loans has been

Accepted Answer

A) the rising regulatory constraints on substitute financial instruments. 
B) the desire of mortgage and auto lenders to exit this field of lending. 
C) the improvement in information technology. 
D) the relaxation of regulatory restrictions on credit card operations. 
A) the rising regulatory constraints on substitute financial instruments. 
B) the desire of mortgage and auto lenders to exit this field of lending. 
C) the improvement in information technology. 
D) the relaxation of regulatory restrictions on credit card operations.

Question 15

Securitization is a process of asset transformation that involves a number of different financial institutions working together.These financial institutions are known collectively as the

Accepted Answer

A) transformers. 
B) amalgamation. 
C) movers and shakers. 
D) shadow banking system. 
A) transformers. 
B) amalgamation. 
C) movers and shakers. 
D) shadow banking system.

Question 16

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 17

A financial innovation that developed as a result of banks avoidance of bank branching restrictions was

Accepted Answer

A) money market mutual funds. 
B) commercial paper. 
C) junk bonds. 
D) bank holding companies. 
A) money market mutual funds. 
B) commercial paper. 
C) junk bonds. 
D) bank holding companies.

Question 18

In a ________ banking system,commercial banks provide a full range of banking,securities,and insurance services,all within a single legal entity.

Accepted Answer

A) universal 
B) severable 
C) barrier-free 
D) dividerless 
A) universal 
B) severable 
C) barrier-free 
D) dividerless

Question 19

Thrift institutions importance as a source of funds for borrowers

Accepted Answer

A) has shrunk from around 40 percent of total credit advanced in the late 1970s to below 30 percent by 2014. 
B) has shrunk from over 20 percent of total credit advanced in the late 1970s to around 3 percent by 2014. 
C) has expanded dramatically,from around 15 percent of total credit advanced in the late 1970s to above 25 percent by 2014. 
D) has expanded dramatically,from around 15 percent of total credit advanced in the late 1970s to above 30 percent by 2014. 
A) has shrunk from around 40 percent of total credit advanced in the late 1970s to below 30 percent by 2014. 
B) has shrunk from over 20 percent of total credit advanced in the late 1970s to around 3 percent by 2014. 
C) has expanded dramatically,from around 15 percent of total credit advanced in the late 1970s to above 25 percent by 2014. 
D) has expanded dramatically,from around 15 percent of total credit advanced in the late 1970s to above 30 percent by 2014.

Question 20

So-called fallen angels differ from junk bonds in that

Accepted Answer

A) junk bonds refer to newly issued bonds with low credit ratings,whereas fallen angels refer to previously issued bonds that have had their credit ratings fall below Baa. 
B) junk bonds refer to previously issued bonds that have had their credit ratings fall below Baa,whereas fallen angels refer to newly issued bonds with low credit ratings. 
C) junk bonds have ratings below Baa,whereas fallen angels have ratings below C. 
D) fallen angels have ratings below Baa,whereas junk bonds have ratings below C. 
A) junk bonds refer to newly issued bonds with low credit ratings,whereas fallen angels refer to previously issued bonds that have had their credit ratings fall below Baa. 
B) junk bonds refer to previously issued bonds that have had their credit ratings fall below Baa,whereas fallen angels refer to newly issued bonds with low credit ratings. 
C) junk bonds have ratings below Baa,whereas fallen angels have ratings below C. 
D) fallen angels have ratings below Baa,whereas junk bonds have ratings below C.

Exam 11: Banking Industry: Structure and Competition

Money market mutual funds

Prior to 1863,all commercial banks in the United States

Allowing bank branching across state lines gives banks greater ability to coordinate bank operations.This makes it easier for them to receive the benefits of

Critics of nationwide banking fear

What financial innovations helped banks to get around the bank branching restrictions of the McFadden Act?

Financial innovations that grew out of the bank branching restrictions were

The most important developments that reduced banks' income advantages include

Banks responded to disintermediation by

Which of the following is NOT part of the shadow banking system?

The Second Bank of the United States was denied a new charter by

ATMs were developed because of breakthroughs in technology and as a

The FHLBS gives loans to S&Ls and thus performs a function similar to the ________ for commercial banks.

________ within the U.S.can make loans to foreigners but cannot make loans to domestic residents.

The driving force behind the securitization of mortgages and automobile loans has been

Securitization is a process of asset transformation that involves a number of different financial institutions working together.These financial institutions are known collectively as the

A debit card differs from a credit card in that

A financial innovation that developed as a result of banks avoidance of bank branching restrictions was

In a ________ banking system,commercial banks provide a full range of banking,securities,and insurance services,all within a single legal entity.

Thrift institutions importance as a source of funds for borrowers

So-called fallen angels differ from junk bonds in that

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

The Meaning of Interest Rates

The Behavior 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

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Financial Crises

Central Banks and the Federal Reserve System

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

Web 1:financial Crises in Emerging Market Economies

Web 2:the Islm Model

Web 3:nonbank Finance

Web 4:financial Derivatives

Web 5:conflicts of Interest in the Financial Services Industry

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