Question 1

Lack of competition in the United States banking industry can be attributed to

Accepted Answer

A) the fact that competition does not benefit consumers. 
B) the fact that branching has eliminated competition. 
C) recent legislation restricting competition. 
D) nineteenth-century populist sentiment. 
A) the fact that competition does not benefit consumers. 
B) the fact that branching has eliminated competition. 
C) recent legislation restricting competition. 
D) nineteenth-century populist sentiment.

Question 2

Rising interest-rate risk

Accepted Answer

A) increased the cost of financial innovation. 
B) increased the demand for financial innovation. 
C) reduced the cost of financial innovation. 
D) reduced the demand for financial innovation. 
A) increased the cost of financial innovation. 
B) increased the demand for financial innovation. 
C) reduced the cost of financial innovation. 
D) reduced the demand for financial innovation.

Question 3

Newly-issued high-yield bonds rated below investment grade by the bond-rating agencies are frequently referred to as

Accepted Answer

A) municipal bonds. 
B) Yankee bonds. 
C) "fallen angels." 
D) junk bonds. 
A) municipal bonds. 
B) Yankee bonds. 
C) "fallen angels." 
D) junk bonds.

Question 4

Thrift institutions include

Accepted Answer

A) commercial banks. 
B) brokerage firms 
C) insurance companies. 
D) mutual savings banks. 
A) commercial banks. 
B) brokerage firms 
C) insurance companies. 
D) mutual savings banks.

Question 5

One factor contributing to the rapid growth of the commercial paper market since 1970 is

Accepted Answer

A) the fact that commercial paper has no default risk. 
B) improved information technology making it easier to screen credit risks. 
C) government regulation. 
D) FDIC insurance for commercial paper. 
A) the fact that commercial paper has no default risk. 
B) improved information technology making it easier to screen credit risks. 
C) government regulation. 
D) FDIC insurance for commercial paper.

Question 6

The large number of banks in the United States is an indication of

Accepted Answer

A) vigorous competition within the banking industry. 
B) lack of competition within the banking industry. 
C) only efficient banks operating within the United States. 
D) consumer preference for local banks. 
A) vigorous competition within the banking industry. 
B) lack of competition within the banking industry. 
C) only efficient banks operating within the United States. 
D) consumer preference for local banks.

Question 7

An advantage to American banks from operating foreign branches is that Eurodollar deposits in offshore branches are

Accepted Answer

A) not subject to reserve requirements. 
B) insured by the FDIC. 
C) subject to extensive regulatory supervision. 
D) all demand deposits that pay no interest. 
A) not subject to reserve requirements. 
B) insured by the FDIC. 
C) subject to extensive regulatory supervision. 
D) all demand deposits that pay no interest.

Question 8

As a result of the global financial crisis several of the large,free-standing investment banking firms chose to become bank holding companies.This means that they will now be regulated by

Accepted Answer

A) the Federal Reserve. 
B) the FDIC. 
C) the state banking authorities. 
D) the Treasury. 
A) the Federal Reserve. 
B) the FDIC. 
C) the state banking authorities. 
D) the Treasury.

Question 9

Nationwide banking might reduce bank failures due to

Accepted Answer

A) reduced competition. 
B) reduced lending to small businesses. 
C) diversification of loan portfolios across state lines. 
D) elimination of community banks. 
A) reduced competition. 
B) reduced lending to small businesses. 
C) diversification of loan portfolios across state lines. 
D) elimination of community banks.

Question 10

The regulatory system that has evolved in the United States whereby banks are regulated at the state level,the national level,or both,is known as a

Accepted Answer

A) bilateral regulatory system. 
B) tiered regulatory system. 
C) two-tiered regulatory system. 
D) dual banking system. 
A) bilateral regulatory system. 
B) tiered regulatory system. 
C) two-tiered regulatory system. 
D) dual banking system.

Question 11

Why did the interest rate volatility of the 1970s spur financial innovation?

Accepted Answer

Banks were very vulnerable to interest-r

Question 12

Since 1980

Accepted Answer

A) banks have decreased risk taking to offset the decline in profits. 
B) banks have offset the decline in profits from traditional activities with increased income from off-balance-sheet activities. 
C) banks have offset the decline in profits from off-balance-sheet activities with increased income from traditional activities. 
D) bank profits have grown rapidly due to deregulation. 
A) banks have decreased risk taking to offset the decline in profits. 
B) banks have offset the decline in profits from traditional activities with increased income from off-balance-sheet activities. 
C) banks have offset the decline in profits from off-balance-sheet activities with increased income from traditional activities. 
D) bank profits have grown rapidly due to deregulation.

Question 13

The main center of the Eurodollar market is

Accepted Answer

A) London. 
B) Basel. 
C) Paris. 
D) New York. 
A) London. 
B) Basel. 
C) Paris. 
D) New York.

Question 14

U.S.banks have most of their branches in

Accepted Answer

A) Latin America,the Far East,the Caribbean,and London. 
B) Latin America,the Middle East,the Caribbean,and London. 
C) Mexico,the Middle East,the Caribbean,and London. 
D) South America,the Middle East,the Caribbean,and Canada. 
A) Latin America,the Far East,the Caribbean,and London. 
B) Latin America,the Middle East,the Caribbean,and London. 
C) Mexico,the Middle East,the Caribbean,and London. 
D) South America,the Middle East,the Caribbean,and Canada.

Question 15

To eliminate the abuses of the state-chartered banks,the ________ created a new banking system of federally chartered banks,supervised by the ________.

Accepted Answer

A) National Bank Act of 1863;Office of the Comptroller of the Currency 
B) Federal Reserve Act of 1863;Office of the Comptroller of the Currency 
C) National Bank Act of 1863;Office of Thrift Supervision 
D) Federal Reserve Act of 1863;Office of Thrift Supervision 
A) National Bank Act of 1863;Office of the Comptroller of the Currency 
B) Federal Reserve Act of 1863;Office of the Comptroller of the Currency 
C) National Bank Act of 1863;Office of Thrift Supervision 
D) Federal Reserve Act of 1863;Office of Thrift Supervision

Question 16

Reasons for holding Eurodollars include

Accepted Answer

A) the fact that Eurodollar deposits are insured by the FDIC. 
B) the fact that dollars are widely used to conduct international transactions. 
C) the fact that minimum transaction sizes are very low,making Eurodollars an attractive savings instrument for consumers. 
D) the fact that Eurodollar deposits are heavily regulated. 
A) the fact that Eurodollar deposits are insured by the FDIC. 
B) the fact that dollars are widely used to conduct international transactions. 
C) the fact that minimum transaction sizes are very low,making Eurodollars an attractive savings instrument for consumers. 
D) the fact that Eurodollar deposits are heavily regulated.

Question 17

Although it has a population about half that of the United States,Japan has

Accepted Answer

A) many more banks. 
B) about 25 percent of the number of banks. 
C) more than 5000 commercial banks. 
D) fewer than 100 commercial banks. 
A) many more banks. 
B) about 25 percent of the number of banks. 
C) more than 5000 commercial banks. 
D) fewer than 100 commercial banks.

Question 18

Loophole mining refers to financial innovation designed to

Accepted Answer

A) hide transactions from the IRS. 
B) conceal transactions from the SEC. 
C) get around regulations. 
D) conceal transactions from the Treasury Department. 
A) hide transactions from the IRS. 
B) conceal transactions from the SEC. 
C) get around regulations. 
D) conceal transactions from the Treasury Department.

Question 19

Prior to 1980,the Fed set an interest rate ________,a maximum limit,on the interest rate that could be paid on time deposits.

Accepted Answer

A) floor 
B) ceiling 
C) wall 
D) window 
A) floor 
B) ceiling 
C) wall 
D) window

Question 20

The entry of AT&T and GM 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.

Exam 11: Banking Industry: Structure and Competition

Lack of competition in the United States banking industry can be attributed to

Rising interest-rate risk

Newly-issued high-yield bonds rated below investment grade by the bond-rating agencies are frequently referred to as

Thrift institutions include

One factor contributing to the rapid growth of the commercial paper market since 1970 is

The large number of banks in the United States is an indication of

An advantage to American banks from operating foreign branches is that Eurodollar deposits in offshore branches are

As a result of the global financial crisis several of the large,free-standing investment banking firms chose to become bank holding companies.This means that they will now be regulated by

Nationwide banking might reduce bank failures due to

The regulatory system that has evolved in the United States whereby banks are regulated at the state level,the national level,or both,is known as a

Why did the interest rate volatility of the 1970s spur financial innovation?

Since 1980

The main center of the Eurodollar market is

U.S.banks have most of their branches in

To eliminate the abuses of the state-chartered banks,the ________ created a new banking system of federally chartered banks,supervised by the ________.

Reasons for holding Eurodollars include

Although it has a population about half that of the United States,Japan has

Loophole mining refers to financial innovation designed to

Prior to 1980,the Fed set an interest rate ________,a maximum limit,on the interest rate that could be paid on time deposits.

The entry of AT&T and GM into the credit card business is an indication of

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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To eliminate the abuses of the state-chartered banks,the created a new banking system of federally chartered banks,supervised by the .