Question 1

In September 2008,the Reserve Primary Fund,a money market mutual fund,found itself in the situation know as "breaking the buck." This means that

Accepted Answer

A) they could no longer afford to redeem shares at the par value of $1. 
B) they required shareholders to contribute a dollar more in fees each month. 
C) shareholders were able to redeem shares for more than a $1. 
D) shares earned more than a dollar in interest. 
A) they could no longer afford to redeem shares at the par value of $1. 
B) they required shareholders to contribute a dollar more in fees each month. 
C) shareholders were able to redeem shares for more than a $1. 
D) shares earned more than a dollar in interest.

Question 2

The agreement to provide a standardized commodity to a buyer on a specific date at a specific future price is

Accepted Answer

A) a put option. 
B) a call option. 
C) a futures contract. 
D) a mortgage-backed security. 
A) a put option. 
B) a call option. 
C) a futures contract. 
D) a mortgage-backed security.

Question 3

The legislation overturning the Glass-Steagall Act is

Accepted Answer

A) the McFadden Act. 
B) the Gramm-Leach-Bliley Act. 
C) the Garn-St.Germain Act 
D) the Riegle-Neal Act. 
A) the McFadden Act. 
B) the Gramm-Leach-Bliley Act. 
C) the Garn-St.Germain Act 
D) the Riegle-Neal Act.

Question 4

Unlike banks,________ have been allowed to branch statewide since 1980.

Accepted Answer

A) federally-chartered S&Ls 
B) state-chartered S&Ls 
C) financially troubled S&Ls 
D) technically insolvent S&Ls 
A) federally-chartered S&Ls 
B) state-chartered S&Ls 
C) financially troubled S&Ls 
D) technically insolvent S&Ls

Question 5

The most significant change in the economic environment that changed the demand for financial products in recent years has been

Accepted Answer

A) the aging of the baby-boomer generation. 
B) the dramatic increase in the volatility of interest rates. 
C) the dramatic increase in competition from foreign banks. 
D) the deregulation of financial institutions. 
A) the aging of the baby-boomer generation. 
B) the dramatic increase in the volatility of interest rates. 
C) the dramatic increase in competition from foreign banks. 
D) the deregulation of financial institutions.

Question 6

________ is the process of researching and developing profitable new products and services by financial institutions.

Accepted Answer

A) Financial engineering 
B) Financial manipulation 
C) Customer manipulation 
D) Customer engineering 
A) Financial engineering 
B) Financial manipulation 
C) Customer manipulation 
D) Customer engineering

Question 7

One of the concerns of increased bank consolidation is the reduction in community banks which could result in

Accepted Answer

A) less lending to small businesses. 
B) loss of cultural identity. 
C) higher interest rates. 
D) more bank regulation. 
A) less lending to small businesses. 
B) loss of cultural identity. 
C) higher interest rates. 
D) more bank regulation.

Question 8

The modern commercial banking system began in America when the

Accepted Answer

A) Bank of United States was chartered in New York in 1801. 
B) Bank of North America was chartered in Philadelphia in 1782. 
C) Bank of United States was chartered in Philadelphia in 1801. 
D) Bank of North America was chartered in New York in 1782. 
A) Bank of United States was chartered in New York in 1801. 
B) Bank of North America was chartered in Philadelphia in 1782. 
C) Bank of United States was chartered in Philadelphia in 1801. 
D) Bank of North America was chartered in New York in 1782.

Question 9

________ are the only depository institutions that are tax-exempt.

Accepted Answer

A) Commercial banks 
B) Savings and loans 
C) Mutual savings banks 
D) Credit unions 
A) Commercial banks 
B) Savings and loans 
C) Mutual savings banks 
D) Credit unions

Question 10

The primary reason for the recent reduction in the number of banks is

Accepted Answer

A) bank failures. 
B) re-regulation of banking. 
C) restrictions on interstate branching. 
D) bank consolidation. 
A) bank failures. 
B) re-regulation of banking. 
C) restrictions on interstate branching. 
D) bank consolidation.

Question 11

Prior to 2008,the 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 12

Eurodollars are

Accepted Answer

A) dollar-dominated deposits held in banks outside the United States. 
B) deposits held by U.S.banks in Europe. 
C) deposits held by U.S.banks in foreign countries. 
D) dollar-dominated deposits held in U.S.banks by Europeans. 
A) dollar-dominated deposits held in banks outside the United States. 
B) deposits held by U.S.banks in Europe. 
C) deposits held by U.S.banks in foreign countries. 
D) dollar-dominated deposits held in U.S.banks by Europeans.

Question 13

Foreign banks may engage in banking activities in the United States by opening all of the following EXCEPT

Accepted Answer

A) an agency office of the foreign bank. 
B) a subsidiary U.S.bank. 
C) a branch of the foreign bank. 
D) a McFadden Corporation. 
A) an agency office of the foreign bank. 
B) a subsidiary U.S.bank. 
C) a branch of the foreign bank. 
D) a McFadden Corporation.

Question 14

Which of the following statements concerning bank regulation in the United States is TRUE?

Accepted Answer

A) The Office of the Comptroller of the Currency has the primary responsibility for state banks that are members of the Federal Reserve System. 
B) The Federal Reserve and the state banking authorities jointly have responsibility for the state banks that are members of the Federal Reserve System. 
C) The Office of the Comptroller of the Currency has sole regulatory responsibility over bank holding companies. 
D) The state banking authorities have sole regulatory responsibility for all state banks. 
A) The Office of the Comptroller of the Currency has the primary responsibility for state banks that are members of the Federal Reserve System. 
B) The Federal Reserve and the state banking authorities jointly have responsibility for the state banks that are members of the Federal Reserve System. 
C) The Office of the Comptroller of the Currency has sole regulatory responsibility over bank holding companies. 
D) The state banking authorities have sole regulatory responsibility for all state banks.

Question 15

Banks have attempted to maintain adequate profit levels by

Accepted Answer

A) making fewer riskier loans,such as commercial real estate loans. 
B) pursuing new off-balance-sheet activities. 
C) increasing reserve deposits at the Fed. 
D) decreasing capital accounts. 
A) making fewer riskier loans,such as commercial real estate loans. 
B) pursuing new off-balance-sheet activities. 
C) increasing reserve deposits at the Fed. 
D) decreasing capital accounts.

Question 16

The government institution that has responsibility for the amount of money and credit supplied in the economy as a whole is the

Accepted Answer

A) central bank. 
B) commercial bank. 
C) bank of settlement. 
D) monetary fund. 
A) central bank. 
B) commercial bank. 
C) bank of settlement. 
D) monetary fund.

Question 17

Mutual savings banks are owned by

Accepted Answer

A) shareholders. 
B) partners. 
C) depositors. 
D) foreign investors. 
A) shareholders. 
B) partners. 
C) depositors. 
D) foreign investors.

Question 18

New computer technology has

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 19

State banks that are not members of the Federal Reserve System are most likely to be examined by the

Accepted Answer

A) Federal Reserve System. 
B) FDIC. 
C) FHLBS. 
D) Comptroller of the Currency. 
A) Federal Reserve System. 
B) FDIC. 
C) FHLBS. 
D) Comptroller of the Currency.

Question 20

A firm issuing credit cards earns income from

Accepted Answer

A) loans it makes to credit card holders. 
B) subsidies from the local governments. 
C) payments made to it by manufacturers of the products sold in stores on credit card purchases. 
D) sales of the card in foreign countries. 
A) loans it makes to credit card holders. 
B) subsidies from the local governments. 
C) payments made to it by manufacturers of the products sold in stores on credit card purchases. 
D) sales of the card in foreign countries.

Exam 11: Banking Industry: Structure and Competition

In September 2008,the Reserve Primary Fund,a money market mutual fund,found itself in the situation know as "breaking the buck." This means that

The agreement to provide a standardized commodity to a buyer on a specific date at a specific future price is

The legislation overturning the Glass-Steagall Act is

Unlike banks,________ have been allowed to branch statewide since 1980.

The most significant change in the economic environment that changed the demand for financial products in recent years has been

________ is the process of researching and developing profitable new products and services by financial institutions.

One of the concerns of increased bank consolidation is the reduction in community banks which could result in

The modern commercial banking system began in America when the

________ are the only depository institutions that are tax-exempt.

The primary reason for the recent reduction in the number of banks is

Prior to 2008,the bank's cost of holding reserves equaled

Eurodollars are

Foreign banks may engage in banking activities in the United States by opening all of the following EXCEPT

Which of the following statements concerning bank regulation in the United States is TRUE?

Banks have attempted to maintain adequate profit levels by

The government institution that has responsibility for the amount of money and credit supplied in the economy as a whole is the

Mutual savings banks are owned by

New computer technology has

State banks that are not members of the Federal Reserve System are most likely to be examined by the

A firm issuing credit cards earns income from

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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