Question 1

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. D

Question 2

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. A

Question 3

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. A

Question 4

________ 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 5

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 6

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 7

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

Accepted Answer

Banks were very vulnerable to interest-r

Question 8

Bank customers perceive Internet banks as being

Accepted Answer

A)  more secure than physical bank branches. 
B)  a better method for the purchase of long-term savings products. 
C)  better at keeping customer information private. 
D)  prone to many more technical problems. 
A)  more secure than physical bank branches. 
B)  a better method for the purchase of long-term savings products. 
C)  better at keeping customer information private. 
D)  prone to many more technical problems.

Question 9

The Federal Reserve Act of 1913 required that

Accepted Answer

A)  state banks be subject to the same regulations as national banks. 
B)  national banks establish branches in the cities containing Federal Reserve banks. 
C)  national banks join the Federal Reserve System. 
D)  state banks could not join the Federal Reserve System. 
A)  state banks be subject to the same regulations as national banks. 
B)  national banks establish branches in the cities containing Federal Reserve banks. 
C)  national banks join the Federal Reserve System. 
D)  state banks could not join the Federal Reserve System.

Question 10

The most important developments that have reduced banks' income advantages in the past thirty years 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 11

Under the Gramm-Leach-Bliley Act the oversight of the securities activities of bank holding companies belongs to

Accepted Answer

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

Question 12

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 13

Financial instruments whose payoffs are linked to previously issued securities are called

Accepted Answer

A)  grandfathered bonds. 
B)  financial derivatives. 
C)  hedge securities. 
D)  reversible bonds. 
A)  grandfathered bonds. 
B)  financial derivatives. 
C)  hedge securities. 
D)  reversible bonds.

Question 14

Today the United States has a dual banking system in which banks supervised by the ________ and by the ________ operate side by side.

Accepted Answer

A)  federal government; municipalities 
B)  state governments; municipalities 
C)  federal government; states 
D)  municipalities; states 
A)  federal government; municipalities 
B)  state governments; municipalities 
C)  federal government; states 
D)  municipalities; states

Question 15

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 16

Before 1863,

Accepted Answer

A)  federally-chartered banks had regulatory advantages not granted to state-chartered banks. 
B)  the number of federally-chartered banks grew at a much faster rate than at any other time since the end of the Civil War. 
C)  banks acquired funds by issuing bank notes. 
D)  banks were required to maintain 100% of their deposits as reserves. 
A)  federally-chartered banks had regulatory advantages not granted to state-chartered banks. 
B)  the number of federally-chartered banks grew at a much faster rate than at any other time since the end of the Civil War. 
C)  banks acquired funds by issuing bank notes. 
D)  banks were required to maintain 100% of their deposits as reserves.

Question 17

The development of money market mutual funds contributed to the growth of ________ since the money market mutual funds need to hold liquid,high-quality,short-terms assets.

Accepted Answer

A)  the commercial paper market 
B)  the municipal bond market 
C)  the corporate bond market 
D)  the junk bond market 
A)  the commercial paper market 
B)  the municipal bond market 
C)  the corporate bond market 
D)  the junk bond market

Question 18

In this type of arrangement,any balances above a certain amount in a corporation's checking account at the end of the business day are "removed" and invested in overnight securities that pay the corporation interest.This innovation is referred to as a

Accepted Answer

A)  sweep account. 
B)  share draft account. 
C)  removed-repo account. 
D)  stockman account. 
A)  sweep account. 
B)  share draft account. 
C)  removed-repo account. 
D)  stockman account.

Question 19

The McFadden Act of 1927

Accepted Answer

A)  effectively prohibited banks from branching across state lines. 
B)  required that banks maintain bank capital equal to at least 6 percent of their assets. 
C)  effectively required that banks maintain a correspondent relationship with large money center banks. 
D)  separated the commercial banks and investment banks. 
A)  effectively prohibited banks from branching across state lines. 
B)  required that banks maintain bank capital equal to at least 6 percent of their assets. 
C)  effectively required that banks maintain a correspondent relationship with large money center banks. 
D)  separated the commercial banks and investment banks.

Question 20

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.

Exam 12: Banking Industry: Structure and Competition

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

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

Banks responded to disintermediation by

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

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

Mutual savings banks are owned by

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

Bank customers perceive Internet banks as being

The Federal Reserve Act of 1913 required that

The most important developments that have reduced banks' income advantages in the past thirty years include:

Under the Gramm-Leach-Bliley Act the oversight of the securities activities of bank holding companies belongs to

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

Financial instruments whose payoffs are linked to previously issued securities are called

Today the United States has a dual banking system in which banks supervised by the ________ and by the ________ operate side by side.

Loophole mining refers to financial innovation designed to

Before 1863,

The development of money market mutual funds contributed to the growth of ________ since the money market mutual funds need to hold liquid,high-quality,short-terms assets.

In this type of arrangement,any balances above a certain amount in a corporation's checking account at the end of the business day are "removed" and invested in overnight securities that pay the corporation interest.This innovation is referred to as a

The McFadden Act of 1927

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

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

Understanding 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

Financial Crises

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

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

The ISLM Model

Filters

Today the United States has a dual banking system in which banks supervised by the and by the operate side by side.