Question 1

A disadvantage of virtual banks (clicks)is that ________.

Accepted Answer

A)  their hours are more limited than physical banks 
B)  they are more secure than physical banks 
C)  they are more costly to operate than physical banks 
D)  customers worry about the security of on-line transactions 
A)  their hours are more limited than physical banks 
B)  they are more secure than physical banks 
C)  they are more costly to operate than physical banks 
D)  customers worry about the security of on-line transactions

Question 2

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)  regulations that restrict branch operations 
D)  consumer preference for local banks 
A)  vigorous competition within the banking industry 
B)  lack of competition within the banking industry 
C)  regulations that restrict branch operations 
D)  consumer preference for local banks

Question 3

Automated teller machines ________.

Accepted Answer

A)  are more costly to use than human tellers, so banks discourage their use by charging more for use of ATMs 
B)  cost about the same to use as human tellers in banks, so banks discourage their use by charging more for use of ATMs 
C)  cost less than human tellers, so banks may encourage their use by charging less for using ATMs 
D)  cost nothing to use, so banks provide their services free of charge 
A)  are more costly to use than human tellers, so banks discourage their use by charging more for use of ATMs 
B)  cost about the same to use as human tellers in banks, so banks discourage their use by charging more for use of ATMs 
C)  cost less than human tellers, so banks may encourage their use by charging less for using ATMs 
D)  cost nothing to use, so banks provide their services free of charge

Question 4

Prior to 2008,bank managers in the U.S.looked on reserve requirements ________.

Accepted Answer

A)  as a tax on deposits 
B)  as a subsidy on deposits 
C)  as a subsidy on loans 
D)  as a tax on loans 
A)  as a tax on deposits 
B)  as a subsidy on deposits 
C)  as a subsidy on loans 
D)  as a tax on loans

Question 5

As the banking system in Canada evolves,it is expected that ________.

Accepted Answer

A)  the number and importance of small banks will increase 
B)  the number and importance of large banks will decrease 
C)  small banks will grow at the expense of large banks 
D)  the number and importance of large banks will increase 
A)  the number and importance of small banks will increase 
B)  the number and importance of large banks will decrease 
C)  small banks will grow at the expense of large banks 
D)  the number and importance of large banks will increase

Question 6

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)  past regulations that the ability of banks to open branches 
A)  the fact that competition does not benefit consumers 
B)  the fact that branching has eliminated competition 
C)  recent legislation restricting competition 
D)  past regulations that the ability of banks to open branches

Question 7

The 2001 Bank Reform Act states that ________.

Accepted Answer

A)  medium sized banks can be closely held if there is a 35 percent public float 
B)  large banks with shareholders equity greater than $5 billion can be closely held 
C)  all banks, regardless of size and capitalization, can be closely held 
D)  small banks must be widely held 
A)  medium sized banks can be closely held if there is a 35 percent public float 
B)  large banks with shareholders equity greater than $5 billion can be closely held 
C)  all banks, regardless of size and capitalization, can be closely held 
D)  small banks must be widely held

Question 8

Both ________ and ________ were financial innovations that occurred because of interest rate risk volatility.

Accepted Answer

A)  adjustable-rate mortgages; commercial paper 
B)  adjustable-rate mortgages; financial derivatives 
C)  sweep accounts; financial derivatives 
D)  sweep accounts; commercial paper 
A)  adjustable-rate mortgages; commercial paper 
B)  adjustable-rate mortgages; financial derivatives 
C)  sweep accounts; financial derivatives 
D)  sweep accounts; commercial paper

Question 9

Credit unions are usually ________.

Accepted Answer

A)  more profitable than Schedule I banks 
B)  regulated by the OSFI 
C)  regulated by a Centrale 
D)  investors in mortgage loans 
A)  more profitable than Schedule I banks 
B)  regulated by the OSFI 
C)  regulated by a Centrale 
D)  investors in mortgage loans

Question 10

The regulatory system that permitted the organization of a bank by any group that met certain criteria is known as a ________.

Accepted Answer

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

Question 11

The process in which people take their funds out of the banking system seeking higher-yielding securities is called ________.

Accepted Answer

A)  capital mobility 
B)  loophole mining 
C)  disintermediation 
D)  deposit jumping 
A)  capital mobility 
B)  loophole mining 
C)  disintermediation 
D)  deposit jumping

Question 12

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 13

The presence of so many commercial banks in the United States is most likely the result of ________.

Accepted Answer

A)  consumers' strong desire for dealing with only local banks 
B)  adverse selection and moral hazard problems that give local banks a competitive advantage over larger banks 
C)  prior regulations that restrict the ability of these financial institutions to open branches 
D)  consumers' preference for state banks 
A)  consumers' strong desire for dealing with only local banks 
B)  adverse selection and moral hazard problems that give local banks a competitive advantage over larger banks 
C)  prior regulations that restrict the ability of these financial institutions to open branches 
D)  consumers' preference for state banks

Question 14

Which of the following are true statements?

Accepted Answer

A)  Schedule I and Schedule II banks have different powers. 
B)  Widely held foreign banks can own 50 percent of a Canadian bank subsidiary. 
C)  Any widely held and regulated Canadian financial institution, other than a bank, may own 100 percent of a bank. 
D)  Schedule I banks have the same powers than Schedule II banks. 
A)  Schedule I and Schedule II banks have different powers. 
B)  Widely held foreign banks can own 50 percent of a Canadian bank subsidiary. 
C)  Any widely held and regulated Canadian financial institution, other than a bank, may own 100 percent of a bank. 
D)  Schedule I banks have the same powers than Schedule II 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 Bank of Canada 
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 Bank of Canada 
D)  decreasing capital accounts

Question 16

Canadian banks have most of their branches in ________.

Accepted Answer

A)  the U.S., Mexico, South America, Europe, and Asia 
B)  Latin America, the Middle East, Mexico, and Europe 
C)  Mexico, the Middle East, the Caribbean, and London 
D)  South America, the Middle East, and the Caribbean 
A)  the U.S., Mexico, South America, Europe, and Asia 
B)  Latin America, the Middle East, Mexico, and Europe 
C)  Mexico, the Middle East, the Caribbean, and London 
D)  South America, the Middle East, and the Caribbean

Question 17

The experience of disintermediation in the banking industry illustrates that ________.

Accepted Answer

A)  more regulation of financial markets may avoid such problems in the future 
B)  banks are unable to remain competitive with other financial intermediaries 
C)  consumers no longer desire the services that banks provide 
D)  markets invent alternatives to costly regulations 
A)  more regulation of financial markets may avoid such problems in the future 
B)  banks are unable to remain competitive with other financial intermediaries 
C)  consumers no longer desire the services that banks provide 
D)  markets invent alternatives to costly regulations

Question 18

The most important source of the changes in supply conditions that stimulate financial innovation has been the ________.

Accepted Answer

A)  deregulation of financial institutions 
B)  dramatic increase in the volatility of interest rates 
C)  improvement in computer and telecommunications technology 
D)  dramatic increase in competition from foreign banks 
A)  deregulation of financial institutions 
B)  dramatic increase in the volatility of interest rates 
C)  improvement in computer and telecommunications technology 
D)  dramatic increase in competition from foreign banks

Question 19

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 20

The declining cost of computer technology has made ________ a reality.

Accepted Answer

A)  brick and mortar banking 
B)  commercial banking 
C)  virtual banking 
D)  investment banking 
A)  brick and mortar banking 
B)  commercial banking 
C)  virtual banking 
D)  investment banking

Exam 11: Banking Industry: Structure and Competition

A disadvantage of virtual banks (clicks)is that ________.

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

Automated teller machines ________.

Prior to 2008,bank managers in the U.S.looked on reserve requirements ________.

As the banking system in Canada evolves,it is expected that ________.

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

The 2001 Bank Reform Act states that ________.

Both ________ and ________ were financial innovations that occurred because of interest rate risk volatility.

Credit unions are usually ________.

The regulatory system that permitted the organization of a bank by any group that met certain criteria is known as a ________.

The process in which people take their funds out of the banking system seeking higher-yielding securities is called ________.

A debit card differs from a credit card in that ________.

The presence of so many commercial banks in the United States is most likely the result of ________.

Which of the following are true statements?

Banks have attempted to maintain adequate profit levels by ________.

Canadian banks have most of their branches in ________.

The experience of disintermediation in the banking industry illustrates that ________.

The most important source of the changes in supply conditions that stimulate financial innovation has been the ________.

Rising interest-rate risk ________.

The declining cost of computer technology has made ________ a reality.

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

Understanding Interest Rates

The Behaviour 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

Economic Analysis of Financial Regulation

Nonbank Finance

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

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

Both and were financial innovations that occurred because of interest rate risk volatility.