Question 1

Bank consolidation will likely result in ________.

Accepted Answer

A) less competition 
B) the elimination of credit unions 
C) large, complex banking organizations 
D) a shift in assets from larger banks to smaller banks 
A) less competition 
B) the elimination of credit unions 
C) large, complex banking organizations 
D) a shift in assets from larger banks to smaller banks

Question 2

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 3

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 4

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

Accepted Answer

Banks were very vulnerable to interest-r

Question 5

A major difference between the British-style and Japanese banking systems is that ________.

Accepted Answer

A) British-style banks are allowed to hold substantial equity stakes in commercial firms, whereas Japanese banks cannot 
B) Japanese banks are allowed to hold substantial equity stakes in commercial firms, whereas British-style banks cannot 
C) bank holding companies are illegal in British-style banks 
D) Japanese banks are usually organized as bank holding companies 
A) British-style banks are allowed to hold substantial equity stakes in commercial firms, whereas Japanese banks cannot 
B) Japanese banks are allowed to hold substantial equity stakes in commercial firms, whereas British-style banks cannot 
C) bank holding companies are illegal in British-style banks 
D) Japanese banks are usually organized as bank holding companies

Question 6

Disintermediation resulted from ________.

Accepted Answer

A) interest rate ceilings combine with inflation-driven increases in interest rates 
B) elimination of Regulation Q (the regulation imposing interest rate ceilings on bank deposits) 
C) increases in federal income taxes 
D) reserve requirements 
A) interest rate ceilings combine with inflation-driven increases in interest rates 
B) elimination of Regulation Q (the regulation imposing interest rate ceilings on bank deposits) 
C) increases in federal income taxes 
D) reserve requirements

Question 7

In a ________ banking system, commercial banks are allowed to hold equity stakes in commercial firms.

Accepted Answer

A) British 
B) German 
C) Japanese 
D) North American 
A) British 
B) German 
C) Japanese 
D) North American

Question 8

The four-pillars were identified as ________.

Accepted Answer

A) banking, brokerage, trusts, and mutual funds 
B) banking, brokerage, credit unions, and mutual funds 
C) banking, brokerage, credit unions, and insurance 
D) banking, brokerage, trusts, and insurance 
A) banking, brokerage, trusts, and mutual funds 
B) banking, brokerage, credit unions, and mutual funds 
C) banking, brokerage, credit unions, and insurance 
D) banking, brokerage, trusts, and insurance

Question 9

The business term for economies of scope is ________.

Accepted Answer

A) economies of scale 
B) diversification 
C) cooperation 
D) synergies 
A) economies of scale 
B) diversification 
C) cooperation 
D) synergies

Question 10

What important changes in banking have occurred as the result of low cost information technology? Discuss four examples of these changes.

Accepted Answer

Information technology lowers the cost o

Question 11

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 12

________ is creating a marketable capital market instrument by bundling a portfolio of mortgage or auto loans.

Accepted Answer

A) Diversification 
B) Arbitrage 
C) Computerization 
D) Securitization 
A) Diversification 
B) Arbitrage 
C) Computerization 
D) Securitization

Question 13

Explain why the profitability of traditional banking has declined and how banks have responded.

Accepted Answer

Banks have lost cost advantages because

Question 14

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 15

The modern Canadian banking system began with ________.

Accepted Answer

A) the Chartered Bank of Upper Canada in 1821 
B) the Bank of Montreal in 1817 
C) the Bank of Lower Canada in 1801 
D) the Bank of New Brunswick in 1820 
A) the Chartered Bank of Upper Canada in 1821 
B) the Bank of Montreal in 1817 
C) the Bank of Lower Canada in 1801 
D) the Bank of New Brunswick in 1820

Question 16

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 17

Describe the financial innovations that were stimulated as a response to branching restrictions in the U.S.?

Accepted Answer

Bank holding companies: a bank holding c

Question 18

The difference between a Schedule II and a Schedule III bank is that ________.

Accepted Answer

A) a Schedule II bank is a Canadian subsidiary of a foreign bank 
B) a Schedule III bank is a foreign bank is not allowed to branch directly into Canada 
C) a foreign bank may enter the Canadian banking industry only as a Schedule III bank 
D) widely held foreign banks can own 50 percent of a Canadian bank subsidiary 
A) a Schedule II bank is a Canadian subsidiary of a foreign bank 
B) a Schedule III bank is a foreign bank is not allowed to branch directly into Canada 
C) a foreign bank may enter the Canadian banking industry only as a Schedule III bank 
D) widely held foreign banks can own 50 percent of a Canadian bank subsidiary

Question 19

Credit cards date back to ________.

Accepted Answer

A) prior to the second World War 
B) just after the second World War 
C) the early 1950s 
D) the late 1950s 
A) prior to the second World War 
B) just after the second World War 
C) the early 1950s 
D) the late 1950s

Question 20

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

Exam 11: Banking Industry: Structure and Competition

Bank consolidation will likely result in ________.

ATMs were developed because of breakthroughs in technology and as a ________.

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

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

A major difference between the British-style and Japanese banking systems is that ________.

Disintermediation resulted from ________.

In a ________ banking system, commercial banks are allowed to hold equity stakes in commercial firms.

The four-pillars were identified as ________.

The business term for economies of scope is ________.

What important changes in banking have occurred as the result of low cost information technology? Discuss four examples of these changes.

Automated teller machines ________.

________ is creating a marketable capital market instrument by bundling a portfolio of mortgage or auto loans.

Explain why the profitability of traditional banking has declined and how banks have responded.

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

The modern Canadian banking system began with ________.

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

Describe the financial innovations that were stimulated as a response to branching restrictions in the U.S.?

The difference between a Schedule II and a Schedule III bank is that ________.

Credit cards date back to ________.

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

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

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

Financial Crises in Emerging Markets

The ISLM Model

Non-Bank Finance

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