Question 1

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. C

Question 2

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. A

Question 3

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. C

Question 4

Like the dual banking system for commercial banks,thrifts can have either ________ or ________ charters.

Accepted Answer

A) state; federal 
B) state; local 
C) local; federal 
D) municipal; federal 
A) state; federal 
B) state; local 
C) local; federal 
D) municipal; federal

Question 5

What country is given credit for the birth of the Eurodollar market?

Accepted Answer

A) The United States 
B) England 
C) The Soviet Union 
D) Japan 
A) The United States 
B) England 
C) The Soviet Union 
D) Japan

Question 6

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 7

The Federal Reserve Act required all ________ banks to become members of the Federal Reserve System,while ________ banks could choose to become members of the system.

Accepted Answer

A) state; national 
B) state; municipal 
C) national; state 
D) national; municipal 
A) state; national 
B) state; municipal 
C) national; state 
D) national; municipal

Question 8

Prior to 2008,bank managers 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 9

As a result of the subprime 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 10

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 11

So-called fallen angels differ from junk bonds in that

Accepted Answer

A) junk bonds refer to newly issued bonds with low credit ratings,whereas fallen angels refer to previously bonds that have had their credit ratings fall below Baa. 
B) junk bonds refer to previously bonds that have had their credit ratings fall below Baa,whereas fallen angels refer to newly issued bonds with low credit ratings. 
C) junk bonds have ratings below Baa,whereas fallen angels have ratings below C. 
D) fallen angels have ratings below Baa,whereas junk bonds have ratings below C. 
A) junk bonds refer to newly issued bonds with low credit ratings,whereas fallen angels refer to previously bonds that have had their credit ratings fall below Baa. 
B) junk bonds refer to previously bonds that have had their credit ratings fall below Baa,whereas fallen angels refer to newly issued bonds with low credit ratings. 
C) junk bonds have ratings below Baa,whereas fallen angels have ratings below C. 
D) fallen angels have ratings below Baa,whereas junk bonds have ratings below C.

Question 12

The legislation that effectively prohibited banks from branching across state lines and forced all national banks to conform to the branching regulations in the state in which they reside is the

Accepted Answer

A) McFadden Act. 
B) National Bank Act. 
C) Glass-Steagall Act. 
D) Garn-St.Germain Act. 
A) McFadden Act. 
B) National Bank Act. 
C) Glass-Steagall Act. 
D) Garn-St.Germain Act.

Question 13

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 14

An essential characteristic of credit unions is that

Accepted Answer

A) they are typically large. 
B) branching across state lines is prohibited. 
C) their lending is primarily for mortgage loans. 
D) they are organized for individuals with a common bond. 
A) they are typically large. 
B) branching across state lines is prohibited. 
C) their lending is primarily for mortgage loans. 
D) they are organized for individuals with a common bond.

Question 15

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 16

Although the National Bank Act of 1863 was designed to eliminate state-chartered banks by imposing a prohibitive tax on banknotes,these banks have been able to stay in business by

Accepted Answer

A) issuing credit cards. 
B) ignoring the regulations. 
C) acquiring funds through deposits. 
D) branching into other states. 
A) issuing credit cards. 
B) ignoring the regulations. 
C) acquiring funds through deposits. 
D) branching into other states.

Question 17

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 18

An instrument developed to help investors and institutions hedge interest-rate risk is

Accepted Answer

A) a put option. 
B) a call option. 
C) a financial derivative. 
D) a mortgage-backed security. 
A) a put option. 
B) a call option. 
C) a financial derivative. 
D) a mortgage-backed security.

Question 19

The U.S.banking system is considered to be a dual system because

Accepted Answer

A) banks offer both checking and savings accounts. 
B) it actually includes both banks and thrift institutions. 
C) it is regulated by both state and federal governments. 
D) it was established before the Civil War,requiring separate regulatory bodies for the North and South. 
A) banks offer both checking and savings accounts. 
B) it actually includes both banks and thrift institutions. 
C) it is regulated by both state and federal governments. 
D) it was established before the Civil War,requiring separate regulatory bodies for the North and South.

Question 20

Sweep accounts

Accepted Answer

A) have made reserve requirements nonbonding for many banks. 
B) sweep funds out of deposit accounts into long-term securities. 
C) enable banks to avoid paying interest to corporate customers. 
D) reduce banks' assets. 
A) have made reserve requirements nonbonding for many banks. 
B) sweep funds out of deposit accounts into long-term securities. 
C) enable banks to avoid paying interest to corporate customers. 
D) reduce banks' assets.

Exam 12: Banking Industry: Structure and Competition

Automated teller machines

Disintermediation resulted from

New computer technology has

Like the dual banking system for commercial banks,thrifts can have either ________ or ________ charters.

What country is given credit for the birth of the Eurodollar market?

The modern commercial banking system began in America when the

The Federal Reserve Act required all ________ banks to become members of the Federal Reserve System,while ________ banks could choose to become members of the system.

Prior to 2008,bank managers looked on reserve requirements

As a result of the subprime 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

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

So-called fallen angels differ from junk bonds in that

The legislation that effectively prohibited banks from branching across state lines and forced all national banks to conform to the branching regulations in the state in which they reside is the

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

An essential characteristic of credit unions is that

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

Although the National Bank Act of 1863 was designed to eliminate state-chartered banks by imposing a prohibitive tax on banknotes,these banks have been able to stay in business by

The Federal Reserve Act of 1913 required that

An instrument developed to help investors and institutions hedge interest-rate risk is

The U.S.banking system is considered to be a dual system because

Sweep accounts

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 and the Subprime Meltdown

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Central Banks and the Federal Reserve System

The Money Supply Process

Tools for Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

The Demand for Money

The Islm Model

Monetary and Fiscal Policy in the ISLM Model

Aggregate Demand and Supply Analysis

Transmission Mechanisms of Monetary Policy: The Evidence

Money and Inflation

Rational Expectations: Implications for Policy

Filters

Like the dual banking system for commercial banks,thrifts can have either or charters.

The Federal Reserve Act required all banks to become members of the Federal Reserve System,while banks could choose to become members of the system.