Question 1

Deposits in European banks denominated in dollars for the purpose of international transactions are known as

Accepted Answer

A) Eurodollars. 
B) European Currency Units. 
C) European Monetary Units. 
D) International Monetary Units. 
A) Eurodollars. 
B) European Currency Units. 
C) European Monetary Units. 
D) International Monetary Units.

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

A ________ is a subsidiary of a U.S.bank that is engaged primarily in international banking.

Accepted Answer

A) Edge Act corporation 
B) Eurodollar agency 
C) universal bank 
D) McFadden corporation 
A) Edge Act corporation 
B) Eurodollar agency 
C) universal bank 
D) McFadden corporation

Question 4

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 5

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 6

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.

Question 7

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 8

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 9

In a ________ banking system,commercial banks provide a full range of banking,securities,and insurance services,all within a single legal entity.

Accepted Answer

A) universal 
B) severable 
C) barrier-free 
D) dividerless 
A) universal 
B) severable 
C) barrier-free 
D) dividerless

Question 10

Prior to 1980,the Fed set an interest rate ________ that is a maximum limit on the interest rate that could be paid on time deposits.

Accepted Answer

A) floor 
B) ceiling 
C) wall 
D) window 
A) floor 
B) ceiling 
C) wall 
D) window

Question 11

The Glass-Steagall Act,before its repeal in 1999,prohibited commercial banks from

Accepted Answer

A) issuing equity to finance bank expansion. 
B) engaging in underwriting and dealing of corporate securities. 
C) selling new issues of government securities. 
D) purchasing any debt securities. 
A) issuing equity to finance bank expansion. 
B) engaging in underwriting and dealing of corporate securities. 
C) selling new issues of government securities. 
D) purchasing any debt securities.

Question 12

Sweep accounts which were created to avoid reserve requirements became possible because of a change in ________.

Accepted Answer

A) demand conditions 
B) supply conditions 
C) government rules 
D) bank mergers 
A) demand conditions 
B) supply conditions 
C) government rules 
D) bank mergers

Question 13

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 14

Which of the following is a true statement concerning bank holding companies?

Accepted Answer

A) Bank holding companies own few large banks. 
B) Bank holding companies have experienced dramatic growth in the past three decades. 
C) The McFadden Act has prevented bank holding companies from establishing branch banks. 
D) Bank holding companies can own only banks. 
A) Bank holding companies own few large banks. 
B) Bank holding companies have experienced dramatic growth in the past three decades. 
C) The McFadden Act has prevented bank holding companies from establishing branch banks. 
D) Bank holding companies can own only banks.

Question 15

The main center of the Eurodollar market is

Accepted Answer

A) London. 
B) Basel. 
C) Paris. 
D) New York. 
A) London. 
B) Basel. 
C) Paris. 
D) New York.

Question 16

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 17

Since 1974,commercial banks importance as a source of funds for nonfinancial borrowers

Accepted Answer

A) has shrunk dramatically,from around 40 percent of total credit advanced to below 30 percent by 2005. 
B) has shrunk dramatically,from around 70 percent of total credit advanced to below 50 percent by 2005. 
C) has expanded dramatically,from around 50 percent of total credit advanced to above 70 percent by 2005. 
D) has expanded dramatically,from around 30 percent of total credit advanced to above 50 percent by 2005. 
A) has shrunk dramatically,from around 40 percent of total credit advanced to below 30 percent by 2005. 
B) has shrunk dramatically,from around 70 percent of total credit advanced to below 50 percent by 2005. 
C) has expanded dramatically,from around 50 percent of total credit advanced to above 70 percent by 2005. 
D) has expanded dramatically,from around 30 percent of total credit advanced to above 50 percent by 2005.

Question 18

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

Accepted Answer

A) the growth of the junk bond market. 
B) the competition from money market mutual funds. 
C) the growth of securitization. 
D) the growth in the commercial paper market. 
A) the growth of the junk bond market. 
B) the competition from money market mutual funds. 
C) the growth of securitization. 
D) the growth in the commercial paper market.

Question 19

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 20

________ 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

Exam 12: Banking Industry: Structure and Competition

Deposits in European banks denominated in dollars for the purpose of international transactions are known as

ATMs were developed because of breakthroughs in technology and as a

A ________ is a subsidiary of a U.S.bank that is engaged primarily in international banking.

Loophole mining refers to financial innovation designed to

Mutual savings banks are owned by ________.

Banks responded to disintermediation by

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

Before 1863,

In a ________ banking system,commercial banks provide a full range of banking,securities,and insurance services,all within a single legal entity.

Prior to 1980,the Fed set an interest rate ________ that is a maximum limit on the interest rate that could be paid on time deposits.

The Glass-Steagall Act,before its repeal in 1999,prohibited commercial banks from

Sweep accounts which were created to avoid reserve requirements became possible because of a change in ________.

Bank customers perceive Internet banks as being

Which of the following is a true statement concerning bank holding companies?

The main center of the Eurodollar market is

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

Since 1974,commercial banks importance as a source of funds for nonfinancial borrowers

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

Eurodollars are

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

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

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