Question 1

The most significant change in the economic environment that changed the demand for financial products in recent years has been

Accepted Answer

A) the aging of the baby-boomer generation. 
B) the dramatic increase in the volatility of interest rates. 
C) the dramatic increase in competition from foreign banks. 
D) the deregulation of financial institutions. 
A) the aging of the baby-boomer generation. 
B) the dramatic increase in the volatility of interest rates. 
C) the dramatic increase in competition from foreign banks. 
D) the deregulation of financial institutions.

Question 2

The regulatory agency responsible for supervising savings and loans institutions is the

Accepted Answer

A) FSLIC. 
B) Fed. 
C) Comptroller of the Currency. 
D) Office of Thrift Supervision. 
A) FSLIC. 
B) Fed. 
C) Comptroller of the Currency. 
D) Office of Thrift Supervision.

Question 3

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

Accepted Answer

Banks were very vulnerable to interest-r

Question 4

Financial innovation has caused

Accepted Answer

A) banks to suffer declines in their cost advantages in acquiring funds,although it has not caused a decline in income advantages. 
B) banks to suffer a simultaneous decline of cost and income advantages. 
C) banks to suffer declines in their income advantages in acquiring funds,although it has not caused a decline in cost advantages. 
D) banks to achieve competitive advantages in both costs and income. 
A) banks to suffer declines in their cost advantages in acquiring funds,although it has not caused a decline in income advantages. 
B) banks to suffer a simultaneous decline of cost and income advantages. 
C) banks to suffer declines in their income advantages in acquiring funds,although it has not caused a decline in cost advantages. 
D) banks to achieve competitive advantages in both costs and income.

Question 5

________ 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 6

A major difference between the United States and Japanese banking systems is that

Accepted Answer

A) American 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 American banks cannot. 
C) bank holding companies are illegal in the United States. 
D) Japanese banks are usually organized as bank holding companies. 
A) American 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 American banks cannot. 
C) bank holding companies are illegal in the United States. 
D) Japanese banks are usually organized as bank holding companies.

Question 7

Since 1980

Accepted Answer

A) bank profitability has declined. 
B) banks have offset the decline in profits from traditional activities with increased income from off-balance-sheet activities. 
C) banks have offset the decline in profits from off-balance-sheet activities with increased income from traditional activities. 
D) bank profits have grown rapidly due to deregulation. 
A) bank profitability has declined. 
B) banks have offset the decline in profits from traditional activities with increased income from off-balance-sheet activities. 
C) banks have offset the decline in profits from off-balance-sheet activities with increased income from traditional activities. 
D) bank profits have grown rapidly due to deregulation.

Question 8

Prior to 2008,the bank's cost of holding reserves equaled

Accepted Answer

A) the interest paid on deposits times the amount of reserves. 
B) the interest paid on deposits times the amount of deposits. 
C) the interest earned on loans times the amount of loans. 
D) the interest earned on loans times the amount on reserves. 
A) the interest paid on deposits times the amount of reserves. 
B) the interest paid on deposits times the amount of deposits. 
C) the interest earned on loans times the amount of loans. 
D) the interest earned on loans times the amount on reserves.

Question 9

________ is the process of researching and developing profitable new products and services by financial institutions.

Accepted Answer

A) Financial engineering 
B) Financial manipulation 
C) Customer manipulation 
D) Customer engineering 
A) Financial engineering 
B) Financial manipulation 
C) Customer manipulation 
D) Customer engineering

Question 10

________ within the U.S.can make loans to foreigners but cannot make loans to domestic residents.

Accepted Answer

A) Edge Act corporations 
B) International Banking Facilities 
C) Universal banks 
D) Euro banks 
A) Edge Act corporations 
B) International Banking Facilities 
C) Universal banks 
D) Euro banks

Question 11

The driving force behind the securitization of mortgages and automobile loans has been

Accepted Answer

A) the rising regulatory constraints on substitute financial instruments. 
B) the desire of mortgage and auto lenders to exit this field of lending. 
C) the improvement in computer technology. 
D) the relaxation of regulatory restrictions on credit card operations. 
A) the rising regulatory constraints on substitute financial instruments. 
B) the desire of mortgage and auto lenders to exit this field of lending. 
C) the improvement in computer technology. 
D) the relaxation of regulatory restrictions on credit card operations.

Question 12

Thrift institutions importance as a source of funds for borrowers

Accepted Answer

A) has shrunk from around 40 percent of total credit advanced in the late 1970s to below 30 percent by 2005. 
B) has shrunk from over 20 percent of total credit advanced in the late 1970s to below 6 percent by 2005. 
C) has expanded dramatically,from around 15 percent of total credit advanced in the late 1970s to above 25 percent by 2005. 
D) has expanded dramatically,from around 15 percent of total credit advanced in the late 1970s to above 30 percent by 2005. 
A) has shrunk from around 40 percent of total credit advanced in the late 1970s to below 30 percent by 2005. 
B) has shrunk from over 20 percent of total credit advanced in the late 1970s to below 6 percent by 2005. 
C) has expanded dramatically,from around 15 percent of total credit advanced in the late 1970s to above 25 percent by 2005. 
D) has expanded dramatically,from around 15 percent of total credit advanced in the late 1970s to above 30 percent by 2005.

Question 13

Under the Gramm-Leach-Bliley Act states retain regulatory authority over ________.

Accepted Answer

A) bank holding companies 
B) securities activities 
C) insurance activities 
D) bank subsidiaries engaged in securities underwriting 
A) bank holding companies 
B) securities activities 
C) insurance activities 
D) bank subsidiaries engaged in securities underwriting

Question 14

In a ________ banking system,commercial banks engage in securities underwriting,but legal subsidiaries conduct the different activities.Also,banking and insurance are not typically undertaken together in this system.

Accepted Answer

A) universal 
B) British-style universal 
C) short-fence 
D) compartmentalized 
A) universal 
B) British-style universal 
C) short-fence 
D) compartmentalized

Question 15

Currency circulated by banks that could be redeemed for gold was called ________.

Accepted Answer

A) junk bonds 
B) banknotes 
C) gold bills 
D) state money 
A) junk bonds 
B) banknotes 
C) gold bills 
D) state money

Question 16

Bank holding companies that rival money center banks in size,but are not located in money center cities are

Accepted Answer

A) superregional banks. 
B) bank clearing houses. 
C) international banks. 
D) local banks. 
A) superregional banks. 
B) bank clearing houses. 
C) international banks. 
D) local banks.

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

One factor contributing to the decline in cost advantages that banks once had is the

Accepted Answer

A) decline in the importance of checkable deposits from over 60 percent of banks' liabilities to under 10 percent today. 
B) decline in the importance of savings deposits from over 60 percent of banks' liabilities to under 15 percent today. 
C) decline in the importance of checkable deposits from over 40 percent of banks' liabilities to under 15 percent today. 
D) decline in the importance of savings deposits from over 40 percent of banks' liabilities to under 20 percent today. 
A) decline in the importance of checkable deposits from over 60 percent of banks' liabilities to under 10 percent today. 
B) decline in the importance of savings deposits from over 60 percent of banks' liabilities to under 15 percent today. 
C) decline in the importance of checkable deposits from over 40 percent of banks' liabilities to under 15 percent today. 
D) decline in the importance of savings deposits from over 40 percent of banks' liabilities to under 20 percent today.

Question 19

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 20

Adjustable rate mortgages

Accepted Answer

A) protect households against higher mortgage payments when interest rates rise. 
B) keep financial institutions' earnings high even when interest rates are falling. 
C) benefit homeowners when interest rates are falling. 
D) generally have higher initial interest rates than on conventional fixed-rate mortgages. 
A) protect households against higher mortgage payments when interest rates rise. 
B) keep financial institutions' earnings high even when interest rates are falling. 
C) benefit homeowners when interest rates are falling. 
D) generally have higher initial interest rates than on conventional fixed-rate mortgages.

Exam 12: Banking Industry: Structure and Competition

The most significant change in the economic environment that changed the demand for financial products in recent years has been

The regulatory agency responsible for supervising savings and loans institutions is the

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

Financial innovation has caused

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

A major difference between the United States and Japanese banking systems is that

Since 1980

Prior to 2008,the bank's cost of holding reserves equaled

________ is the process of researching and developing profitable new products and services by financial institutions.

________ within the U.S.can make loans to foreigners but cannot make loans to domestic residents.

The driving force behind the securitization of mortgages and automobile loans has been

Thrift institutions importance as a source of funds for borrowers

Under the Gramm-Leach-Bliley Act states retain regulatory authority over ________.

In a ________ banking system,commercial banks engage in securities underwriting,but legal subsidiaries conduct the different activities.Also,banking and insurance are not typically undertaken together in this system.

Currency circulated by banks that could be redeemed for gold was called ________.

Bank holding companies that rival money center banks in size,but are not located in money center cities are

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.

One factor contributing to the decline in cost advantages that banks once had is the

A debit card differs from a credit card in that

Adjustable rate mortgages

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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