Exam 1: Why Are Financial Institutions Special

Of the ten largest banks in the world at the beginning of 2012, how many were U.S. banks?

Negative externalities exist in the depository sector when

Advantages of depositing funds into a typical bank account instead of directly buying corporate securities include all of the following EXCEPT

In recent years, the proportion of savings and demand deposits have decreased and the proportion of pension funds have increased in the financial assets held by U.S. households.

Financial intermediaries are

Pension and mutual funds have a lower correlation between the maturities of their assets and liabilities than do commercial banks and thrifts.

All of the following are examples of participants in the shadow banking system EXCEPT

The Community Reinvestment Act and the Home Mortgage Disclosure Act were both passed to provide incentives to comply with

An FI acting as an agent in matching savers and borrowers of funds can attain economies of scale and provide this service more efficiently than either the saver or borrower could on their own.

Depository institutions (DIs) play an important role in the transmission of monetary policy from the Federal Reserve to the rest of the economy primarily because

Each of the following is a special function performed by FIs at a macro level EXCEPT

Many households place funds with financial institutions because many FI accounts provide

A significant recent trend in the provision of financial services is that households increasingly prefer denomination intermediation and information services provided by

In its role as a delegated monitor, an FI

Financial institutions act as intermediaries between suppliers and demanders of money.

Safety and soundness regulations include all of the following layers of protection EXCEPT

The asset transformation function of an FI is to issue primary financial claims to corporations while purchasing primary claims issued by households and other investors.

The recent financial crisis highlighted, in retrospect, how heavily households and businesses had come to rely on FIs to act as specialists in

FIs typically provide secondary claims to household savers that have inferior liquidity than primary securities of corporations such as equity and bonds.

As a delegated monitor, an FI's actions reduce agency costs.