Question 1

The second stage in the regulatory process is

Accepted Answer

A)  a crisis. 
B)  regulation. 
C)  response by the financial system. 
D)  regulatory response. 
A)  a crisis. 
B)  regulation. 
C)  response by the financial system. 
D)  regulatory response.

Question 2

The creation of a lender of last resort in the United States

Accepted Answer

A)  occurred in response to banking panics. 
B)  was mandated in the U.S. Constitution. 
C)  occurred in response to the S&L crisis of the 1980s. 
D)  has been recommended by the Treasury in its report of late 1992. 
A)  occurred in response to banking panics. 
B)  was mandated in the U.S. Constitution. 
C)  occurred in response to the S&L crisis of the 1980s. 
D)  has been recommended by the Treasury in its report of late 1992.

Question 3

How does deflation affect those with debt?

Accepted Answer

A decline in the price level m

Question 4

The original intention of the Fed's role as lender of last resort was to make loans to banks that were

Accepted Answer

A)  not illiquid nor insolvent. 
B)  illiquid, but not insolvent. 
C)  insolvent, but not illiquid. 
D)  both illiquid and insolvent. 
A)  not illiquid nor insolvent. 
B)  illiquid, but not insolvent. 
C)  insolvent, but not illiquid. 
D)  both illiquid and insolvent.

Question 5

Disintermediation refers to the

Accepted Answer

A)  failure of financial intermediaries due to moral hazard problems. 
B)  failure of financial intermediaries due to adverse selection problems. 
C)  movement of savers and borrowers from banks to financial markets. 
D)  removal of government regulations of financial intermediaries. 
A)  failure of financial intermediaries due to moral hazard problems. 
B)  failure of financial intermediaries due to adverse selection problems. 
C)  movement of savers and borrowers from banks to financial markets. 
D)  removal of government regulations of financial intermediaries.

Question 6

Why was the Fed reluctant to rescue insolvent banks?

Accepted Answer

A)  It thought it may lead to moral hazard. 
B)  It thought it may lead to adverse selection. 
C)  It thought they were still liquid. 
D)  It did not think they were insolvent. 
A)  It thought it may lead to moral hazard. 
B)  It thought it may lead to adverse selection. 
C)  It thought they were still liquid. 
D)  It did not think they were insolvent.

Question 7

The recession that became the Great Depression began

Accepted Answer

A)  two months prior to the stock market crash of 1929. 
B)  with the stock market crash of 1929. 
C)  one year after the stock market crash of 1929. 
D)  with the banking panics of the early 1930s. 
A)  two months prior to the stock market crash of 1929. 
B)  with the stock market crash of 1929. 
C)  one year after the stock market crash of 1929. 
D)  with the banking panics of the early 1930s.

Question 8

All of the following were actions taken by the government or the Fed in response to the Financial Crisis of 2007-2009 EXCEPT

Accepted Answer

A)  purchasing of most toxic assets such as mortgage-backed securities. 
B)  reducing the federal funds rate to near zero. 
C)  insuring deposits in money market mutual funds. 
D)  effective nationalization of Fannie Mae and Freddie Mac. 
A)  purchasing of most toxic assets such as mortgage-backed securities. 
B)  reducing the federal funds rate to near zero. 
C)  insuring deposits in money market mutual funds. 
D)  effective nationalization of Fannie Mae and Freddie Mac.

Question 9

By how much did real investment decline between 1929 and 1933?

Accepted Answer

A)  18% 
B)  20% 
C)  27% 
D)  81% 
A)  18% 
B)  20% 
C)  27% 
D)  81%

Question 10

An ATS account

Accepted Answer

A)  converts a corporation's checking account balance at the end of the day into an overnight repurchase agreement. 
B)  is the name given to NOW accounts outside of New England. 
C)  are negotiable certificates of deposit of less than $100,000. 
D)  were used during the Great Depression by depositors who had lost faith in conventional checking accounts. 
A)  converts a corporation's checking account balance at the end of the day into an overnight repurchase agreement. 
B)  is the name given to NOW accounts outside of New England. 
C)  are negotiable certificates of deposit of less than $100,000. 
D)  were used during the Great Depression by depositors who had lost faith in conventional checking accounts.

Question 11

Which investment caused the Reserve Primary Fund to incur heavy losses?

Accepted Answer

A)  mortgage-backed securities 
B)  real estate investment trusts 
C)  commercial paper issued by Bear Stearns 
D)  commercial paper issued by Lehman Brothers 
A)  mortgage-backed securities 
B)  real estate investment trusts 
C)  commercial paper issued by Bear Stearns 
D)  commercial paper issued by Lehman Brothers

Question 12

Sovereign debt refers to

Accepted Answer

A)  debt owned by the government. 
B)  bonds issued by the government. 
C)  debt owed to the government. 
D)  debt only issued by nations with kings or queens. 
A)  debt owned by the government. 
B)  bonds issued by the government. 
C)  debt owed to the government. 
D)  debt only issued by nations with kings or queens.

Question 13

Regulation Q

Accepted Answer

A)  prohibited interstate banking. 
B)  placed ceilings on allowable interest rates on time and savings deposits. 
C)  required all banks to hold reserves against demand deposits. 
D)  broadened the basis on which the Fed could make discount loans. 
A)  prohibited interstate banking. 
B)  placed ceilings on allowable interest rates on time and savings deposits. 
C)  required all banks to hold reserves against demand deposits. 
D)  broadened the basis on which the Fed could make discount loans.

Question 14

Describe the four stages of the financial regulatory pattern.

Accepted Answer

The first stage is a crisis in the finan

Question 15

Losses in which holding resulted in BNP Paribas not allowing investors to redeem shares from three of its investment funds?

Accepted Answer

A)  mortgage-backed securities 
B)  Lehman Brothers 
C)  Bear Stearns 
D)  Real Estate Investment Trusts 
A)  mortgage-backed securities 
B)  Lehman Brothers 
C)  Bear Stearns 
D)  Real Estate Investment Trusts

Question 16

What does it mean for a money market mutual fund to "break the buck"?

Accepted Answer

A)  The value of its share declines below $1. 
B)  It incurs losses on its investments. 
C)  It increases its fees to more than 1% of net asset value. 
D)  It is unable to meet the demand for withdrawals by investors. 
A)  The value of its share declines below $1. 
B)  It incurs losses on its investments. 
C)  It increases its fees to more than 1% of net asset value. 
D)  It is unable to meet the demand for withdrawals by investors.

Question 17

The Franklin National Bank Crisis had its greatest impact on the market for

Accepted Answer

A)  commercial paper. 
B)  commodity futures. 
C)  negotiable certificates of deposit. 
D)  Eurodollars. 
A)  commercial paper. 
B)  commodity futures. 
C)  negotiable certificates of deposit. 
D)  Eurodollars.

Question 18

Which of the following did NOT significantly exacerbate the banking crisis of the early 1930s?

Accepted Answer

A)  The Fed's decision not to make loans to insolvent banks. 
B)  The large number of small, poorly diversified banks. 
C)  The large number of rural banks that held agricultural loans during a time of falling commodity prices. 
D)  The large amount of fraud carried out by bank managers. 
A)  The Fed's decision not to make loans to insolvent banks. 
B)  The large number of small, poorly diversified banks. 
C)  The large number of rural banks that held agricultural loans during a time of falling commodity prices. 
D)  The large amount of fraud carried out by bank managers.

Question 19

Regulation Q was intended to

Accepted Answer

A)  maintain banks' profitability by limiting competition for funds. 
B)  increase the reserves banks would hold against demand deposits. 
C)  increase the reserves banks would hold against time deposits. 
D)  eliminate the need for discount loans. 
A)  maintain banks' profitability by limiting competition for funds. 
B)  increase the reserves banks would hold against demand deposits. 
C)  increase the reserves banks would hold against time deposits. 
D)  eliminate the need for discount loans.

Question 20

Which investment bank avoided bankruptcy by being purchased by JP Morgan Chase in March 2008?

Accepted Answer

A)  Morgan Stanley 
B)  Lehman Brothers 
C)  Bear Stearns 
D)  Merril Lynch 
A)  Morgan Stanley 
B)  Lehman Brothers 
C)  Bear Stearns 
D)  Merril Lynch

The second stage in the regulatory process is

The creation of a lender of last resort in the United States

How does deflation affect those with debt?

The original intention of the Fed's role as lender of last resort was to make loans to banks that were

Disintermediation refers to the

Why was the Fed reluctant to rescue insolvent banks?

The recession that became the Great Depression began

All of the following were actions taken by the government or the Fed in response to the Financial Crisis of 2007-2009 EXCEPT

By how much did real investment decline between 1929 and 1933?

An ATS account

Which investment caused the Reserve Primary Fund to incur heavy losses?

Sovereign debt refers to

Regulation Q

Describe the four stages of the financial regulatory pattern.

Losses in which holding resulted in BNP Paribas not allowing investors to redeem shares from three of its investment funds?

What does it mean for a money market mutual fund to "break the buck"?

The Franklin National Bank Crisis had its greatest impact on the market for

Which of the following did NOT significantly exacerbate the banking crisis of the early 1930s?

Regulation Q was intended to

Which investment bank avoided bankruptcy by being purchased by JP Morgan Chase in March 2008?

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, mutual Funds, hedge Funds, and the Shadow Banking System

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I: the Aggregate Demand and Aggregate Supply Model

Monetary Theory Ii: the Is-Mp Model

Filters

Exam 12: Financial Crises and Financial Regulation

The second stage in the regulatory process is

The creation of a lender of last resort in the United States

How does deflation affect those with debt?

The original intention of the Fed's role as lender of last resort was to make loans to banks that were

Disintermediation refers to the

Why was the Fed reluctant to rescue insolvent banks?

The recession that became the Great Depression began

All of the following were actions taken by the government or the Fed in response to the Financial Crisis of 2007-2009 EXCEPT

By how much did real investment decline between 1929 and 1933?

An ATS account

Which investment caused the Reserve Primary Fund to incur heavy losses?

Sovereign debt refers to

Regulation Q

Describe the four stages of the financial regulatory pattern.

Losses in which holding resulted in BNP Paribas not allowing investors to redeem shares from three of its investment funds?

What does it mean for a money market mutual fund to "break the buck"?

The Franklin National Bank Crisis had its greatest impact on the market for

Which of the following did NOT significantly exacerbate the banking crisis of the early 1930s?

Regulation Q was intended to

Which investment bank avoided bankruptcy by being purchased by JP Morgan Chase in March 2008?

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, mutual Funds, hedge Funds, and the Shadow Banking System

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I: the Aggregate Demand and Aggregate Supply Model

Monetary Theory Ii: the Is-Mp Model

Filters