Question 1

Federal funds are

Accepted Answer

A)  the tax revenues of the Federal government. 
B)  loans by the Federal Reserve to banks. 
C)  loans by banks to the Federal Reserve. 
D)  short-term loans between banks. 
A)  the tax revenues of the Federal government. 
B)  loans by the Federal Reserve to banks. 
C)  loans by banks to the Federal Reserve. 
D)  short-term loans between banks.

Question 2

Securities that banks sell and agree to repurchase are known as

Accepted Answer

A)  federal funds. 
B)  discount loans. 
C)  repurchase agreements. 
D)  NOW accounts. 
A)  federal funds. 
B)  discount loans. 
C)  repurchase agreements. 
D)  NOW accounts.

Question 3

If a bank has a leverage ratio of 0.1 and a return on capital of 2%,what is its return on equity?

Accepted Answer

A)  0.2% 
B)  2.1% 
C)  5% 
D)  20% 
A)  0.2% 
B)  2.1% 
C)  5% 
D)  20%

Question 4

Which of the following things do banks do with the funds they acquire from savers?

Accepted Answer

A)  invest in corporate stock 
B)  invest in corporate bonds 
C)  make loans to individuals 
D)  all of the above 
A)  invest in corporate stock 
B)  invest in corporate bonds 
C)  make loans to individuals 
D)  all of the above

Question 5

Since most banks have positive gaps and negative duration gaps,an increase in market interest rates will

Accepted Answer

A)  increase bank profits and increase bank capital. 
B)  increase bank profits and decrease bank capital. 
C)  decrease bank profits and increase bank capital. 
D)  decrease bank profits and decrease bank capital. 
A)  increase bank profits and increase bank capital. 
B)  increase bank profits and decrease bank capital. 
C)  decrease bank profits and increase bank capital. 
D)  decrease bank profits and decrease bank capital.

Question 6

Loans by the Federal Reserve to banks are known as

Accepted Answer

A)  repurchase agreements. 
B)  Federal funds. 
C)  discount loans. 
D)  cash items in the process of collection. 
A)  repurchase agreements. 
B)  Federal funds. 
C)  discount loans. 
D)  cash items in the process of collection.

Question 7

Banks use credit rationing rather than simply raising the interest rate charged borrowers with higher default risks because

Accepted Answer

A)  of fear of adverse selection problems. 
B)  of interest rate ceilings in many states. 
C)  of fear of offending the loan applicants. 
D)  use of credit rationing is encouraged by the Federal Reserve. 
A)  of fear of adverse selection problems. 
B)  of interest rate ceilings in many states. 
C)  of fear of offending the loan applicants. 
D)  use of credit rationing is encouraged by the Federal Reserve.

Question 8

Why are U.S.government securities referred to as a bank's secondary reserves?

Accepted Answer

A)  Their current market value may count toward meeting a bank's legal reserve requirements. 
B)  They are very liquid. 
C)  Banks are legally required to hold a certain minimum amount of these securities. 
D)  They are the same thing as vault cash. 
A)  Their current market value may count toward meeting a bank's legal reserve requirements. 
B)  They are very liquid. 
C)  Banks are legally required to hold a certain minimum amount of these securities. 
D)  They are the same thing as vault cash.

Question 9

Standby letters of credit

Accepted Answer

A)  are a form of swaps. 
B)  are a promise by a bank to lend the borrower funds to pay off its maturing commercial paper. 
C)  are a promise by a large depositor to provide additional funds to a bank should the bank face an unexpectedly large deposit outflow. 
D)  represent the unused balance on a bank credit card. 
A)  are a form of swaps. 
B)  are a promise by a bank to lend the borrower funds to pay off its maturing commercial paper. 
C)  are a promise by a large depositor to provide additional funds to a bank should the bank face an unexpectedly large deposit outflow. 
D)  represent the unused balance on a bank credit card.

Question 10

Congress introduced deposit insurance in response to

Accepted Answer

A)  the savings-and-loan crisis of the 1980s. 
B)  the banking crisis of the 1930s. 
C)  the demise of the Second Bank of the United States in 1836. 
D)  the demise of the First Bank of the United States in 1811. 
A)  the savings-and-loan crisis of the 1980s. 
B)  the banking crisis of the 1930s. 
C)  the demise of the Second Bank of the United States in 1836. 
D)  the demise of the First Bank of the United States in 1811.

Question 11

A loan officer uses a credit scoring system to

Accepted Answer

A)  compare the interest rate on a loan to interest rates on other assets with comparable risk. 
B)  keep track of the fraction of a bank's assets tied up in loans to a single individual or business. 
C)  predict statistically whether an individual is likely to default on a loan. 
D)  match any particular loan with the deposits being used to fund it. 
A)  compare the interest rate on a loan to interest rates on other assets with comparable risk. 
B)  keep track of the fraction of a bank's assets tied up in loans to a single individual or business. 
C)  predict statistically whether an individual is likely to default on a loan. 
D)  match any particular loan with the deposits being used to fund it.

Question 12

The difference between a savings deposit and a time deposit is

Accepted Answer

A)  time deposits pay no interest. 
B)  savings deposits pay no interest. 
C)  time deposits have specified maturities. 
D)  savings deposits have specified maturities. 
A)  time deposits pay no interest. 
B)  savings deposits pay no interest. 
C)  time deposits have specified maturities. 
D)  savings deposits have specified maturities.

Question 13

The portion of bank capital set aside in anticipation of future loan losses is known as

Accepted Answer

A)  required reserves. 
B)  excess reserves. 
C)  secondary reserves. 
D)  loan loss reserves. 
A)  required reserves. 
B)  excess reserves. 
C)  secondary reserves. 
D)  loan loss reserves.

Question 14

If you deposit a $50 check in the bank,the immediate impact on your bank's balance sheet will be a

Accepted Answer

A)  $50 increase in reserves and a $50 increase in checkable deposits. 
B)  $50 decrease in reserves and a $50 increase in checkable deposits. 
C)  $50 increase in reserves and a $50 decrease in checkable deposits. 
D)  $50 decrease in liabilities and a $50 increase in checkable deposits. 
A)  $50 increase in reserves and a $50 increase in checkable deposits. 
B)  $50 decrease in reserves and a $50 increase in checkable deposits. 
C)  $50 increase in reserves and a $50 decrease in checkable deposits. 
D)  $50 decrease in liabilities and a $50 increase in checkable deposits.

Question 15

Which of the following is the source of funds for bank loans?

Accepted Answer

A)  marketable securities 
B)  required reserves 
C)  excess reserves 
D)  bank capital 
A)  marketable securities 
B)  required reserves 
C)  excess reserves 
D)  bank capital

Question 16

What is a repurchase agreement?

Accepted Answer

Banks sell securitie

Question 17

When a bank issues a checkable deposit and loans the funds out to a business,it has transformed

Accepted Answer

A)  a financial asset for a saver into a liability for a borrower. 
B)  a financial liability for a saver into a financial asset for a borrower. 
C)  a short-term liability to a borrower into a long-term asset to a saver. 
D)  one liability into another liability. 
A)  a financial asset for a saver into a liability for a borrower. 
B)  a financial liability for a saver into a financial asset for a borrower. 
C)  a short-term liability to a borrower into a long-term asset to a saver. 
D)  one liability into another liability.

Question 18

The United States has a dual banking system in the sense that

Accepted Answer

A)  the public may deposit money in either commercial banks or savings-and-loan associations. 
B)  banks offer both demand deposits and time deposits to savers. 
C)  banks are chartered by the federal government and by state governments. 
D)  banks both take in deposits and make loans. 
A)  the public may deposit money in either commercial banks or savings-and-loan associations. 
B)  banks offer both demand deposits and time deposits to savers. 
C)  banks are chartered by the federal government and by state governments. 
D)  banks both take in deposits and make loans.

Question 19

The FDIC was created in

Accepted Answer

A)  1863. 
B)  1913. 
C)  1934. 
D)  1991. 
A)  1863. 
B)  1913. 
C)  1934. 
D)  1991.

Question 20

In order to reduce the likelihood of excessive leverage in the banking system,governments have traditionally

Accepted Answer

A)  imposed capital requirements on commercial banks. 
B)  imposed capital requirement on investment banks. 
C)  imposed capital requirements on both commercial and investment banks. 
D)  imposed asset requirements on all banks. 
A)  imposed capital requirements on commercial banks. 
B)  imposed capital requirement on investment banks. 
C)  imposed capital requirements on both commercial and investment banks. 
D)  imposed asset requirements on all banks.

Federal funds are

Securities that banks sell and agree to repurchase are known as

If a bank has a leverage ratio of 0.1 and a return on capital of 2%,what is its return on equity?

Which of the following things do banks do with the funds they acquire from savers?

Since most banks have positive gaps and negative duration gaps,an increase in market interest rates will

Loans by the Federal Reserve to banks are known as

Banks use credit rationing rather than simply raising the interest rate charged borrowers with higher default risks because

Why are U.S.government securities referred to as a bank's secondary reserves?

Standby letters of credit

Congress introduced deposit insurance in response to

A loan officer uses a credit scoring system to

The difference between a savings deposit and a time deposit is

The portion of bank capital set aside in anticipation of future loan losses is known as

If you deposit a $50 check in the bank,the immediate impact on your bank's balance sheet will be a

Which of the following is the source of funds for bank loans?

What is a repurchase agreement?

When a bank issues a checkable deposit and loans the funds out to a business,it has transformed

The United States has a dual banking system in the sense that

The FDIC was created in

In order to reduce the likelihood of excessive leverage in the banking system,governments have traditionally

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

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

Financial Crises and Financial Regulation

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

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Exam 10: The Economics of Banking

Federal funds are

Securities that banks sell and agree to repurchase are known as

If a bank has a leverage ratio of 0.1 and a return on capital of 2%,what is its return on equity?

Which of the following things do banks do with the funds they acquire from savers?

Since most banks have positive gaps and negative duration gaps,an increase in market interest rates will

Loans by the Federal Reserve to banks are known as

Banks use credit rationing rather than simply raising the interest rate charged borrowers with higher default risks because

Why are U.S.government securities referred to as a bank's secondary reserves?

Standby letters of credit

Congress introduced deposit insurance in response to

A loan officer uses a credit scoring system to

The difference between a savings deposit and a time deposit is

The portion of bank capital set aside in anticipation of future loan losses is known as

If you deposit a $50 check in the bank,the immediate impact on your bank's balance sheet will be a

Which of the following is the source of funds for bank loans?

What is a repurchase agreement?

When a bank issues a checkable deposit and loans the funds out to a business,it has transformed

The United States has a dual banking system in the sense that

The FDIC was created in

In order to reduce the likelihood of excessive leverage in the banking system,governments have traditionally

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

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

Financial Crises and Financial Regulation

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