Question 1

According to the Herfindahl index, the U.S banking industry is _____ concentrated than that of most developed economies.

Accepted Answer

A)  more 
B)  less 
C)  equally 
D)  The Herfindal index is not a measure of concentration. 
A)  more 
B)  less 
C)  equally 
D)  The Herfindal index is not a measure of concentration. B

Question 2

According to the Herfindahl index, the U.S. banking industry has become increasingly concentrated in the last few decades.

Accepted Answer

A) True 
 B)False  True

Question 3

The Great Inflation affected the banking industry through the following channels.

Accepted Answer

A)  lower nominal interest rates 
B)  decline in deposits 
C)  decreased competition among banks 
D)  all of the above 
A)  lower nominal interest rates 
B)  decline in deposits 
C)  decreased competition among banks 
D)  all of the above B

Question 4

Bank holding companies allows bankers to circumvent

Accepted Answer

A)  Regulation Q. 
B)  interstate banking restrictions. 
C)  reserve requirements. 
D)  none of the above. 
A)  Regulation Q. 
B)  interstate banking restrictions. 
C)  reserve requirements. 
D)  none of the above.

Question 5

A small bank in a rural community proposes to merge with a large national bank. Give one reason customers of the small bank might object to the proposal. Give a reason they might be in favor.

Accepted Answer

Customers might object to the merger sin

Question 6

ARMs

Accepted Answer

A)  force borrowers to assume interest rate risk. 
B)  became more prevalent during the Great Inflation. 
C)  both of the above. 
D)  neither of the above. 
A)  force borrowers to assume interest rate risk. 
B)  became more prevalent during the Great Inflation. 
C)  both of the above. 
D)  neither of the above.

Question 7

Commercial banks are the only institutions in the United States that take transactions deposits.

Accepted Answer

A) True 
 B)False

Question 8

Mortgage backed assets are an example of a securitized asset.

Accepted Answer

A) True 
 B)False

Question 9

The biggest reason for the consolidation of the banking industry in the 1980s was

Accepted Answer

A)  mergers. 
B)  bankruptcy. 
C)  bailouts. 
D)  all of the above. 
A)  mergers. 
B)  bankruptcy. 
C)  bailouts. 
D)  all of the above.

Question 10

Securitization has allowed some banks to concentrate on

Accepted Answer

A)  origination of loans. 
B)  credit risk. 
C)  specialized lending. 
D)  all of the above. 
A)  origination of loans. 
B)  credit risk. 
C)  specialized lending. 
D)  all of the above.

Question 11

Why would larger banks be less risky?

Accepted Answer

Large banks can have

Question 12

Bank consolidation is potentially a problem because

Accepted Answer

A)  larger banks are harder to regulate. 
B)  banks are less diversified. 
C)  banks are less able to innovate. 
D)  all of the above. 
A)  larger banks are harder to regulate. 
B)  banks are less diversified. 
C)  banks are less able to innovate. 
D)  all of the above.

Question 13

What is a unit bank?

Accepted Answer

A unit ban

Question 14

Regulation Q (the restriction on interest paid on deposits) was responsible for the rise in nominal interest rates in the 1970s.

Accepted Answer

A) True 
 B)False

Question 15

The erosion of Glass-Steagall allowed financial institutions to take advantage of

Accepted Answer

A)  economies of scale. 
B)  economies of scope. 
C)  interstate banking. 
D)  all of the above. 
A)  economies of scale. 
B)  economies of scope. 
C)  interstate banking. 
D)  all of the above.

Question 16

The Herfindahl index is a measure of banking innovation.

Accepted Answer

A) True 
 B)False

Question 17

Bank consolidation is desirable because

Accepted Answer

A)  small banks with little capital are eliminated. 
B)  banks are more diversified. 
C)  both of the above. 
D)  neither of the above. 
A)  small banks with little capital are eliminated. 
B)  banks are more diversified. 
C)  both of the above. 
D)  neither of the above.

Question 18

Junk bonds are an example of a securitized asset.

Accepted Answer

A) True 
 B)False

Question 19

Government regulation is relatively permissive in the United States compared to other countries.

Accepted Answer

A) True 
 B)False

Question 20

ATMs have reduced a bank's expenses.

Accepted Answer

A) True 
 B)False

Exam 10: Innovation and Structure in Banking and Finance

According to the Herfindahl index, the U.S banking industry is _____ concentrated than that of most developed economies.

According to the Herfindahl index, the U.S. banking industry has become increasingly concentrated in the last few decades.

The Great Inflation affected the banking industry through the following channels.

Bank holding companies allows bankers to circumvent

A small bank in a rural community proposes to merge with a large national bank. Give one reason customers of the small bank might object to the proposal. Give a reason they might be in favor.

ARMs

Commercial banks are the only institutions in the United States that take transactions deposits.

Mortgage backed assets are an example of a securitized asset.

The biggest reason for the consolidation of the banking industry in the 1980s was

Securitization has allowed some banks to concentrate on

Why would larger banks be less risky?

Bank consolidation is potentially a problem because

What is a unit bank?

Regulation Q (the restriction on interest paid on deposits) was responsible for the rise in nominal interest rates in the 1970s.

The erosion of Glass-Steagall allowed financial institutions to take advantage of

The Herfindahl index is a measure of banking innovation.

Bank consolidation is desirable because

Junk bonds are an example of a securitized asset.

Government regulation is relatively permissive in the United States compared to other countries.

ATMs have reduced a bank's expenses.

The Financial System

Money

Interest Rates

The Economics of Interest-Rate Fluctuations

The Economics of Interest-Rate Spreads and Yield Curves

Rational Expectations, Efficient Markets, and the Valuation of Corporate Equities

Financial Structure, Transaction Costs, and Asymmetric Information

Bank Management

The Economics of Financial Regulation

Financial Derivatives

Financial Crises: Causes and Consequences

Central Bank Form and Function

The Money Supply Process and the Money Multipliers

Monetary Policy Tools

Monetary Policy Targets and Goals

Foreign Exchange

International Monetary Regimes

Money Demand

Is-Lm

Is-Lm in Action

Aggregate Supply and Demand and the Growth Diamond

Monetary Policy Transmission Mechanisms

Inflation and Money

Rational Expectations Redux: Monetary Policy Implications

Filters