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

The introduction of mutual funds has made reserve requirements largely ineffective.

Accepted Answer

A) True 
 B)False  False

Question 3

Why does the lack of a prepayment clause matter to the interest rate risk involved in taking a fixed rate mortgage?

Accepted Answer

Without the clause, if interest rates fall, the homeowner can refinance the loan at the lower rate, so there is less interest rate risk.

Question 4

Junk bonds are an example of a securitized asset.

Accepted Answer

A) True 
 B)False

Question 5

Unit banks have no branches.

Accepted Answer

A) True 
 B)False

Question 6

Unit banks are banks that operate in only one state.

Accepted Answer

A) True 
 B)False

Question 7

Regulation Q (the restriction on interest paid on deposits) and rising nominal interest rates during the Great Inflation were responsible for an increase the size of the mutual fund industry.

Accepted Answer

A) True 
 B)False

Question 8

According to the Herfindahl index, the United States has one of the most concentrated banking industries in the world.

Accepted Answer

A) True 
 B)False

Question 9

Regulators do not consider a financial institution to be a bank if it does not

Accepted Answer

A)  take deposits. 
B)  borrow from the Fed. 
C)  both of the above. 
D)  neither of the above. 
A)  take deposits. 
B)  borrow from the Fed. 
C)  both of the above. 
D)  neither of the above.

Question 10

Bank consolidation is potentially a problem because

Accepted Answer

A)  it is harder for large banks to implement technological innovations. 
B)  some consumers may get worse service. 
C)  banks are less able to innovate. 
D)  all of the above. 
A)  it is harder for large banks to implement technological innovations. 
B)  some consumers may get worse service. 
C)  banks are less able to innovate. 
D)  all of the above.

Question 11

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 12

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 13

Bank consolidation is potentially a problem because

Accepted Answer

A)  larger banks are harder to regulate. 
B)  a failure of a large bank has a big effect on the economy. 
C)  both of the above. 
D)  neither of the above. 
A)  larger banks are harder to regulate. 
B)  a failure of a large bank has a big effect on the economy. 
C)  both of the above. 
D)  neither of the above.

Question 14

Why have some argued that securitization has increased risk across the whole economy, increasing the severity of the recession in 2009?

Accepted Answer

Loans are no longer held by a

Question 15

Mortgage backed assets are an example of a securitized asset.

Accepted Answer

A) True 
 B)False

Question 16

Bank consolidation is potentially a problem because

Accepted Answer

A)  larger banks tend to be more diversified. 
B)  larger banks tend to take greater risks. 
C)  both of the above. 
D)  neither of the above. 
A)  larger banks tend to be more diversified. 
B)  larger banks tend to take greater risks. 
C)  both of the above. 
D)  neither of the above.

Question 17

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 18

SWEEP accounts are an example of loophole mining.

Accepted Answer

A) True 
 B)False

Question 19

What is a national bank?

Accepted Answer

A national bank is c

Question 20

The United States allows individuals to establish

Accepted Answer

A)  savings and loans associations. 
B)  mutual savings banks. 
C)  credit unions. 
D)  all of the above. 
A)  savings and loans associations. 
B)  mutual savings banks. 
C)  credit unions. 
D)  all of the above.

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.

The introduction of mutual funds has made reserve requirements largely ineffective.

Why does the lack of a prepayment clause matter to the interest rate risk involved in taking a fixed rate mortgage?

Junk bonds are an example of a securitized asset.

Unit banks have no branches.

Unit banks are banks that operate in only one state.

Regulation Q (the restriction on interest paid on deposits) and rising nominal interest rates during the Great Inflation were responsible for an increase the size of the mutual fund industry.

According to the Herfindahl index, the United States has one of the most concentrated banking industries in the world.

Regulators do not consider a financial institution to be a bank if it does not

Bank consolidation is potentially a problem because

Bank consolidation is desirable because

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.

Bank consolidation is potentially a problem because

Why have some argued that securitization has increased risk across the whole economy, increasing the severity of the recession in 2009?

Mortgage backed assets are an example of a securitized asset.

Bank consolidation is potentially a problem because

Securitization has allowed some banks to concentrate on

SWEEP accounts are an example of loophole mining.

What is a national bank?

The United States allows individuals to establish

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

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