Question 1

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

Accepted Answer

A)  higher nominal interest rates 
B)  decline in deposits 
C)  increase in disintermediated borrowing 
D)  all of the above 
A)  higher nominal interest rates 
B)  decline in deposits 
C)  increase in disintermediated borrowing 
D)  all of the above

Question 2

Disintermediation occurs when investors take their money out of banks to buy assets that could provide a market rate of return.

Accepted Answer

A) True 
 B)False

Question 3

SWEEP accounts allow banks to make interest on reserves.

Accepted Answer

A) True 
 B)False

Question 4

The process of bundling loans and selling pieces of the group is known as securitization.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A)  hold bonds. 
B)  make loans. 
C)  both of the above. 
D)  neither of the above. 
A)  hold bonds. 
B)  make loans. 
C)  both of the above. 
D)  neither of the above.

Question 6

In the past, excessive competition led to a low rate of innovation within the banking industry.

Accepted Answer

A) True 
 B)False

Question 7

Explain how a lack of competition gave rise to the commercial paper market.

Accepted Answer

The lack of competition among

Question 8

Near monopolization of in banks led to

Accepted Answer

A)  stagnancy in innovation. 
B)  increased innovation. 
C)  greater depositors. 
D)  none of the above 
A)  stagnancy in innovation. 
B)  increased innovation. 
C)  greater depositors. 
D)  none of the above

Question 9

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 10

What regulation do SWEEP accounts circumvent? How do banks benefit?

Accepted Answer

SWEEP accounts get around the

Question 11

The Great Inflation led to a decline in the size of the traditional commercial bank industry.

Accepted Answer

A) True 
 B)False

Question 12

What is a unit bank?

Accepted Answer

A unit ban

Question 13

Banks chartered by the Federal government are called national banks.

Accepted Answer

A) True 
 B)False

Question 14

Banks operating in more than one state used to be illegal.

Accepted Answer

A) True 
 B)False

Question 15

Today, a few large banks have a larger share of

Accepted Answer

A)  assets. 
B)  deposits. 
C)  capital 
D)  all of the above. 
A)  assets. 
B)  deposits. 
C)  capital 
D)  all of the above.

Question 16

Why would larger banks be a problem for regulators?

Accepted Answer

Larger banks might b

Question 17

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 18

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

Accepted Answer

A) True 
 B)False

Question 19

Bank consolidation is desirable because

Accepted Answer

A)  banks are able to do specialized lending. 
B)  banks are more diversified. 
C)  banks are more able to serve small business. 
D)  all of the above. 
A)  banks are able to do specialized lending. 
B)  banks are more diversified. 
C)  banks are more able to serve small business. 
D)  all of the above.

Question 20

The number of FDIC commercial banks has steadily increased since World War II.

Accepted Answer

A) True 
 B)False

Exam 10: Innovation and Structure in Banking and Finance

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

Disintermediation occurs when investors take their money out of banks to buy assets that could provide a market rate of return.

SWEEP accounts allow banks to make interest on reserves.

The process of bundling loans and selling pieces of the group is known as securitization.

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

In the past, excessive competition led to a low rate of innovation within the banking industry.

Explain how a lack of competition gave rise to the commercial paper market.

Near monopolization of in banks led to

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

What regulation do SWEEP accounts circumvent? How do banks benefit?

The Great Inflation led to a decline in the size of the traditional commercial bank industry.

What is a unit bank?

Banks chartered by the Federal government are called national banks.

Banks operating in more than one state used to be illegal.

Today, a few large banks have a larger share of

Why would larger banks be a problem for regulators?

Bank consolidation is potentially a problem because

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

Bank consolidation is desirable because

The number of FDIC commercial banks has steadily increased since World War II.

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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