Exam 1: Why Are Financial Institutions Special

Depository institutions (DIs) play an important role in the transmission of monetary policy from the central bank (Reserve Bank of Australia) to the rest of the economy primarily because: A)loans to corporations are part of the money supply. B)bank loans are highly regulated. C)depository institutions provide a large amount of credit to finance residential real estate. D)DI deposits are a major portion of the money supply.

Which of the following statements is true?

The asset transformation function of FIs typically involves:

Because the average maturity of assets and the average maturity of liabilities are often different on an FI's balance sheet, the FI is exposed to liquidity risk.

Which of the following is an adequate definition of broad money?

Which of the following are types of regulation that seek to enhance the net social welfare benefits of financial intermediaries' services?

Why do households prefer to use FIs as intermediaries to invest their surplus funds?

Which of the following is an adequate definition of an asset transformer?

In the principal-agent relationship between savers and a borrowing firm the savers are the agents and the borrowing firm is the principal.

Which function of an FI reduces transaction and information costs between a corporation and an individual and may encourage a higher rate of savings?

FIs are better able to manage the risk of mismatching maturities of assets and liabilities than household savers.

Which of the following statements is true?

Which of the following are areas of institution-specific specialness?

Which of the following statements is true?

Which of the following statements is true?

Which of the following statements is false?

The reason FIs can offer highly liquid, low price-risk contracts to savers while investing in relatively illiquid and higher risk assets is:

Net regulatory burden is defined as the difference between the:

Explain the causes of the global financial crisis (GFC) and outline how and why the Australian government implemented the Financial Claims Scheme.

Which of the following statements is true in the context of diversification?