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Study Resources (Statistics)

  101. If one of the specific goals that central bankers focus on is economic growth, should they aim for the highest short-term growth rate the economy can achieve? Explain.          102. We have a country, Fantasyland, where the current per capita real income is 20,000 units of output, and the current average growth rate.
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    71. Following the consolidation that resulted from the 2007-2009 financial crisis in the US, the 4 largest commercial banks share of total deposits was: A. 75%B. 50%C. 40%D. 25%   72. Bank mergers require government approval because banking officials want to make sure that: A. The merger will create a larger bankB. The merger will not create a monopoly in any geographic.
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    41. Under the purchase-and-assumption method of dealing with a failed bank, the FDIC: A. Finds another bank to take over the insolvent bankB. Takes over the day to day management of the bankC. Sells the failed bank to the Federal ReserveD. Sells off the profitable loans of the failed bank in an open auction   42. Considering the methods.
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  94. What is the difference between a bank that is insolvent and one that is illiquid?          95. Why is it that a run on a single bank can turn into a widespread financial panic, or what the text identified as contagion?          96. How do banks potentially make economic downturns more severe and how do economic.
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  101. It has been argued that the laws that prohibited branch banking were needed to protect consumers from large monopoly banks. Does that argument hold up to close scrutiny? Explain.          102. Explain why anti-branching laws often created credit crunches that slowed economic growth.          103. It has been argued that regulations can often be the source.
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    51. General agreement among economists finds that they believe monetary policy is more effective when it is formed: A. By an individual rather than a committeeB. In secrecy without the reasoning behind it being revealed for many yearsC. To keep financial markets guessingD. Independently of political pressure   52. The idea that central banks should be independent of political.
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Multiple Choice Questions  1. Empirical evidence points to the fact that financial crises: A. Are newsworthy but have no impact on economic growthB. Have a negative impact on economic growth only for the year of the crisisC. Have a negative impact on economic growth for yearsD. Can have a positive impact on economic growth as weak borrowers.
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    61. In the United States, one problem with central bank independence is: A. It is almost impossible to obtain because Congress controls the budget of the Federal ReserveB. The United States is a democracy and having an independent central bank is inconsistent with a representative democracyC. Central bank independence has not produced favorable resultsD. The central.
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    31. During a bank crisis: A. Officials at the Federal Reserve find it easy to sort out solvent from insolvent banksB. It is important for regulators to be able to distinguish insolvent from illiquid banksC. It is easy to determine the market prices of bank's assetsD. A bank will go to the central bank for a.
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  94. Explain why it is correct to say the Federal Reserve functions as the government's bank but it is incorrect to say it controls the government's budget.          95. What do modern central bankers not do?          96. What are the specific objectives of most central bankers?          97. Discuss how the goals of central bankers can be linked to.
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  113. Why are banks restricted in the assets that they can own? For example, why do you think banks are prohibited from owning common stock?          114. If we lived in an economy where interest rates were highly volatile, would you expect the maximum asset to capital ratio that a regulator would allow to.
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  125. Considering the government-sponsored enterprises like Freddie Mac, Fannie Mae, and others, do you see any indication that the managers of these agencies are creating a moral hazard? Explain.          126. A saver has a choice between placing $50,000 of savings into a bank account at a bank insured by FDIC or investing the.
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  102. How does the lender of last resort potentially create a moral hazard problem?          103. You have a retirement account in a bank that has failed. The balance in your account is $330,000. Does it make a difference to you if FDIC uses the payoff method or the purchase-and-assumption method for resolving this.
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  113. Within the insurance industry a common saying is that insurance works because of the "law of large numbers". What do you think is meant by this?          114. A very controversial issue in many states currently is whether or not insurance companies should be allowed to use a person's credit history as a.
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  104. One of the specific goals for central bankers is financial system stability. Considering the U.S., for example, would this imply that the Federal Reserve would always take action to prevent any single bank from failing? Explain.          105. How do the specific goals of interest rate and exchange rate stability differ in importance.
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Multiple Choice Questions  1. The central bank in the United States is: A. The Bank of AmericaB. The Federal ReserveC. The U.S. TreasuryD. The Bank of the United States   2. The number of central banks that exist in the world today is: A. Less than 10B. About 250C. Over 170D. Over 50 but less than 100   3. One monopoly that modern central banks have is in: A. Regulating.
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  Essay Questions  122. Discuss the ramifications of the FDIC reducing deposit insurance limits to $25,000.          123. We saw in the text that regulations, specifically deposit insurance and the Basel Accord (of 1988), can create moral hazard. Explain.              .
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  98. Briefly describe the combination of strategies used by government officials to protect investors and ensure the stability of the financial system.          99. Explain why depository institutions receive a disproportionate amount of attention from government regulators (compared to most other industries).          100. In 1873, British economist Walter Bagehot proposed the central bank function as the.
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    21. The primary objective of most central banks in industrialized economies is: A. High securities pricesB. Low unemploymentC. Price stabilityD. A strong domestic currency   22. If prices are not stable: A. Money becomes less useful as a store of valueB. Money performs better as a unit of accountC. It may be an inconvenience, but resources are still allocated efficientlyD. Prices become highly useful.
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    11. Bank failures tend to occur most often during periods of: A. Stock market run ups when, like many companies, banks tend to be overvaluedB. High inflation when the fixed rate loans of many banks cause their real returns to decreaseC. Recessions when many borrowers have a difficult time repaying loans and lending activity slowsD. Wars.
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    71. Pension funds resemble insurance companies by: A. Pooling the savings of only large investorsB. Accepting depositsC. Spreading riskD. Becoming better investments the longer you live   72. In most companies, an employee must work for a number of years before qualifying for pension benefits. This process is referred to as: A. A defined-benefit periodB. VestingC. Regulated contribution periodD. Mandatory benefit pending   73. Vesting can make.
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    81. Whenever central bankers face more than one goal, the policy framework requires: A. The central bank to always focus on inflation firstB. Central bankers to focus on all goals, no matter whatC. Economic growth to be the top priorityD. Central bankers to make their priorities clear   82. The ability to control inflation expectations is most closely related.
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  117. Explain why the decoding of the human genome has interesting implications for the life insurance industry.          118. Explain the difference between a pension fund that is a defined-contribution plan from one that is a defined-benefit.          119. In what way(s) can a pension plan be seen as the opposite of life insurance?              .
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    61. Credit Unions are regulated by a combination of agencies which includes: A. State authoritiesB. The Federal ReserveC. The Federal Deposit Insurance CorporationD. The Office of the Comptroller of the Currency   62. Banks can effectively choose their regulators by deciding whether to: A. Be a private or public corporationB. Be a member of the Federal Reserve or notC. Purchase FDIC insurance or.
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  124. The FDIC used to charge all banks the same rate for insurance on deposits. From what you have learned, what problems did this create for not only the FDIC but for well run banks?          125. Discuss the case for a "super-regulator" in the context of what you have learned about "regulatory competition."      .
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    81. Banks are required to disclose certain information. This disclosure is done for all of the following reasons except: A. To enable regulators to more easily assess the financial condition of banksB. To allow financial market participants to penalize banks that carry additional riskC. To allow customers to more easily compare prices for services offered.
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      Short Answer Questions  91. The text points out that there is an inverse relationship between the fiscal cost of a bank crisis and real GDP growth. What are some of the reason that can explain this inverse relationship?          92. Why might there be a trade-off between a bank's profitability and its safety?          93. Why do bank.
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    91. Fannie Mae, Ginnie Mae, and Freddie Mac are examples of: A. Private regulatory bodies that supervise home mortgage lendersB. Government-sponsored enterprises chartered to encourage home lendingC. Government-sponsored enterprises that were chartered to encourage small business loansD. Government-sponsored enterprises that provide homeowners insurance to people who cannot obtain it from private insurers   92. Government-sponsored enterprises like Fannie Mae.
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    31. The main problem from inflation as seen by most economists is: A. Inflation raises prices more than wagesB. Inflation harms lenders more than it benefits borrowersC. During periods of inflation some prices fallD. Inflation creates risk   32. In terms of economic growth, the central bank would like to: A. Have the maximum growth rate possibleB. Keep the growth rate averaging.
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  109. There are two current trends in the financial industry which run in opposite directions. What are they?          110. What is the basic difference(s) between term and whole life insurance?          111. Which insurance companies, life or property and casualty, would you think would invest more in long-term assets? Explain.          112. Many insurance companies sell group policies that.
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  120. Why do you think Congress and the President are reluctant to fix the problems (identified in the text) with the Social Security System?          121. From a transaction cost perspective, discuss why a firm may contract with an investment bank to underwrite or place an issue.          122. Explain why a large equipment provider that sells.
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  105. The Reigle-Neal Interstate Banking and Branching Efficiency Act has allowed banks to diversify themselves geographically. Has this geographical expansion resulted in the harm to consumers that early supporters of anti-branching laws feared? Explain.          106. Explain why a domestic bank in the U.S. might create a subsidiary bank in a foreign location like.
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    Short Answer Questions  97. Why does the United States have more banks that most other highly industrialized countries?          98. Why did it take almost 100 years before the United States had its own national currency?          99. What does it mean to say the United States has a dual banking system?          100. What is the source of regulatory competition.
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  116. What were the positive effects of the 1988 Basel Accord? What were its shortcomings?          117. What are the three pillars of the 1998 Basel Accord?          118. Identify at least two problems a borrower would face if banks were not required to disclose the information that they are currently required to make available.              .
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  Short Answer Questions  90. If we look back in history, why has the role of creating money fallen to central banks?          91. If governments operated like businesses, meaning their goal was to maximize profits, why would they likely never give up the power to print money to any other institution?          92. If we think back to.
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    21. The government's providing of deposit insurance and functioning as the lender of last resort has significantly: A. Decreased the incentive for bank managers to take on riskB. Increased the amount of regulation of banks required, but has had no effect on bank's incentive to take on riskC. Increased the incentive for banks to take.
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  119. Define the components of the CAMELS criteria and explain how a CAMELS rating is calculated.          120. The CAMELS criteria to evaluate the health of banks by supervisors is not made public. Make a case for one making this information public and a case for keeping it private.          121. How have regulators in the US.
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  110. Besides regulating banks, the government also regulates nondepository financial institutions, such as insurance companies. Consider a property casualty insurance company; why would the government need to regulate them?          111. You get married and, in doing some basic financial planning, your spouse suggests that the two of you open separate accounts so that.
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  107. Why might the central bankers in emerging market economies focus more attention on a stable exchange rate than say the Federal Reserve or the European Central Bank?          108. Today there is a clear consensus about the best way to design a central bank. What are the criteria for a successful central bank?          109. The.
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    51. Whole life insurance differs from term life in which of the following ways? A. Whole life has a variable premium over the life of the policy, increasing as the policyholder gets older. Term life has a fixed premium foreverB. Term life has a savings component whole life is pure insuranceC. Term life is usually.
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    41. Which of the following is an example of the economies of scope argument for increased profits for large financial holding companies? A. Financial holding companies offer a wide array of services under one nameB. Financial holding companies need only one CEO, one Board of Directors, and one accounting system regardless of sizeC. Financial holding.
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    81. The category of financial intermediaries called securities firms includes each of the following, except: A. Mutual fundsB. BrokeragesC. Investment banksD. Credit unions   82. The practice of "placing the issue" is conducted by: A. The underwriting services of investment banksB. Mutual fund companiesC. Brokerage firmsD. Commercial banks   83. The main risk that investment banks face from their underwriting services is: A. The client will not pay for.
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    71. Today, most central banks announce their policy actions: A. One year after the policy is put in placeB. Almost immediatelyC. Within a 3 to 5 year "window"D. Usually six months after the policy is put in place   72. The Federal Reserve's policy regarding announcing its policy decisions has: A. Always been to announce it immediately; that was part of.
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    41. Since the Federal Reserve was created, it has: A. Averted all financial panics that could have plagued the U.S. economyB. Averted a few financial panics but not mostC. Improved its skill at providing financial market stabilityD. Proved to be much better at preventing international panics than domestic ones   42. The focus of central banks in terms of.
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    11. The stability of the financial system is enhanced by the ability of central banks to: A. Be a lender of last resortB. Provide loans to insolvent banksC. Provide deposit insuranceD. Convert poorly run banks into branches of the central bank   12. In 2009, the average daily volume on the Federal Reserve's Fedwire system was: A. $25 billionB. $250 billionC. $2.5 trillionD. $250.
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    51. The government's too-big-to-fail policy applies to: A. Certain highly populated states where a bank run impacts a large percent of the total populationB. Large banks whose failure would certainly start a widespread panic in the financial systemC. Large corporate payroll accounts held by some banks where many people would lose their incomeD. Banks that have.
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