Money Bank Quizzes

* Question 1
0 out of 1 points | | | The Argentine banking crisis of 2001 resulted from Argentina's banks being required to Answer | | | | | Selected Answer: | pay back the value of failed loans. | Correct Answer: | purchase large amounts of government debt. | | | | | * Question 2
1 out of 1 points | | | Newly-issued high-yield bonds rated below investment grade by the bond-rating agencies are frequently referred to asAnswer | | | | | Selected Answer: | junk bonds. | Correct Answer: | junk bonds. | | | | | * Question 3
1 out of 1 points | | | Rising interest-rate riskAnswer | | | | | Selected Answer: | increased the demand for financial innovation. | Correct Answer: | increased the demand for financial innovation. | | | | | * Question 4
1 out of 1 points | | | The most significant change in the economic environment that changed the demand for financial products in recent years has beenAnswer | | | | | Selected Answer: | the dramatic increase in the volatility of interest rates. | Correct Answer: | the dramatic increase in the volatility of interest rates. | | | | | * Question 5
1 out of 1 points | | | Eurodollars areAnswer | | | | | Selected Answer: | dollar-dominated deposits held in banks outside the United States. | Correct Answer: | dollar-dominated deposits held in banks outside the United States. | | | | | * Question 6
1 out of 1 points | | | Moral hazard is an important concern of insurance arrangements because the existence of insuranceAnswer | | | | | Selected Answer: | provides increased incentives for risk taking. | Correct Answer: | provides increased incentives for risk taking. | | | | | * Question 7
1 out of 1 points | | | The process of transforming otherwise illiquid financial assets into marketable capital market instruments is know asAnswer | | | | | Selected Answer: | securitization. | Correct Answer: | securitization. | | | | | * Question 8
1 out of 1 points | | | Probably the most significant factor explaining the drastic drop in the number of bank failures since the Great Depression has beenAnswer | | | | | Selected Answer: | the creation of the FDIC. | Correct Answer: | the creation of the FDIC. | | | | | * Question 9
1 out of 1 points | | | The ability to use one resource to provide different products and services isAnswer | | | | | Selected Answer: | economies of scope. | Correct Answer: | economies of scope. | | | | | * Question 10
1 out of 1 points | | | If the FDIC decides that a bank is too big to fail, it will use the ________ method, effectively ensuring that ________ depositors will suffer losses.Answer | | | | | Selected Answer: | purchase and assumption; no | Correct Answer: | purchase and assumption; no | | | | | * Question 11
1 out of 1 points | | | A problem with the too-big-to-fail policy is that it ________ the incentives for ________ by big banks.Answer | | | | | Selected Answer: | increases; moral hazard | Correct Answer: | increases; moral hazard | | | | | * Question 12
1 out of 1 points | | | The most important source of the changes in supply conditions that stimulate financial innovation has been theAnswer | | | | | Selected Answer: | improvement in computer and telecommunications technology. | Correct Answer: | improvement in computer and telecommunications technology. | | | | | * Question 13
1 out of 1 points | | | Banks will be examined at least once a year and given a CAMELS rating by examiners. The L stands for ________.Answer | | | | | Selected Answer: | liquidity | Correct Answer: | liquidity | | | | | * Question 14
1 out of 1 points | | | Disintermediation resulted fromAnswer | | | | | Selected Answer: | interest rate ceilings combine with inflation-driven increases in interest rates. | Correct Answer: | interest rate ceilings combine with inflation-driven increases in interest rates. | | | | | * Question 15
1 out of 1 points | | | Banks engage in regulatory arbitrage byAnswer | | | | | Selected Answer: | keeping high-risk assets on their books while removing low-risk assets with the same capital requirement. | Correct Answer: | keeping high-risk assets on their books while removing low-risk assets with the same capital requirement. | | | | | * Question 16
0 out of 1 points | | | The development of money market mutual funds contributed to the growth of ________ since the money market mutual funds need to hold liquid, high-quality, short-terms assets.Answer | | | | | Selected Answer: | the municipal bond market | Correct Answer: | the commercial paper market | | | | | * Question 17
1 out of 1 points | | | Both ________ and ________ were financial innovations that occurred because of interest rate risk volatility.Answer | | | | | Selected Answer: | adjustable-rate mortgages; financial derivatives | Correct Answer: | adjustable-rate mortgages; financial derivatives | | | | | * Question 18
1 out of 1 points | | | The agreement to provide a standardized commodity to a buyer on a specific date at a specific future price isAnswer | | | | | Selected Answer: | a futures contract. | Correct Answer: | a futures contract. | | | | | * Question 19
1 out of 1 points | | | The Glass-Steagall Act, before its repeal in 1999, prohibited commercial banks from Answer | | | | | Selected Answer: | engaging in underwriting and dealing of corporate securities. | Correct Answer: | engaging in underwriting and dealing of corporate securities. | | | | | * Question 20
1 out of 1 points | | | The process of transforming otherwise illiquid financial assets into marketable capital market instruments is know asAnswer | | | | | Selected Answer: | securitization. | Correct Answer: | securitization. | | | | | * Question 21
1 out of 1 points | | | Regulations that reduced competition between banks includedAnswer | | | | | Selected Answer: | branching restrictions. | Correct Answer: | branching restrictions. | | | | | * Question 22
1 out of 1 points | | | The experience of disintermediation in the banking industry illustrates thatAnswer | | | | | Selected Answer: | markets invent alternatives to costly regulations. | Correct Answer: | markets invent alternatives to costly regulations. | | | | | * Question 23
1 out of 1 points | | | So-called fallen angels differ from junk bonds in thatAnswer | | | | | Selected Answer: | junk bonds refer to newly issued bonds with low credit ratings, whereas fallen angels refer to previously bonds that have had their credit ratings fall below Baa. | Correct Answer: | junk bonds refer to newly issued bonds with low credit ratings, whereas fallen angels refer to previously bonds that have had their credit ratings fall below Baa. | | | | | * Question 24
1 out of 1 points | | | During times of financial crisis, mark-to-market accounting Answer | | | | | Selected Answer: | requires that a financial firms' assets be marked down in value which can worsen the lending crisis. | Correct Answer: | requires that a financial firms' assets be marked down in value which can worsen the lending crisis. | | | | | * Question 25
1 out of 1 points | | | The U.S. banking system is considered to be a dual system becauseAnswer | | | | | Selected Answer: | it is regulated by both state and federal governments. | Correct Answer: | it is regulated by both state and federal governments. | | | | | * Question 26
1 out of 1 points | | | As in the United States, an important factor in the banking crises in Latin America was theAnswer | | | | | Selected Answer: | financial liberalization that occurred in the 1980s. | Correct Answer: | financial liberalization that occurred in the 1980s. | | | | | * Question 27
1 out of 1 points | | | The most significant change in the economic environment that changed the demand for financial products since 1970 has beenAnswer | | | | | Selected Answer: | the dramatic increase in the volatility of interest rates. | Correct Answer: | the dramatic increase in the volatility of interest rates. | | | | | * Question 28
1 out of 1 points | | | The regulatory system that has evolved in the United States whereby banks are regulated at the state level, the national level, or both, is known as aAnswer | | | | | Selected Answer: | dual banking system. | Correct Answer: | dual banking system. | | | | | * Question 29
1 out of 1 points | | | The Federal Reserve Act required all ________ banks to become members of the Federal Reserve System, while ________ banks could choose to become members of the system.Answer | | | | | Selected Answer: | national; state | Correct Answer: | national; state | | | | | * Question 30
1 out of 1 points | | | Adjustable rate mortgagesAnswer | | | | | Selected Answer: | benefit homeowners when interest rates are falling. | Correct Answer: | benefit homeowners when interest rates are falling. | | | | | * Question 31
1 out of 1 points | | | A financial innovation that developed as a result of banks avoidance of bank branching restrictions was ________.Answer | | | | | Selected Answer: | bank holding companies | Correct Answer: | bank holding companies | | | | | * Question 32
1 out of 1 points | | | Because of asymmetric information, the failure of one bank can lead to runs on other banks. This is theAnswer | | | | | Selected Answer: | contagion effect. | Correct Answer: | contagion effect. | | | | | * Question 33
1 out of 1 points | | | Both ________ and ________ were financial innovations that occurred because of interest rate risk volatility.Answer | | | | | Selected Answer: | adjustable-rate mortgages; financial derivatives | Correct Answer: | adjustable-rate mortgages; financial derivatives | | | | | * Question 34
1 out of 1 points | | | The Federal Reserve Act required all ________ banks to become members of the Federal Reserve System, while ________ banks could choose to become members of the system.Answer | | | | | Selected Answer: | national; state | Correct Answer: | national; state | | | | | * Question 35
1 out of 1 points | | | A debit card differs from a credit card in thatAnswer | | | | | Selected Answer: | a credit card is a loan while for a debit card purchase, payment is made immediately. | Correct Answer: | a credit card is a loan while for a debit card purchase, payment is made immediately. | | | | |
Thursday, March 28, 2013 7:32:12 PM CDT
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 Question 1
1 out of 1 points | | | If the desired intermediate target is an interest rate, the preferred policy instrument would beAnswer | | | | | Selected Answer: | the federal funds rate. | Correct Answer: | the federal funds rate. | | | | |
 Question 2
1 out of 1 points | | | The Fed uses three policy tools to manipulate the money supply: open market operations, which affect the ________; changes in borrowed reserves, which affect the ________; and changes in reserve requirements, which affect the ________. Answer | | | | | Selected Answer: | monetary base; monetary base; money multiplier | Correct Answer: | monetary base; monetary base; money multiplier | | | | |
 Question 3
0 out of 1 points | | | Suppose on any given day there is an excess supply of reserves in the federal funds market. If the Federal Reserve wishes to keep the federal funds rate at its current level, then the appropriate action for the Federal Reserve to take is a ________ open market ________, everything else held constant.Answer | | | | | Selected Answer: | dynamic; sale | Correct Answer: | defensive; sale | | | | |
 Question 4
0 out of 1 points | | | If Treasury deposits at the Fed are predicted to ________, the manager of the trading desk at the New York Fed bank will likely conduct ________ open market operations to ________ reserves.Answer | | | | | Selected Answer: | decrease; dynamic; drain | Correct Answer: | increase; defensive; inject | | | | |
 Question 5
1 out of 1 points | | | Suppose interest rates are kept very low for a long time such that there is a spike in the amount of lending. Everything else held constant, this could cause ________ bubble.Answer | | | | | Selected Answer: | a credit-driven | Correct Answer: | a credit-driven | | | | |
 Question 6
1 out of 1 points | | | Which of the following criteria need not be satisfied for choosing an intermediate target?Answer | | | | | Selected Answer: | The variable must be transportable. | Correct Answer: | The variable must be transportable. | | | | |
 Question 7
1 out of 1 points | | | The monetary policy strategy that provides an immediate signal on target achievement isAnswer | | | | | Selected Answer: | monetary targeting. | Correct Answer: | monetary targeting. | | | | |
 Question 8
1 out of 1 points | | | Everything else held constant, in the market for reserves, when the demand for federal funds intersects the reserve supply curve on the vertical section, increasing the discount rate Answer | | | | | Selected Answer: | has no effect on the federal funds rate. | Correct Answer: | has no effect on the federal funds rate. | | | | |
 Question 9
1 out of 1 points | | | If the desired intermediate target is an interest rate, then the preferred policy instrument will be a(n) ________ variable like the ________.Answer | | | | | Selected Answer: | interest rate; federal funds rate | Correct Answer: | interest rate; federal funds rate | | | | |
 Question 10
1 out of 1 points | | | Everything else held constant, in the market for reserves, when the federal funds rate is 3%, raising the discount rate from 5% to 6% Answer | | | | | Selected Answer: | has no effect on the federal funds rate. | Correct Answer: | has no effect on the federal funds rate. | | | | |
 Question 11
1 out of 1 points | | | Which of the following special lending facilities set up by the Federal Reserve is reserve neutral?Answer | | | | | Selected Answer: | Term Securities Lending Facility | Correct Answer: | Term Securities Lending Facility | | | | |
 Question 12
1 out of 1 points | | | The quantity of reserves demanded equals Answer | | | | | Selected Answer: | required reserves plus excess reserves. | Correct Answer: | required reserves plus excess reserves. | | | | |
 Question 13
1 out of 1 points | | | When good weather speeds the check-clearing process, float tends to ________ causing the Fed to initiate defensive open market ________.Answer | | | | | Selected Answer: | decrease; purchases | Correct Answer: | decrease; purchases | | | | |
 Question 14
0 out of 1 points | | | If the Taylor Principle is not followed and nominal interest rates are increased by less than the increase in the inflation rate, then real interest rates will ________ and monetary policy will be too ________.Answer | | | | | Selected Answer: | fall; tight | Correct Answer: | fall; loose | | | | |
 Question 15
1 out of 1 points | | | If the Fed expects currency holdings to rise, it conducts open market ________ to offset the expected ________ in reserves.Answer | | | | | Selected Answer: | purchases; decrease | Correct Answer: | purchases; decrease | | | | |
 Question 16
0 out of 1 points | | | The quantity of reserves supplied equalsAnswer | | | | | Selected Answer: | required reserves plus borrowed reserves. | Correct Answer: | nonborrowed reserves plus borrowed reserves. | | | | |
 Question 17
0 out of 1 points | | | The guiding principle for the conduct of monetary policy that held that as long as loans were being made for "productive" purposes, then providing reserves to the banking system to make these loans would not be inflationary became known as theAnswer | | | | | Selected Answer: | efficient liquidity doctrine. | Correct Answer: | real bills doctrine. | | | | |
 Question 18
0 out of 1 points | | | Everything else held constant, a credit-drive bubble is generally considered to have the potential to cause ________ damage to an economy compared to an irrational exuberance bubble.Answer | | | | | Selected Answer: | less | Correct Answer: | more | | | | |
 Question 19
1 out of 1 points | | | The interest rate on seasonal credit equals Answer | | | | | Selected Answer: | an average of the federal funds rate and rates on certificates of deposits. | Correct Answer: | an average of the federal funds rate and rates on certificates of deposits. | | | | |
 Question 20
1 out of 1 points | | | If float is predicted to increase because of bad weather, the manager of the trading desk at the New York Fed bank will likely conduct ________ open market operations to ________ reserves.Answer | | | | | Selected Answer: | defensive; drain | Correct Answer: | defensive; drain | | | | |
 Question 21
1 out of 1 points | | | The discount rate isAnswer | | | | | Selected Answer: | the interest rate the Fed charges on loans to banks. | Correct Answer: | the interest rate the Fed charges on loans to banks. | | | | |
 Question 22
1 out of 1 points | | | In the market for reserves, when the federal funds rate is above the interest rate paid on excess reserves, the demand curve for reserves is ________.Answer | | | | | Selected Answer: | negatively sloped | Correct Answer: | negatively sloped | | | | |
 Question 23
0 out of 1 points | | | In the market for reserves, a lower discount rate Answer | | | | | Selected Answer: | lengthens the vertical section of the supply curve of reserves. | Correct Answer: | shortens the vertical section of the supply curve of reserves. | | | | |
 Question 24
0 out of 1 points | | | Which of the following is not an element of inflation targeting?Answer | | | | | Selected Answer: | An institutional commitment to price stability as the primary long-run goal | Correct Answer: | An information-inclusive approach in which only monetary aggregates are used in making decisions about monetary policy | | | | |
 Question 25
0 out of 1 points | | | The actual execution of open market operations is done atAnswer | | | | | Selected Answer: | the Federal Reserve Bank of Philadelphia. | Correct Answer: | the Federal Reserve Bank of New York. | | | | |
 Question 26
0 out of 1 points | | | Which of the following is an advantage to money targeting?Answer | | | | | Selected Answer: | It does not rely on a stable money-inflation relationship. | Correct Answer: | There is an immediate signal on the achievement of the target. | | | | |
 Question 27
0 out of 1 points | | | Which of the following is not an operating instrument?Answer | | | | | Selected Answer: | Monetary base | Correct Answer: | Discount rate | | | | |
 Question 28
0 out of 1 points | | | Open market operations intended to offset movements in noncontrollable factors (such as float) that affect reserves and the monetary base are calledAnswer | | | | | Selected Answer: | offensive open market operations. | Correct Answer: | defensive open market operations. | | | | |
 Question 29
0 out of 1 points | | | Everything else held constant, in the market for reserves, when the federal funds rate is 3%, increasing the interest rate paid on excess reserves from 1% to 2% Answer | | | | | Selected Answer: | lowers the federal funds rate. | Correct Answer: | has no effect on the federal funds rate. | | | | |
 Question 30
0 out of 1 points | | | A decrease in ________ increases the money supply since it causes the ________ to rise.Answer | | | | | Selected Answer: | reserve requirements; monetary base | Correct Answer: | reserve requirements; money multiplier | | | | |