ECON 330 CHAPTER 11

Why does the United States operate under a dual banking system? ?(Check all that? apply.)
a) Dual banking systems encourage competition between? state-chartered banks and federally chartered banks.
b) Financial innovation is more likely to occur in a dual

C,D

Currency in circulation that cannot be redeemed for gold is? called:
a) junk bonds
b) state money
c) gold bills
d) fiat money

D

?"If inflation had not risen in the 1960s and? 1970s, the banking industry might be healthier? today." Is this statement? true, false, or? uncertain? Explain your answer.
a) True. Higher inflation helped raise interest? rates, which caused the disintermed

A

Why have banks been losing income advantages on their assets in recent? years?
a) Securitization has enabled other financial institutions to originate? loans, taking away some of the? banks' loan business.
b) The collapse of the subprime mortgage market h

D

?'The commercial banking industry in Canada is less competitive than the commercial banking industry in the United States because in Canada only a few large banks dominate the? industry, while in the United States there are around? 6,500 commercial? banks

A

The McFadden Act of? 1927:
a) prohibited banks from branching across state lines.
b) separated commercial banks and investment banks.
c) required that banks maintain bank capital equal to at least 6 percent of their assets.
d) required that all banks seek

A

Bank holding companies
that rival money center banks in size but are not located in money center cities are known? as:
a) international banks.
b) superregional banks.
c) district branch banks.
d) multinational banks.

B

The ability to use one common resource to provide different products and services? is:
a) economies of scope
b) diversification
c) economies of scale
d) vertical integration

A

What has been the likely effect of the? Gramm-Leach-Bliley Act on financial? consolidation?
a) This legislation further stimulated financial consolidation of the banking industry.? Thus, more financial mergers are likely to? occur, which will increase bot

A

Commercial banks that provide a full range of? banking, securities, and insurance? services, all within a single legal? entity, are part? of:
a) decentralised banking
b) an international banking system
c) a universal banking system
d) barrier-free banking

C

Why is there a higher percentage of banks with less than? $25 million of assets among commercial banks than among savings and loans and mutual savings? banks?
a) Because commercial banks specialize in providing credit card and other? transaction-based ser

B

Thrift institutions? include:
a) insurance companies
b) mutual savings banks
c) commercial banks
d) brokerage firms

B

If the bank at which you keep your checking account is owned by? foreigners, should you worry that your deposits are less safe than if the bank were owned by? Americans?
a) No, because the foreign bank is subject to the same regulations as the? American-o

A

Deposits in European banks denominated in dollars for the purpose of international transactions are known? as:
a) Eurodollars
b) international monetary units
c) European currency units
d) European monetary units

A

Which regulatory agency has the primary responsibility for supervising national? banks?
a) comptroller of the currency
b) FDIC
c) Federal Reserve System

A

Which regulatory agency has the primary responsibility for supervising bank holding companies?
a) comptroller of the currency
b) officer of thrift supervision
c) Federal Reserve System

C

Which regulatory agency has the primary responsibility for supervising non-federal reserve member state banks?
a) comptroller of the currency
b) state banking authorities
c) Federal Reserve System

B

Which regulatory agency has the primary responsibility for supervising Federal Reserve Member State Banks?
a) comptroller of the currency
b) state banking authorities
c) Federal Reserve System

C

Which regulatory agency has the primary responsibility for supervising Federally chartered savings and loan associations
a) comptroller of the currency
b) Officer of Thrift Supervisions
c) Federal Reserve System

B

Which regulatory agency has the primary responsibility for supervising federally chartered credit unions?
a) comptroller of the currency
b) National Credit Union Administration
c) Federal Reserve System

B

The government agency that oversees the banking system and is responsible for the supply of money and credit in the economy is the
a) national bank
b) community bank
c) virtual bank
d) central bank

D

The _________________, established in 1791, is the first central bank in the United States.
a) Bank of the United States
b) Federal Reserve System
c) Credit Suisse First Boston

A

The current central bank of the United States is
a) Morgan Stanley
b) the Federal Reserve
c) the Third Bank of the United States
d) the First National Bank of Boston

B

Which of the following is likely a result of increased? interest-rate volatility?
a) An increase in costs for financial products and services
b) A decrease in demand for financial services and products
c) A decrease in costs for financial products and ser

D

The following are the main sources for financial innovation except
a) changes in supply conditions
b) avoidance of costly regulation
c) changes in demand conditions
d) promotion of bank regulations

D

Which of the following financial innovations helped banks reduce their? interest-rate risk that came from the increased volatility of interest rates since the? 1970s?
a) junk bonds and commercial paper
b) ATMs
c) bank holding companies
d) adjustable-rate

D

As a result of strict banking? regulations, the United States? has:
a) many more smaller banks when compared to other industrialised countries
b) banks that are quite large relative to those in other industrialised countries
c) a few dominant banks that h

A

According to the? text, there are about
a) ?5,000 commercial banks in the United States.
b) 5,700 commercial banks in the United States.
c) 10,000 commercial banks in the United States.
d) 15,000 commercial banks in the United States.

B

A few industries in the United States have ___________ firms than the commercial banking industry.
a) fewer
b) more
c) about the same

B

Bank failures have contributed to the decline in the number of banks. Another major reason is the
a) creation of financial derivatives.
b) prevalence of bank consolidation.
c) history of branching restrictions.
d) existence of securitization.

B

Banks could gain the benefits of ____________ because they would now be able to make loans in different states rather than focus in just one.
a) diversification
b) bank consolidation
c) securitization

A

Small banks are also known as
a) supraregional banks.
b) community banks.
c) savings and loan institutions.
d) state banks.

B

Large banks are ___________ than community banks.
a) more efficient
b) less efficient
c) as efficient

A

Large banks have a ________ likelihood of failure than community banks.
a) less
b) greater
c) the same

A

How did competitive forces lead to the repeal of the? Glass-Steagall Act's separation of the banking and securities? industries? ?(Check all that? apply.)
a) Financial innovation motivated banks and other financial institutions to bypass the intent of the

A,B,D

The following examples contributed to the erosion of the? Glass-Steagall act except the statement that indicates that
a) the Federal Reserve introduced a loophole that affiliates of approved commercial banks used.
b) an executive order prohibited banks fr

B

The legislation that repealed the? Glass-Steagall Act is the
a) Regulation Q.
b) ?Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994.
c) Douglas Amendment of 1956.
d) Gramm-Leach-Bliley Financial Services Modernization Act of 1999.

D

Which of the following is the only depository institution to maintain a? tax-exempt status?
a) Commercial banks
b) Credit unions
c) Savings and loan associations
d) Mutual savings banks

B

Which of the following statements about savings and loans is not true??
a) There are more savings and loans than banks
b) Savings and loans are supervised by the Office of Thrift Supervision
c) Savings and loans have historically been subject to less rest

A

Compared to? banks, credit unions
a) have customers that share some common bond such as employment.
b) tend to be larger.
c) have no deposit insurance.
d) usually lend to commercial enterprises.

A

Which of the following explain why only two U.S. banks are present among the ten largest banks in the? world? ?(Select all that? apply.)
a) An inefficient legal system.
b) A large number of banks in the United States.
c) Stricter regulations in the United

B, C, D

________________ is a special subsidiary of US banks engaged primarily in international banking
a) An International Banking Facility
b) An Edge Act Corporation
c) A Credit Union
d) A Mutual Savings Bank

B

____________ are financial institutions within the United States that can accept time deposits from foreigners but are not subject to either reserve requirements or restrictions on interest payments.
a) International Banking Facilities
b) Savings and loan

A