Econ Final Part 2

1.

1 point

The most significant change in the economic environment that changed the demand for financial products in recent years has been

the aging of the baby-boomer generation.

the deregulation of financial institutions.

the dramatic increase in the volatility of interest rates.

the dramatic increase in competition from foreign banks.

2.

1 point

The agreement to provide a standardized commodity to a buyer on a specific date at a specific future price is

a mortgage-backed security.

a call option.

a futures contract.

a put option.

3.

1 point

Moral hazard is an important concern of insurance arrangements because the existence of insurance

provides increased incentives for risk taking.

is a hindrance to efficient risk taking.

creates an adverse selection problem but no moral hazard problem.

causes the private cost of the insured activity to increase.

4.

1 point

As the banking system in the United States evolves, it is expected that

the number and importance of large banks will decrease.

the number and importance of small banks will increase.

small banks will grow at the expense of large banks.

the number and importance of large banks will increase.

5.

1 point

Under the European System of Central Banks, the Governing Council is similar in structure to the ________ of the Federal Reserve System.

Federal Open Market Committee

Board of Governors

Federal Reserve Banks

Federal Advisory Council

6.

1 point

Newly-issued high-yield bonds rated below investment grade by the bond-rating agencies are frequently referred to as

"fallen angels."

junk bonds.

Yankee bonds.

municipal bonds.

7.

1 point

High unemployment is undesirable because it

reduces idle resources.

always increases interest rates.

always increases inflation.

results in a loss of output.

8.

1 point

Financial innovations occur because of financial institutions search for ________.

profits

stability

recognition

fame

9.

1 point

Under the European System of Central Banks, the Executive Board is similar in structure to the ________ of the Federal Reserve System.

Federal Advisory Council

Board of Governors

Federal Open Market Committee

Federal Reserve Banks

10.

1 point

________ is the process of researching and developing profitable new products and services by financial institutions.

Customer engineering

Financial manipulation

Customer manipulation

Financial engineering

11.

1 point

The Fed's support of the Depository Institutions Deregulation and Monetary Control Act of 1980 stemmed in part from its

belief that depositors had to become more knowledgeable of banking operations.

belief that all banking regulations should be eliminated.

concern over declining Fed membership.

belief that interest rate ceilings were too high.

12.

1 point

A firm issuing credit cards earns income from

payments made to it by manufacturers of the products sold in stores on credit card purchases.

loans it makes to credit card holders.

sales of the card in foreign countries.

subsidies from the local governments.

13.

1 point

The most common definition that monetary policymakers use for price stability is

low and stable deflation.

low and stable inflation.

an inflation rate of zero percent.

high and stable inflation.

14.

1 point

The government safety net creates ________ problem because risk-loving entrepreneurs might find banking an attractive industry.

an adverse selection

a moral hazard

a revenue

a lemons

15.

1 point

The U.S. banking system is considered to be a dual system because

it is regulated by both state and federal governments.

it actually includes both banks and thrift institutions.

banks offer both checking and savings accounts.

it was established before the Civil War, requiring separate regulatory bodies for the North and South.

16.

1 point

The time-inconsistency problem in monetary policy can occur when the central bank conducts policy

using a strict and inflexible rule.

using a flexible, discretionary rule.

using a nominal anchor.

on a discretionary, day-by-day basis.

17.

1 point

What makes the Federal Reserve so unique compared to other central banks around the world is its

decentralized structure.

monetary policy functions.

regulatory functions.

centralized structure.

18.

1 point

ATMs were developed because of breakthroughs in technology and as a

increasing the competition from foreign banks.

means of avoiding restrictive branching regulations.

way of concealing transactions from the SEC.

means of avoiding paying interest to corporate customers.

19.

1 point

Experts predict that the future structure of the U.S. banking industry will have

an increased number of banks.

as few as ten banks.

several thousand banks.

a few hundred banks.

20.

1 point

Which regulatory body charters national banks?

The U.S. Treasury

The FDIC

The Comptroller of the Currency

The Federal Reserve

21.

1 point

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 a

dual banking system.

two-tiered regulatory system.

tiered regulatory system.

bilateral regulatory system.

22.

1 point

Members of Congress are able to influence monetary policy, albeit indirectly, through their ability to

instruct the General Accounting Office to audit the foreign exchange market functions of the Federal Reserve.

propose legislation that would force the Fed to submit budget requests to Congress, as must other government agencies.

withhold appropriations from the Board of Governors.

withhold appropriations from the Federal Open Market Committee.

23.

1 point

Each governor on the Board of Governors can serve

one full nonrenewable fourteen-year term plus part of another term.

only one nonrenewable fourteen-year term.

one full nonrenewable eight-year term plus part of another term.

only one nonrenewable eight-year term.

24.

1 point

To prevent bank runs and the consequent bank failures, the United States established the ________ in 1934 to provide deposit insurance.

SEC

ATM

Federal Reserve

FDIC

25.

1 point

New computer technology has

increased the demand for financial innovation.

reduced the cost of financial innovation.

reduced the demand for financial innovation.

increased the cost of financial innovation.