Econ305 Chapter11

According to Edward Kane, because the banking industry is one of the most ________ industries in America, it is an industry in which ________ is especially likely to occur. A) regulated; loophole mining B) regulated; innovation C) competitive; innovation D) competitive; loophole mining

A

Financial instruments whose payoffs are linked to previously issued securities are called ________. A) financial derivatives B) hedge securities C) reversible bonds D) grandfathered bonds

A

Lack of competition in the United States banking industry can be attributed to ________. A) past regulations that the ability of banks to open branches B) the fact that branching has eliminated competition C) recent legislation restricting competition D) the fact that competition does not benefit consumers

A

A firm issuing credit cards earns income from ________. A) sales of the card in foreign countries B) loans it makes to credit card holders C) payments made to it by manufacturers of the products sold in stores on credit card purchases D) subsidies from the local governments

B

A major difference between the British-style and Japanese banking systems is that ________. A) Japanese banks are usually organized as bank holding companies B) Japanese banks are allowed to hold substantial equity stakes in commercial firms, whereas British-style banks cannot C) British-style banks are allowed to hold substantial equity stakes D) bank holding companies are illegal in British-style banks

B

ATMs were developed because of breakthroughs in technology and as a ________. A) way of concealing transactions from the SEC B) means of avoiding restrictive branching regulations C) increasing the competition from foreign banks D) means of avoiding paying interest to corporate customers

B

Deposits in European banks denominated in dollars for the purpose of international transactions are known as ________. A) European Monetary Units B) Eurodollars C) European Currency Units D) International Monetary Units

B

Financial innovations occur because of financial institutions search for ________. A) fame B) profits C) stability D) recognition

B

In a ________ banking system, commercial banks provide a full range of banking, securities, and insurance services, all within a single legal entity. A) barrier-free B) universal C) dividerless D) severable

B

One factor contributing to the decline in cost advantages that banks once had is the ________. A) increase in the importance of chequable deposits as part of a banks' source of funds B) decline in the importance of chequable deposits as part of a banks' source of funds C) increase in the importance of savings deposits as part of a banks' source of funds D) decline in the importance of savings deposits as part of a banks' source of funds

B

Reasons for holding Eurodollars include ________. A) the fact that Eurodollar deposits are insured by the FDIC B) the fact that dollars are widely used to conduct international transactions C) the fact that Eurodollar deposits are heavily regulated D) the fact that minimum transaction sizes are very low, making Eurodollars an attractive savings instrument for consumers

B

A debit card differs from a credit card in that ________. A) a debit card is a loan while for a credit card purchase, payment is made immediately B) a credit card is a long-term loan while a debit card is a short-term loan C) a debit card is a long-term loan while a credit card is a short-term loan D) a credit card is a loan while for a debit card purchase, payment is made immediately

D

The ability to use one resource to provide different products and services is ________. A) economies of scale B) diversification C) vertical integration D) economies of scope

D

The U.S. banking system is considered to be a dual system because ________. A) it is regulated by both state and federal governments B) banks offer both chequing and savings accounts C) it was established before the Civil War, requiring separate regulatory bodies for the North and South D) it actually includes both banks and thrift institutions

A

The four-pillars were identified as ________. A) banking, brokerage, trusts, and insurance B) banking, brokerage, credit unions, and insurance C) banking, brokerage, trusts, and mutual funds D) banking, brokerage, credit unions, and mutual funds

A

The modern Canadian banking system began with ________. A) the Bank of Montreal in 1817 B) the Bank of New Brunswick in 1820 C) the Chartered Bank of Upper Canada in 1821 D) the Bank of Lower Canada in 1801

A

________ is the process of researching and developing profitable new products and services by financial institutions. A) Financial engineering B) Customer manipulation C) Financial manipulation D) Customer engineering

A

So-called fallen angels differ from junk bonds in that ________. A) junk bonds refer to previously bonds that have had their credit ratings fall below Baa, whereas fallen angels refer to newly issued bonds with low credit ratings B) 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 C) fallen angels have ratings below Baa, whereas junk bonds have ratings below C D) junk bonds have ratings below Baa, whereas fallen angels have ratings below C

B

The 2001 Bank Act Reform legislation provides ________. A) less ability for banks to join strategic alliances and joint ventures B) greater flexibility for bank involvement in the IT area C) details on why banks cannot expand their use of information technology D) a list of restricted activities

B

The declining cost of computer technology has made ________ a reality. A) commercial banking B) virtual banking C) brick and mortar banking D) investment banking

B

The government institution that has responsibility for the amount of money and credit supplied in the economy as a whole is the ________. A) bank of settlement B) central bank C) monetary fund D) commercial bank

B

The process in which people take their funds out of the banking system seeking higher-yielding securities is called ________. A) loophole mining B) disintermediation C) deposit jumping D) capital mobility

B

The separation of the banking and other financial services industries was known as ________. A) convergence B) the four-pillar approach C) underwriting D) consolidation

B

Uncertainty about interest-rate movements and returns is called ________. A) financial creativity B) interest-rate risk C) interest-rate irregularities D) market potential

B

Which of the following are true statements? A) A foreign bank may enter the Canadian banking industry only as a Schedule III bank. B) A Schedule II bank may have a significant shareholder (more than 10 percent) for up to 10 years after chartering. C) A Schedule II bank may enter the Canadian banking industry only as a Schedule II bank. D) Schedule I banks have more powers than Schedule II banks.

B

Banking consolidation in Canada will result in ________. A) an increased number of small banks B) a reduction in bank size C) an increase in bank size D) elimination of small banks

C

Near banks are defined as ________. A) banks and trust and mortgage loan companies B) trust and mortgage loan companies, and brokers C) trust and mortgage loan companies, and credit unions and caisses populaires D) banks, brokers, and credit unions and caisses populaires

C

One advantage of the holding company form of corporate ownership is that ________. A) it demands less flexibility to achieve economies of scale B) it prevents strategic partnerships C) it allows them to engage in other activities related to banking D) there is more regulation

C

The six largest chartered banks in Canada together hold ________ of the assets in the industry. A) nearly 75 percent B) 25 percent C) over 90 percent D) just over 50 percent

C

What country is given credit for the birth of the Eurodollar market? A) Japan B) The United States C) The Soviet Union D) England

C

Which of the following is a true statement concerning bank holding companies? A) The McFadden Act has prevented bank holding companies from establishing branch banks. B) Bank holding companies own few large banks. C) Bank holding companies are an important advantage to circumvent restrictive branching regulations. D) Bank holding companies can own only banks.

C