Money & Banking Final

According to the lecture and lecture notes, if you owe the bank ________, you own the bank. If a group of banks owe _______, they own the country. a) $1 million; $1 billion b) $1 billion; $1 million c) $1 trillion; $1 billion d) $1 billion; $1 trillion

$1 billion; $1 trillion

Assume that you bought a $300,000 house and got a $240,000 mortgage on it. If the house is currently valued at $200,000, the underwater amount of this house is ______. a) $100,000 b) $60,000 c) $40,000 d) unknown

$40,000

According to the lecture and lecture notes, what is the approximate size of the TARP (Troubled Asset Relief Program)? a) $700 billion b) $700 million c) $450 billion d) $700 trillion

$700 billion

Which of the following is not a major factor that can cause a financial crisis? a) a bankruptcy of a local bank b) hyper-inflation c) debt deflation d) all of the above e) only (b) and (c) of the above

A bankruptcy of a local bank

The Consumer Financial Protection Bureau can regulate ________. a) mortgage-related businesses b) payday loans c) student loan companies d) all of the above e) only (b) and (c) of the above

All of the above

The agency that was created to protect depositors after the banking failures of 1930-1933 is the A) Federal Deposit Insurance Corporation. B) Office of the Comptroller of the Currency. C) Federal Reserve System. D) Treasury Department.

Federal Deposit Insurance Corporation

According to Dr. Choi's class lecture, European policymakers tend to hate _______ whereas U.S. policy makers tend to hate _____. A) inflation; deflation B) deflation; inflation C) inflation; inflation D) deflation; deflation

Inflation; Deflation

According to the lecture and lecture notes, which one of the following is recorded as the largest bank failure during the 2007-2010 crisis? a) Lehman Brothers b) CIT Group c) General Motors d) Washington Mutual

Lehman Brothers

Underwater mortgage is a mortgage whose borrowed (mortgage) amount is _______ the current value of the home. a) less than b) more than c) the same as

More than

The 2007-2010 crisis was primarily caused by the housing bubble and the subsequent subprime mortgage meltdown. Can you identify the factors that caused the start of the housing bubble and the subsequent subprime mortgage meltdown? a) High liquidity afforded by the Fed's easy monetary policy. b) Human greed c) The Great Recession d) all of the above e) only (a) and (b) of the above

Only (a) and (b) of the above

Which of the following is a major factor that can cause a financial crisis? a) uncertainty about the future and fear of unknown b) unexpected rapid decrease in interest rates c) stock market crashes d) all of the above e) only (a) and (c) of the above

Only (a) and (c) above

Securitization means that ______ assets are pooled and made into ______ assets. A) marketable; non-marketable B) non-marketable; marketable C) illiquid; liquid D) only (a) and (c) of the above E) only (b) and (c) of the above

Only (b) and (c) above

Which of the following is a major factor that can cause a financial crisis? a) a bankcruptcy of a local bank b) hyper-inflatioin c) debt deflation d) all of the above e) only (b) and (c) of the above

Only (b) and (c) of the above

The primary purpose of deposit insurance is to A) protect bank employees from unemployment. B) improve the flow of information to investors. C) prevent banking panics. D) protect bank shareholders against losses.

Prevent banking panics

Which of the following is not a government-sponsored agency that specializes in mortgage securitization? a) Freddie Mac b) Fannie Mae c) Sallie Mae d) only (a) and (b) of the above

Sallie Mae

Which of the following legislation created the Consumer Financial Protection Bureau? a) The Gramm-Leach-Bliley Act b) The Federal Reserve Act c) The Glass-Steagall Act d) The Dodd-Frank Act

The Dodd-Frank Act

Which of the following legislation created the Financial Stability Oversight Council? a) The Gramm-Leach-Bliley Act b) The Glass-Steagall Act c) The Dodd-Frank Act d) The Federal Reserve Act

The Dodd-Frank Act

Which of the following is responsible for funding the Consumer Financial Protection Bureau? a) The Congress b) The U.S. Treasury Department c) The large commercial banks d) The Federal Reserve Banking System

The Federal Reserve Banking System

The 2008-2009 recession that corresponds closely with the 2007-2010 financial crisis is often known as _______. a) The Gross Embarrassment b) The Major Meltdown c) The Great Opportunity d) The Great Depression e) The Great Recession

The Great Recession

Debt deflation can start from _______ . a) the deflationary pressure in the economy b) an increase in interest rates c) a stock market crash d) the reduction in debt-serviceability

The deflationary pressure in the economy

Vault cash is _______. a) currency and coin kept at the bank's vault b) currency and coin kept at the Fed's vault c) currency and coin kept at the U.S. Treasury's vault d) all of the above e) only (a) and (b) of the above

a) currency and coin kept at the bank's vault

The loan given to banks by the Federal Reserve Bank is known as the ______. a) discount loan b) Federal loan c) subsidy d) all of the above e) only (a) and (b) of the above

a) discount loan

Which of the following is a monetary policy tool used by the Fed? a) the open market operations b) the prudent supervision of large banks c) the minimum capital requirements d) all of the above e) only (a) and (c) of the above

a) the open market operations

If the required reserve ratio is 5% and the Fed loans $1,500 to the bank, the total amount new money that will be created is ______. a) $3,000 b) $30,000 c) $1,575 d) $1,500

b) $30,000

A simple deposit multiplier is defined as ______. a) a product of the required reserve ratio and reserves b) an inverse of the required reserve ratio c) a product of the excess reserve ratio and reserves d) an inverse of the excess reserve ratio

b) an inverse of the required reserve ratio

Which of the following can a bank loan out to customers? a) loanable reserves b) excess reserves c) total reserves d) required reserves

b) excess reserves

Money in a very narrow sense is defined as paper currency and coin. Economists ________ this definition when defining money. a) are neutral to b) reject c) accept

b) rejects

In the modern finanical system, ______ replaced ______ as the issuer of money. a) goldsmiths; banks b) the Fed; goldsmiths c) the U.S. Treasury; banks d) goldsmiths; the Fed

b) the Fed; goldsmiths

Reserve is defined as something stored or kept available for future use or need. The econmists defined it as ______. a) the division of vault cash by bank deposits with the Fed b) the sum of vault cash and bank deposits with the Fed c) the difference between vault cash and bank deposits with the Fed d) the product of vault cash and bank deposits with the Fed

b) the sum of vault cash and bank deposits with the Fed

Which of the following is not true about the Federal Reserve System (Fed)? a) The position of the Chairperson of the Board of Governors has a 4-year renewable term. b) The Fed is subject to the Congressional hearings under the Humphrey-Hawkins Act c) The Fed has to recieve its annual budget from the Congress. d) all of the above e) Only (a) and (b) of the above

c) The Fed has to recieve its annual budget from the Congress.

The Federal Reserve System (Fed) must be independent from all political influences because ________. a) An important policy such as monetary policy must be controlled by an exclusive group of elites b) the Congress and the President can do a better job of managing economic growth. c) The monetary policy makers at the Fed must be allowed to have a long-term view d) all of the above e) only (a) and (b) of the above

c) The monetary policy makers at the Fed must be allowed to have a long-term view

Which of the following is an argument for the independence of the Federal Reserve System (Fed) from all political influences? a) It is undemocratic to have monetary policy controlled by an elite and exclusive group b) To achieve economic goals, it makes sense to place both monetary and fiscal policies under the control of the Congress and the President. c) debt monetiainz must not occur d) all of the above e) only (a) and (b) of the above

c) debt monetiainz must not occur

If the required reserve ratio is 19%, the simple deposit multiplier is ______. a) 20 b) 19 c) none of the above d) 81 e) 0.5

c) none of the above

Money in a very narrow sense is defined as paper currency and coin. In the U.S., currency is issued by _______ and the coin is issued by _________. a) the Federal Reserve; the Federal Reserve b) the U.S. Treasury; the U.S. Treasury c) the U.S. Treasury; the Federal Reserve d) the Federal Reserve; the U.S. Treasury

d) the Federal Reserve; the U.S. Treasury

If the required reserve ratio is 4%, the simple deposit multiplier is ______. a) none of the above b) 0.25 c) 4 d) 0.04 e) 25

e) 25

Which of the following ensures the independence of the Federal Reserve System from political influences? a) Members of the Board of Governors have a non-renewable 14-year term b) The Federal Reserve Banks guarantee their employees permanent job c) The Fed earns its own income. d) all of the above ensures the Fed's independence e) Only (a) and (c) of the above

e) Only (a) and (c) of the above