Quiz Instructions

 

What did the Congressional Budget Office estimate the cost of the S&L debacle to be in 1992 dollars?

            $1 trillion

            $100 million

            $3 trillion

            $200 billion

 

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Question 2 5 pts Which of the following organizations has check clearing as its main role?<br>

Which of the following organizations has check clearing as its main role?

            FDIC

            SEC

            CHIPS

            COMEX

 

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Question 3 5 pts Over periods of several years, the primary determinant of changes in the money supply is changes in<br>

Over periods of several years, the primary determinant of changes in the money supply is changes in

            the required reserve ratio.

            the nonborrowed monetary base.

            the money multiplier.

            discount loans.

Vault cash is a(an)

            liability of the Fed and is not counted as reserves.

            liability of the Fed and is counted as reserves.

            asset of the Fed and is counted as reserves.

            asset of the Fed and is not counted as reserves.

 

The Japanese central bank is known as

            the Bank of Japan.

            the Federal Japanese Bank.

            the National Japanese Bank.

            the Grand Nippon Central Bank.

 

Which of the following did NOT significantly exacerbate the banking crisis of the early 1930s?

            The large number of small, poorly diversified banks

            The large number of rural banks that held agricultural loans during a time of falling commodity prices

            The large amount of fraud carried out by bank managers

            The Fed's inability to lend against anything other than good commercial loans

 When the spread between the T-bill rate and the discount rate increases

            the volume of discount lending falls.

            the Fed must be attempting to expand the money supply.

            the Fed must be attempting to contract the money supply.

            the volume of discount lending rises.

 

During the early 1980s, regulators kept many insolvent or nearly insolvent thrifts from being closed by

            underestimating the value of goodwill that thrifts carried on their books as an asset.

            allowing many assets to be carried on the books at face value rather than market value.

            allowing them to pay interest rates to depositors that were below the going market rates.

            reducing the face value of many mortgages to current market value.

 

Congress created the Federal Reserve System

            to serve as a lender of last resort.

            to provide a source of mortgage loans to the residential housing market.

            to regulate the value of the U.S. dollar against foreign currencies.

            to process the receipt of taxes received by the Internal Revenue Service.

When deposit withdrawals exceed reserves, which of the following is NOT a way in which banks bear the cost?

            Borrowing in the federal funds market

            Borrowing from the Fed

            Calling in loans

            Buying securities

 The loss of business to the commercial paper market that banks have suffered has been particularly damaging because most of the lost business was from

            low-quality borrowers.

            foreign borrowers.

            local municipalities.

            high-quality borrowers.

 

Suppose that a bank with no excess reserves receives a deposit into a checking account of $10,000 in currency. If the required reserve ratio is 0.20, what is the maximum amount that the bank can lend out?

            $50,000

            $10,000

            $8000

            $2000

Adjustable-rate mortgages do not fully eliminate interest-rate risk for all of the following reasons EXCEPT

            the indexes on which they are based are imperfect.

            financial institutions are reluctant to raise interest rates too much so as to not lose customers.

            interest rate can only increase by a specified amount during the term of the mortgage.

            annual rate increases are limited.

When the Fed holds U.S. government securities, it

            pays interest to the government.

            declines to receive interest from the government.

            defers receiving interest from the government.

            earns interest from the government.

Narrow banking is seen by some economists as an answer to the problem of

            moral hazard.

            adverse selection.

            the decline in competition in the banking industry.

            the ineffectiveness of the Fed's use of discount loans.

NOW accounts were developed in order to

            provide banks with a liquid, interest-earning asset.

            circumvent Regulation Q.

            provide banks with a means of earning interest on the funds in their reserve accounts with the Fed.

            provide banks with a checkable deposit on which they did not have to pay interest.

 

The primary assets of the Fed are

            discount loans and reserves.

            discount loans and open market operations.

            government securities and reserves.

            discount loans and government securities.

If currency outstanding equals $500 million, checkable deposits equal $2 billion, reserves equal $200 million, and the required reserve ratio is 0.10, the money multiplier equals

            5.

            3.57.

            1.14.

            4.35.

 

Certificates of deposit differ from demand deposits in that they

            do not pay interest.

            have penalties for early withdrawal.

            are sold only by S&Ls.

            pay non-taxable interest.

The increase in the currency-to-deposit ratio during the 1960s was probably due to

            limitations imposed on deposit insurance.

            high marginal tax rates.

            fear of bank failures.

            rising interest rates.

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