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Multiple Choice



1

The dual banking system in the U.S. today refers to:
A)A bank's ability to issue checking and saving accounts.
B)The ability of banks to be either federally or state chartered.
C)A bank's ability to own another financial institution.
D)A deposit institution can be both a bank and a savings and loan.
2

The U.S. is unusual when compared to Canada or Japan in that:
A)The U.S. banks are privately owned, where banks in the other countries are public institutions.
B)The U.S. has fewer banks than Japan but more than Canada.
C)The U.S. has more banks than either Japan or Canada.
D)The U.S. has more banks than Japan but fewer than Canada.
3

A bank exerts some control over who will regulate it because:
A)Banks spend a lot of money contributing to political campaigns.
B)The bank pays the salary of the regulator.
C)Banks have the right to decide on which regulator will oversee their bank.
D)Banks can switch their charter from state to federal and vice versa.
4

In the early years of the Great Depression, 1929 — 1933:
A)More than a third of all U.S. banks failed.
B)Two-thirds of U.S. banks failed.
C)Over three-fourths of all U.S. banks failed.
D)A little less than one-quarter of U.S. banks failed.
5

Which of the following statements most accurately describes the state of banking in the U.S.:
A)A large number of large banks and a small number of small banks.
B)A large number of small banks and a small number of large banks.
C)A small number of large and small banks.
D)A large number of large and small banks.
6

The actual results of the McFadden Act did not include:
A)Increased inefficiency of banking across the country.
B)A loose network of non-connected banks across the country.
C)The elimination of banking monopolies.
D)A safety net for small inefficient banks to continue to operate.
7

Over the last twenty years in the U.S. the number of banks has:
A)Steadily decreased.
B)Stayed about the same.
C)Increased about 10 percent a year.
D)More than doubled.
8

The Bank Holding Act of 1956:
A)Limited bank holding companies to operating only within their chartered state.
B)Significantly broadened the scope of what bank holding companies could do.
C)Limited the scope of bank holding companies in terms of services offered.
D)a and b
9

Eurodollars are:
A)Dollar-denominated deposits in foreign banks.
B)Euro denominated deposits in U.S. Banks
C)The currency of the European Economic Union.
D)Dollars that are specially printed for use in the European Union countries to minimize counterfeiting.
10

Term life insurance differs from whole life in which of the following ways:
A)Whole life has a variable premium over the life of the policy, increasing as the policyholder gets older. Term life has a premium the policyholder pays once and the policy is in force until death.
B)Term life has a savings component whole life is pure insurance.
C)Term life is usually more expensive than whole life.
D)Whole life is a combination of term life insurance and a savings account.
E)b and c
11

An insurance company provides liability insurance to a bakery protecting the owner against claims from customers. One area of coverage is protection against food poisoning claims. The insurance company may periodically send an employee into the bakery to observe food preparation and food storage processes. The insurance company is trying to avoid:
A)Paying claims.
B)Adverse selection.
C)Moral hazard.
D)Transaction costs.
12

The reinsurance market is characterized as:
A)A few buyers and many sellers.
B)Many buyers and a few sellers.
C)A monopoly since reinsurance is provided by the government.
D)Many buyers and sellers.
13

Pension funds resemble insurance companies in the fact they:
A)Pool the savings of many investors.
B)Spread risk.
C)Accept deposits.
D)a and b
E)a and c
14

Finance companies do perform which of the following functions:
A)Issue commercial paper and securities.
B)Take deposits.
C)Issue certificates of deposit..
D)Offer demand deposit accounts.
E)a and d
15

Fannie Mae, Ginnie Mae, and Freddie Mac are examples of:
A)Private regulatory bodies that supervise home mortgage lenders.
B)Government sponsored agencies that were chartered to encourage small business loans.
C)Government sponsored agencies chartered to encourage home lending.
D)Government sponsored agencies that provide homeowners insurance to people that cannot obtain it from private insurers.





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