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Quiz 2
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1
The U.S. banking system is said to be a dual banking system because:
A)banks may operate as either savings banks or commercial banks.
B)each bank operates using both its physical banking facilities and ATMs.
C)each bank provides other financial services in addition to banking.
D)None of the above is correct.
2
Throughout much of the past century, it was often difficult for federal regulatory agencies to impose strong restrictions on banks because:
A)the U.S. government has preferred to rely on markets rather than regulation to encourage banks to engage in sound banking practices.
B)state banking authorities generally imposed more restrictive policies on banks.
C)the U.S. Congress specifically exempted banks from federal regulation.
D)banks could choose to pursue state charters if federal policies were more restrictive than state policies.
3
Which of the following is a correct description of the banking structure of the U.S. during the past 20 years?
A)The number of banks has been rising rapidly in the U.S., but it is still below the number of banks in Canada and Japan.
B)The number of banks in the U.S. has been stable, but there are more banks in the U.S. than in the U.S. and Japan.
C)The number of banks has been declining in the U.S., but there are still more banks in the U.S. than in Canada or Japan.
D)The number of banks has been declining in the U.S. and there are fewer banks in the U.S. than in Canada or Japan.
4
The National Banking Act of 1863:
A)effectively eliminated paper currency issues by state chartered banks.
B)allowed the creation of nationally chartered banks.
C)created the dual banking system that is still in existence in the U.S.
D)All of the above are correct.
5
During the years 1929 to 1933:
A)the U.S. banking system became much more stable than it had been in earlier years.
B)the U.S. began the process of introducing a dual banking system.
C)about a third of U.S. banks failed.
D)less than 10% of U.S. banks failed.
6
In 1935, most banks had:
A)only one branch.
B)two or three branches.
C)five to ten branches.
D)dozens of branches.
7
The McFadden Act:
A)allowed banks to branch across state lines.
B)resulted in a reduction in the total number of banks in the U.S.
C)subjected nationally chartered banks to the branching restrictions imposed on state chartered banks.
D)increased concentration in the banking industry.
8
Changes in the number of banks in the U.S. since the passage of the Reigle-Neal Interstate Banking and Branching Efficiency Act of 1994 suggest that, under the McFadden Act, banks were:
A)not fully able to realize economies of scale.
B)too large.
C)operating at an efficient scale.
D)None of the above is correct.
9
The Reigle-Neal Act has resulted in:
A)lower total profits for commercial banks.
B)higher interest rates on loans issued by banks.
C)higher interest rates paid by banks on deposits.
D)All of the above are correct.
E)None of the above is correct.
10
Eurodollar deposits:
A)are dollar-denominated deposits held by banks outside of the U.S.
B)are not subject to U.S. banking regulations.
C)provide higher interest-rates than deposits in domestic U.S. banks.
D)All of the above are correct.
11
The interest rate at which banks lend eurodollars to each other is called the:
A)discount rate.
B)eurodollar lending rate.
C)London Interbank Offered Rate.
D)international funds rate.
12
Large financial holding companies may be more profitable than smaller banks as a result of:
A)economies of scale.
B)economies of scope.
C)Both of the above are correct.
D)None of the above is correct.
13
Whole life insurance plans differ from term life insurance plans in that whole life plans:
A)have a savings component as well as an insurance component.
B)have only an insurance component and do not have a savings component.
C)provide insurance throughout an individual's life while term life plans may only be granted to individuals between the ages of 18 and 50.
D)None of the above is correct.
14
Physical exams are used to screen applicants for health and life insurance plans to.
A)reduce the moral hazard problem associated with these forms of insurance.
B)reduce the adverse selection problem associated with these forms of insurance.
C)to reduce both the moral hazard and adverse selection problems associated with these forms of insurance.
D)None of the above is correct.
15
A moral hazard problem exists with health insurance contracts because:
A)most people that buy insurance are immoral.
B)the people that buy insurance are those that are most at risk of illness.
C)individuals that have insurance face a lower cost of medical services and respond by consuming more services.
D)None of the above is correct.
16
Reinsurance firms:
A)insure risks for insurance companies that cannot get regular insurance coverage since they have had too many claims in the past.
B)are used so that insurance companies can issue large policies while maintaining a diversified mix of insurance policies.
C)are no longer legal in the U.S.
D)are the companies that provide car insurance to new drivers.
17
Under a defined contribution pension plan, the risk of financial market fluctuations is borne by:
A)workers.
B)employers.
C)the government.
D)All of the above.
18
Investment banks:
A)provide stock underwriting services.
B)provide advice to firms concerning mergers and acquisitions.
C)attempt to buy newly issued stock and sell it at a higher price in the secondary market.
D)All of the above are correct.





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