Money & Banking Self-Assesment

1. Bank holding companies allows bankers to circumvent

A. Regulation Q

B. Interstate banking restrictions

C. Reserve requirements

D. None of the above

2. The Great Inflation affected the banking industry through the following channels

A. Lower nominal interest rates

B. Decline in deposits

C. Decreased competition among banks

D. All of the above

3. ARMs

A. Force borrowers to assume interest rate risk

B. Became more prevalent during The Great Inflation

C. Both of the above

D. Neither of the above

4. A bank can increase its level of reserves by

A. Selling securities

B. Increasing borrowings

C. Calling loans

D. All of the above

5. Which of the following is NOT a method banks use to control credit risk?

A. Credit rationing

B. Restrictive covenants

C. Specialization

D. They are all methods for controlling credit risk

6. Which of the following balance sheet entries is not sensitive to changes in market interest rates?

A. Bonds

B. Reserves

C. Mortgages

D. Borrowings

7. _______risk and _____risk for bank loans are essentially the same

A. Credit, interest rate

B. Default, credit

C. Interest rate, default

D. None of the above

8. Efficiency wages are ____ the level firms would have to pay to fill all their open positions.

A. Higher than

B. Lower than

C. Equal to

D. None of the above

9. Specialized lending helps lenders solve the problems of

A. Adverse selection

B. Moral hazard

C. Transactions costs

D. All of the above

10. Which of the following is a technique lenders use to alleviate assymetric information problems?

A. Specialized lending

B. Diversified lending

C. Requiring collateral

D. All of the above