41) Sweep accounts A) have made reserve requirements nonbinding for many banks. B) sweep funds out of deposit accounts into long-term securities. C) enable banks to avoid paying interest to corporate customers. D) reduce banks' assets.
41) Sweep accounts
A) have made reserve requirements nonbinding for many banks.
B) sweep funds out of deposit accounts into long-term securities.
C) enable banks to avoid paying interest to corporate customers.
D) reduce banks' assets.
42) Since 1974, commercial banks importance as a source of funds for nonfinancial borrowers
A) has shrunk dramatically, from around 40 percent of total credit advanced to around 25 percent by 2011.
B) has shrunk dramatically, from around 70 percent of total credit advanced to below 50 percent by 2011.
C) has expanded dramatically, from around 50 percent of total credit advanced to above 70 percent by 2011.
D) has expanded dramatically, from around 30 percent of total credit advanced to above 50 percent by 2011.
43) Thrift institutions importance as a source of funds for borrowers
A) has shrunk from around 40 percent of total credit advanced in the late 1970s to below 30 percent by 2011.
B) has shrunk from over 20 percent of total credit advanced in the late 1970s to around 3 percent by 2011.
C) has expanded dramatically, from around 15 percent of total credit advanced in the late 1970s to above 25 percent by 2011.
D) has expanded dramatically, from around 15 percent of total credit advanced in the late 1970s to above 30 percent by 2011.
44) Since 1980
A) bank profitability has declined.
B) banks have offset the decline in profits from traditional activities with increased income from off-balance-sheet activities.
C) banks have offset the decline in profits from off-balance-sheet activities with increased income from traditional activities.
D) bank profits have grown rapidly due to deregulation.
45) Financial innovation has caused
A) banks to suffer declines in their cost advantages in acquiring funds, although it has not caused a decline in income advantages.
B) banks to suffer a simultaneous decline of cost and income advantages.
C) banks to suffer declines in their income advantages in acquiring funds, although it has not caused a decline in cost advantages.
D) banks to achieve competitive advantages in both costs and income.
46) Disintermediation resulted from
A) interest rate ceilings combined with inflation-driven increases in interest rates.
B) elimination of Regulation Q (the regulation imposing interest rate ceilings on bank deposits).
C) increases in federal income taxes.
D) reserve requirements.
47) The experience of disintermediation in the banking industry illustrates that
A) more regulation of financial markets may avoid such problems in the future.
B) banks are unable to remain competitive with other financial intermediaries.
C) consumers no longer desire the services that banks provide.
D) markets invent alternatives to costly regulations.
48) Banks responded to disintermediation by
A) supporting the elimination of interest rate regulations, enabling them to better compete for funds.
B) opposing the elimination of interest rate regulations, as this would increase their cost of funds.
C) demanding that interest rate regulations be imposed on
D) supporting the elimination of interest rate regulations, as this would reduce their cost of funds.
49) One factor contributing to the decline in cost advantages that banks once had is the
A) decline in the importance of checkable deposits from over 60 percent of banks' liabilities to 2 percent today.
B) decline in the importance of savings deposits from over 60 percent of banks' liabilities to under 15 percent today.
C) decline in the importance of checkable deposits from over 40 percent of banks' liabilities to 15 percent today.
D) decline in the importance of savings deposits from over 40 percent of banks' liabilities to under 20 percent today.
50) The most important developments that have reduced banks cost advantages in the past thirty years include:
A) the growth of the junk bond market.
B) the competition from money market mutual funds.
C) the growth of securitization.
D) the growth in the commercial paper market.
51) The most important developments that have reduced banks' income advantages in the past thirty years include:
A) the increase in off-
B) the growth of securitization.
C) the elimination of Regulation Q ceilings.
D) the competition from money market mutual funds.
52) Banks have attempted to maintain adequate profit levels by
A) making fewer riskier loans, such as commercial real estate loans.
B) pursuing new off-balance-sheet activities.
C) increasing reserve deposits at the Fed.
D) decreasing capital accounts..
53) The decline in traditional banking internationally can be attributed to
A) increased regulation.
B) improved information technology.
C) increasing
D) increased protection from competition.
54) Why did the interest rate volatility of the 1970s spur financial innovation?
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