Chapter 13 – Financial Industry Structure
Multiple Choice Questions
1. When compared to Canada or Japan, the U.S. is unusual in that it has:
A. Far fewer banks than either of those countries
2. In recent years the U.S. banking structure has changed in such a way that there are now:
A. More banks
Chapter 13 – Financial Industry Structure
3. The financial crisis in the United States in 2007-2009 brought about all but which of the
following changes:
D. a run on money-market mutual funds
4. If someone wants to start a bank today they would have to:
A. Obtain a charter from the federal government
5. Unit banks are:
D. Commercial banks that have combined into one unit with an investment bank
Chapter 13 – Financial Industry Structure
6. A unit bank is a bank that:
A. Only makes one type of loan (i.e.; home mortgages.)
7. Prior to the Civil War most state banks issued their own banknotes. This resulted in all of
the following problems except:
A. Their values decreased as the holder moved further from the bank
8. The dual banking system in the U.S. today refers to:
A. A bank’s ability to issue checking and saving accounts
Chapter 13 – Financial Industry Structure
9. In the U.S. today:
D. All new banks are federally chartered
10. Banks exert some control over who will regulate them because banks:
D. Pay the salary of the regulator
11. In the early years of the Great Depression, 1929-1933:
A. Over one half of all U.S. banks failed
Chapter 13 – Financial Industry Structure
12. The bank failures that occurred during the early years of the Great Depression:
D. Totaled about 30% of total bank customer deposits
13. The Federal Deposit Insurance Corporation (FDIC) was created:
D. In 1927 as a part of the McFadden Act
14. The Glass-Steagall Act of 1933:
D. Required all state banks to get federal charters
Chapter 13 – Financial Industry Structure
15. The U.S. has many banks because:
D. The Glass-Steagall Act forced the splitting up of large banks
16. 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
17. The number of banks in the U.S. today is approximately:
D. 15,300
Chapter 13 – Financial Industry Structure
18. Many states prohibited bank branching because of all of the following except:
A. They feared the concentration and monopoly power of large banks
19. The actual results of the McFadden Act included:
A. Increased efficiency of banking across the country
20. One of the results of the limit on bank branching was:
D. Increased efficiency in the operations of banks
Chapter 13 – Financial Industry Structure
21. Bank holding companies developed:
D. So that unit banks could combine into larger banks
22. Over the last twenty years in the U.S., the number of banks has:
A. Steadily increased
23. One way that a bank could offer non-bank services across more than one state was to:
Chapter 13 – Financial Industry Structure
24. The Bank Holding Company Act of 1956:
D. Repealed the McFadden Act of 1927
25. As a result of technology, many small businesses today:
D. No longer need banks
26. One of the results of the Reigel-Neal Interstate Banking and Branching Efficiency Act of
1994 was:
D. A decrease in commercial banks but an increase in the number of savings and loans and
savings banks
Chapter 13 – Financial Industry Structure
27. The sharp reduction in the number of banks that has occurred since the mid 1990s has
been due primarily to:
D. The revoking of state bank charters
28. One result of the Reigel-Neal Interstate Banking and Branching Efficiency Act was that:
A. Banking system efficiency decreased
D. Reinforced the Glass-Steagall Act’s limitation on commercial banks’ availability to merge
with insurance or securities firms by increasing the penalties for doing so
Chapter 13 – Financial Industry Structure
30. An Edge Act Corporation is:
A. A company created so a U.S. bank can operate in more than one state
31. The growth of international banking has:
A. Decreased the competition that domestic banks face
32. Eurodollars are:
A. The currency of the European Economic Union
Chapter 13 – Financial Industry Structure
33. Often Eurodollar deposits earn higher returns than U.S. bank deposits for all of the
following reasons except:
A. Eurodollar deposits are not subject to U.S. reserve requirements
34. The interest rate at which banks lend each other Eurodollars is known as:
D. The International Prime Rate
35. The gap between LIBOR and the expected Federal Reserve policy interest rate provides a
key measure of which of the following:
D. the movement of the US stock market
Chapter 13 – Financial Industry Structure
36. Citigroup is an example of:
A. An Edge Act corporation
37. Universal banks are:
D. Multinational corporations that own U.S. banks
38. Which of the following is an accurate statement about universal banks?
D. Universal banks in the United States account for the largest share of financial intermediary
assets
Chapter 13 – Financial Industry Structure
39. Which of the following is not a reason to create large financial holding companies?
A. Financial holding companies offer a wide array of services under one brand name
40. Which of the following is an example of the economies of scale argument for increased
profits for large financial holding companies?
D. The profitability of financial holding companies does not rely on one particular line of
business
41. Which of the following is an example of the economies of scope argument for increased
profits for large financial holding companies?
D. The profitability of financial holding companies does not rely on one particular line of
business
Chapter 13 – Financial Industry Structure
42. Which of the following is an example that can help explain increased profits for large
financial holding companies?
D. Financial holding companies are exempt from having to pay for FDIC insurance
43. Which of the following is not a nondepository institution?
D. A pension fund
44. Which of the following statements best completes the following statement: “Over the past
30 years, the percentage(s) of assets for all financial intermediaries¼”?
A. controlled by banks has increased while the percentage for mutual funds has decreased
Chapter 13 – Financial Industry Structure
13–16
45. Which of the following statements best completes the following statement: “Over the past
30 years, the percentage(s) of assets for all financial intermediaries¼”?
A. controlled by banks has decreased as has the percentage for mutual funds while insurance
D. The late 1700s
47. Lloyd’s of London is perhaps most known for:
A. Being the largest insurance company in the world
Chapter 13 – Financial Industry Structure
48. Lloyd’s of London has a reputation for insuring:
D. Only marine-related risks
49. Insurance companies perform all of the following functions performed by financial
intermediaries except:
50. Insurance companies offer two basic type of insurance; these are:
D. Whole life and term life insurance companies
Chapter 13 – Financial Industry Structure
51. Whole life insurance differs from term 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 fixed premium forever
52. Whole life insurance has decreased in popularity due to:
D. Lower interest rates on alternative savings vehicles
53. A typical automobile insurance policy is an example of:
D. Casualty insurance only
Chapter 13 – Financial Industry Structure
54. Property and casualty insurers will hold assets of shorter maturities than life insurance
companies because:
A. Shorter maturity assets usually have higher returns
55. Insurance company assets will include:
D. Only U.S. Treasury securities
56. A young father needing to provide his family with financial security would be better off
purchasing:
D. No life insurance; instead he should focus on saving
Chapter 13 – Financial Industry Structure
57. Insurance companies can predict fairly accurately:
A. The percentage of policyholders who will have a claim and which policyholders will have
a claim
58. In order for insurance companies to generate predictable payouts, they need to:
D. Offer only life insurance
59. Because most insurance companies insure many people, they do not have to worry about
the problem of:
A. Moral hazard