Econ 4721 HW 4 - Homework 4 Answer Key ECON 4721 Money and...

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Homework 4 - Answer Key ECON 4721: Money and Banking, Fall 2009 1. The regulatory system that has evolved in the United States whereby banks are regulated at the state level, the national level, or both, is known as a A) bilateral regulatory system. B) tiered regulatory system. C) two-tiered regulatory system. D) dual banking system. 2. Probably the most significant factor explaining the drastic drop in the number of bank failures since the Great Depression has been 3. The Glass-Steagall Act, before its repeal in 1999, prohibited commercial banks from A) issuing equity to finance bank expansion. B) engaging in underwriting and dealing of corporate securities. C) selling new issues of government securities. D) purchasing any debt securities. 4. The cost of holding reserves to a bank equals 5. Since 1974, commercial banks’ importance as a source of funds for nonfinancial borrowers below 30 percent by 2005. by 2005. percent by 2005. percent by 2005. 1
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6. The presence of so many commercial banks in the United States is most likely the result of A) consumers’ strong desire for dealing with only local banks. B) adverse selection and moral hazard problems that give local banks a competitive advantage over larger banks. C) prior regulations that restrict the ability of these financial institutions to open branches. D) consumers’ preference for state banks. 7. As the banking system in the United States evolves, it is expected that
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