ch20 - Financial Markets and Institutions 6e(Mishkin/Eakins...

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Financial Markets and Institutions, 6e (Mishkin/Eakins)  Chapter 20    1
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Banking  Regulation 20.1 
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Multi ple  Choi ce
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1) 
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During  the boom years of the 1920s, bank failures were quite  A) 
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uncommon,  averaging less than 30 per year.  B) 
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uncommon,  averaging less than 100 per year.  C) 
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common,  averaging about 600 per year.  D) 
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common,  averaging about 2000 per year.  Answer:  
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Question Status: 
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Previous Edition 2) 
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When one  party to a  transaction has incentives to engage in activities detrimental to the other party, there exists a problem of  A) 
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moral hazard.  B) 
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split incentives.  C) 
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ex ante  shirking.  D) 
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pre - contractual  opportunism.  Answer:  
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Question Status: 
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Previous Edition 3) 
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Moral  hazard is an important consequence of insurance arrangements because the existence of insurance  A) 
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provides  increased incentives for risk taking.  B) 
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impedes  efficient risk taking.  C) 
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causes the  private cost of the insured activity to increase.  D) 
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both A and B of  the above.  E) 
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both B and C of  the above.  Answer:  
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Question Status: 
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Previous Edition 4) 
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Since  depositors , like any lender, only receive fixed payments while the bank keeps any surplus profits, they face the  _________ problem that banks may take on too _________ risk.  A) 
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adverse  selection; little  B) 
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adverse  selection; much  C) 
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moral hazard;  little  D) 
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This note was uploaded on 10/17/2011 for the course ECON 317 taught by Professor Guidry during the Spring '11 term at Nicholls State.

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ch20 - Financial Markets and Institutions 6e(Mishkin/Eakins...

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