Cecchetti3e_MCQuiz_Ch14_FINAL copy

Cecchetti3e_MCQuiz_Ch14_FINAL copy - Chapter 14 Regulating...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 14 Regulating the Financial System Multiple Choice Questions 1. Rumors of a bank failing, even if not true, can become a self-fulfilling prophecy because: A. Customers will not want to obtain loans from this bank B. The rumors will cause people to not want to deposit in this bank C. Regulators will scrutinize the bank heavily looking for something wrong D. Depositors will rush to the bank to withdraw their deposits and the bank under normal situations would not have sufficient liquid assets on hand Ans: D Difficulty: Medium Topic: The Sources and Consequences of Runs, Panics and Crises 2. What matters most during a bank run is: A. The number of loans outstanding B. The solvency of the bank C. The liquidity of the bank D. The size of the bank's assets Ans: C Difficulty: Medium Topic: The Sources and Consequences of Runs, Panics and Crises 3. Contagion is: A. The failure of one bank spreading to other banks through depositors withdrawing of funds B. The phenomenon that if one bank loan defaults it will cause other bank loans to default C. The rapid contraction of investment spending that occurs when interest rates are increased by the Federal Reserve D. The rapid inflation that results from the printing of money Ans: A Difficulty: Easy Topic: The Sources and Consequences of Runs, Panics and Crises
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
4. An economic rationale for government protection of small investors is that: A. Large investors can better afford losses B. Many small investors cannot adequately judge the soundness of their bank C. There is inadequate competition to ensure a bank is operating efficiently D. Banks are often run by unethical managers who will often exploit small investors
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 5

Cecchetti3e_MCQuiz_Ch14_FINAL copy - Chapter 14 Regulating...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online