16 11.5Web Appendix 1:The Savings and Loan Crisis and Its Aftermath 1) Moral hazard and adverse selection problems increased in prominence in the 1980s A) as deregulation required savings and loans and mutual savings banks to be more cautious. B) following a burst of financial innovation in the 1970s and early 1980s that produced new financial instruments and markets, thereby widening the scope for risk taking. C) following a decrease in federal deposit insurance from $100,000 to $40,000. D) as interest rates were sharply decreased to bring down inflation. Answer:B Ques Status:Previous Edition 2) The Depository Institutions Deregulation and Monetary Control Act of 1980 A) separated investment banks and commercial banks. B) restricted the use of ATS accounts. C) imposed restrictive usury ceilings on large agricultural loans. D) increased deposit insurance from $40,000 to $100,000. Answer:D Ques Status:Revised 3) One of the problems experienced by the savings and loan industry during the 1980s was A) managers lack of expertise to manage risk in new lines of business. B) heavy regulations in the new areas open to S&Ls. C) slow growth in lending. D) close monitoring by the FSLIC. Answer:A Ques Status:New 4) In the early stages of the 1980s banking crisis, financial institutions were especially harmed by A) declining interest rates from late 1979 until 1981. B) the severe recession in 1981-82. C) the disinflation from mid 1980 to early 1983. D) the increase in energy prices in the early 80s. Answer:B Ques Status:Previous Edition 5) When regulators chose to allow insolvent S&Ls to continue to operate rather than to close them, they were pursuing a policy of ________. A) regulatory forbearance B) regulatory kindness C) ostrich reasoning D) ignorance reasoning Answer:A Ques Status:Previous Edition Created with PDFBear.com
