1 In Akerlof\'s \'lemons\' study, which of the following complete(s) the sentenc
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Question
1 In Akerlof's 'lemons' study, which of the following complete(s) the sentence shown below?
Because all used cars in the market are priced based on average quality
-i- owners of high-quality cars are not willing to sell
-ii- owners of poor-quality cars want to sell their cars
-iii- buyers will have access only to high quality cars
A. i only
B. ii only
C. i and ii
D. i, ii, and iii
2 The law that created the financial holding company (FHC) structure is the
A. Gramm-Leach-Bliley Act.
B. McFadden Act.
C. Glass-Steagall Act.
D. Garn-St. Germain Act.
3 Which of the following statements would John Adams have been most likely to agree with?A. Banking laws that work in Kansas don't work in Missouri.
B. Europe was better off before it became the European Union.
C. Standardized banking laws make depositors safer.
D. Adams would likely not have agreed with any of the above
4 Which of the following is not considered a subprime loan, according to the PowerPoints?A. the money you get from a pawn shop when you hock a guita
B. a NINA loan
C. a NINJA loan
D. a loan from a finance company that specializes in borrowers with little or bad credit
E. a loan on which the interest rate is higher than the legally-allowed maximum
5 The National Banking Act
A. established the Bank of the United States
B. started the Free Banking Era
C. established the central bank (Federal Reserve)
D. resulted in currency backed by US government bonds
6 "Too big to fail"
A. means that asset size is the main criterion we should use when deciding if a bank should stay open
B. is related to the concept of forbearance
C. implies that a bank with many customers will have a high RoA
D. is not a philosophy used today
7 An insolvent bank
A. has zero net worth
B. has a return on equity (RoE) between 0 and 9.99%
C. has liabilities greater than assets
D. has a negative return on assets (RoA)
E. must shut down
8 1913 is notable in monetary economics because
A. that's when the Federal Reserve was created
B. that marked the end of the Free Banking Era
C. that marked the beginning of the dual banking system
D. all of the above are true
9 A famous and filthy rich chef brags in an interview that he keeps his riches in many different bank accounts across the country. "After all," he says, "if your bank goes under, you're only guaranteed $250,000 to be paid back to you." Why would most economists disgree with this famous chef?
A. Currently you're only guaranteed $100,000, not $250,000, to be repaid if your bank goes under.
B. Less than 1/4 of banks have FDIC insurance.
C. The FDIC usually uses the purchase and assumption method when banks go under.
D. When a bank fails, another bank takes on its liabilities, but not its assets.
10 Which of the following was not a problem during the subprime mortgage crisis described in the powerpoints?
A. Limits on how complicated loan contracts could be
B. A housing market "bubble"
C. Misleading lending practices
D. Lack of understanding of ARMs
11 According to the PowerPoints, the National Banking Act had covert and overt goals. Which of the following is true about them?
A. A covert goal was to have only nationally-chartered banks.
B. An overt goal was to get banks to buy government bonds.
C. A covert goal was to stabilize the nation's money.
D. An overt goal was to regulate exchange rates between dollars and other nations' curencies.
12 When some bank takes out a loan from the Federal Reserve, all else equal,
A. it gains a loan and the left side of its balance sheet is unchanged
B. it gains both actual and required reserves
C. it gains a liability and must pay interest
D. it has borrowed federal funds, which are a type of borrowing
Explanation / Answer
1 c
2 a
6 a
7 c
8 a
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