Question :
31) As was demonstrated in 2007, firms in the shadow : 1244819
31) As was demonstrated in 2007, firms in the shadow banking system
A) were very vulnerable to bank runs.
B) were protected from financial ruin by federal deposit insurance.
C) were well insulated from bank runs.
D) were more insulated from the financial crisis than were commercial banks.
32) In 2008, the Fed and the Treasury began attempting to stabilize the commercial banking system through the Troubled Asset Relief Program (TARP) by
A) allowing domestic banks to be taken over by foreign banks.
B) permitting banks to sell commercial bonds to the Federal Reserve Bank.
C) allowing banks to double any outstanding claims for federal deposit insurance reimbursements.
D) providing funds to banks in exchange for stock.
33) A fractional reserve banking system is one in which banks hold less than 100 percent of ________ in reserves.
A) loans
B) deposits
C) securities
D) shareholder equity
34) A central bank can help stop a bank panic by
A) raising the required reserve ratio.
B) calling in consumer loans.
C) acting as a lender of last resort.
D) decreasing income taxes.
35) In the United States, each bank panic in the late nineteenth and early twentieth centuries was accompanied by
A) inflation.
B) deflation.
C) a depression.
D) a recession.
36) In 1913, Congress established the Federal Reserve system with the intention of putting an end to
A) high interest rates.
B) high unemployment rates.
C) inflation.
D) bank panics.
37) Which of the following is not a major function of the Federal Reserve System?
A) lender of last resort
B) clearing checks between banks
C) setting income tax rates
D) controlling the money supply
38) Bank panics have largely disappeared in the United States because
A) banks are now required to hold a larger fraction of deposits as reserves.
B) bank loans are more closely monitored by the Federal Reserve.
C) of low interest rates.
D) of deposit insurance.
39) The real power within the Federal Reserve lies with the
A) Federal Reserve District banks.
B) Board of Governors.
C) Council of Economic Advisors.
D) Council of Monetary Advisors.
Article Summary
In what is being called a “bail-in,” the finance ministers of the 17-nation Eurozone agreed to step in to assist the banking system in the nation of Cyprus. With this arrangement, the banks receive an infusion of capital, but depositors are being changed a special bank levy of up to 10% on deposit accounts. Like in the United States, Cyprus does have deposit insurance which guarantees deposits up to a certain level, but the size of the debt owed by the Cypriot banks was so large that agreeing to the special bank levy and ignoring the deposit insurance seemed necessary to get support from the European Union. Some analysts have also stated that the levy may have been needed to prevent bank runs on foreign-owned accounts, which have been estimated to make up one-third of the total deposits in Cypriot banks.
40) Refer to the Article Summary. In 2013, the European Union agreed to essentially bail out the banks in the nation of Cyprus, but in doing so also included what is being called a special bank levy which was changed to bank depositors. This levy may have been needed to prevent bank runs, which are situations in which
A) a majority of the shareholders in a bank decide to sell off all their shares of stock.
B) many depositors simultaneously decide to withdraw money from a bank.
C) a majority of the bank’s loans go into default all at once.
D) a bank stops paying interest on all of its interest-bearing accounts.
