The result of the too-big-to-fail policy

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Reference no: EM131937249

1. The result of the "too-big-to-fail" policy is that big banks will take on __________ risks, making failures ___________ likely.

a. fewer; less

b. greater; less

c. fewer; more

d. greater; more

2. The possibility that a borrower may engage in more risky behavior after a loan has been made best describes an example of:

a. the principal-agent problem

b. securitization

c. adverse selection

d. moral hazard

e.none of the above

3. The largest single earning asset of commercial banks in the U.S. is:

a. cash

b. Treasury securities

c. deposits

d. loans

e. commercial paper

4. The primary source of bank funds today is:

a. loans

b. borrowings

c. checkable deposits

d. nontransaction deposits

5. "Bank activities that involve trading financial instruments and the generation of income from fees-all of which affect bank profits" most likely describes:

a. collateralization

b. financial intermediation

c. moral hazard

d. off-balance-sheet activities

e. market segmentation

6. Prior to the current "financial crisis" and financial markets problem period, the most recent one during which there were significant (100 or more in a single year) numbers of bank failures and that posed the threat of "systemic risk" for the economy was (roughly relative to dates):

a. 1929 - 1934

b. 1964 - 1973

c. 1984 - 1994

d. 1996 - 2001

Reference no: EM131937249

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