The Economics Of Money Banking And Financial Markets 6th Canadian Edition By Mishkin – Test Bank

Overview

Chapter 11

Banking Industry: Structure and Competition

11.1 Historical Development of the Canadian Banking System

1) The modern Canadian banking system began with ________.
A) the Chartered Bank of Upper Canada in 1821
B) the Bank of Montreal in 1817
C) the Bank of Lower Canada in 1801
D) the Bank of New Brunswick in 1820
Answer: B
Diff: 1 Type: MC
Skill: Recall
Objective: 11.1 Recognize the key features of the Canadian banking system and the historical context of the implementation of these features

2) The government institution that has responsibility for the amount of money and credit supplied in the economy as a whole is the ________.
A) central bank
B) commercial bank
C) bank of settlement
D) monetary fund
Answer: A
Diff: 1 Type: MC
Skill: Recall
Objective: 11.1 Recognize the key features of the Canadian banking system and the historical context of the implementation of these features

3) Currency circulated by banks that could be redeemed for gold was called ________.
A) junk bonds
B) banknotes
C) gold bills
D) state money
Answer: B
Diff: 1 Type: MC
Skill: Recall
Objective: 11.1 Recognize the key features of the Canadian banking system and the historical context of the implementation of these features

4) The regulatory system that permitted the organization of a bank by any group that met certain criteria is known as a ________.
A) bilateral regulatory system
B) tiered regulatory system
C) two-tiered regulatory system
D) free banking system
Answer: D
Diff: 1
Skill: Recall
Objective: 11.1 Recognize the key features of the Canadian banking system and the historical context of the implementation of these features

5) The U.S. banking system is considered to be a dual system because ________.
A) banks offer both chequing and savings accounts
B) it actually includes both banks and thrift institutions
C) it is regulated by both state and federal governments
D) it was established before the Civil War, requiring separate regulatory bodies for the North and South
Answer: C
Diff: 2 Type: MC
Skill: Recall
Objective: 11.1 Recognize the key features of the Canadian banking system and the historical context of the implementation of these features

6) Which bank became the government’s fiscal agent in 1864?
A) The Bank of Canada
B) The Chartered Bank of Upper Canada
C) The Bank of Montreal
D) The US Treasury
Answer: C
Diff: 1 Type: MC
Skill: Recall
Objective: 11.1 Recognize the key features of the Canadian banking system and the historical context of the implementation of these features

7) The Finance Act of 1914 required that ________.
A) local banks be subject to the same regulations as national banks
B) national banks establish branches in large cities
C) the Department of Finance to act as a lender of last resort
D) the Bank of Canada to act as a lender of last resort
Answer: C
Diff: 2 Type: MC
Skill: Recall
Objective: 11.1 Recognize the key features of the Canadian banking system and the historical context of the implementation of these features

8) Explain how the dual banking system arose in the United States.
Answer: The modern US system because with all commercial banks being chartered by the state in which they operated. However lax banking laws led to bank failures. To eliminate the abuses that led to the failures, federally charged banks were created under the National Bank Act of 1863. As a result today, the US has dual banking system in which banks are supervised by either the state or the federal government.
Diff: 2
Skill: Recall
Objective: 11.1 Recognize the key features of the Canadian banking system and the historical context of the implementation of these features

11.2 Examine how financial innovation led to the growth of the shadow banking system

1) Financial innovations occur because of financial institutions search for ________.
A) profits
B) fame
C) stability
D) recognition
Answer: A
Diff: 1 Type: MC
Skill: Recall
Objective: 11.2 Examine how financial innovation led to the growth of the shadow banking system

2) ________ is the process of researching and developing profitable new products and services by financial institutions.
A) Financial engineering
B) Financial manipulation
C) Customer manipulation
D) Customer engineering
Answer: A
Diff: 1
Skill: Recall
Objective: 11.2 Examine how financial innovation led to the growth of the shadow banking system

3) The most significant change in the economic environment that changed the demand for financial products in recent years has been ________.
A) the aging of the baby-boomer generation
B) the dramatic increase in the volatility of interest rates
C) the dramatic increase in competition from foreign banks
D) the deregulation of financial institutions
Answer: B
Diff: 2 Type: MC
Skill: Recall
Objective: 11.2 Examine how financial innovation led to the growth of the shadow banking system