Business And Its Environment 7th Edition By Baron – Test Bank

Chapter Eleven:
Financial Markets and Their Regulation

True/False Questions:

1) Savings and investments do not involve risks.
Answer: False
Page reference: 291
Difficulty: Easy
AACSB:
Learning Outcome: Identify the fundamental concepts and issues of international business and management

2) Depository institutions such as banks are required to maintain a fractional reserve requirement, which allows the formal banking system to lend a multiple of the deposits held.
Answer: True
Page reference: 291
Difficulty: Easy
AACSB:
Learning Outcome: Identify the fundamental concepts and issues of international business and management

3) If a depositor wants to withdraw her funds, the bank is not obliged to replace the funds with other deposits.
Answer: False
Page reference: 292
Difficulty: Easy
AACSB:
Learning Outcome: Identify the fundamental concepts and issues of international business and management

4) Securitization involves pooling contractual debt obligations and issuing new securities backed by those obligations.
Answer: True
Page reference: 292
Difficulty: Easy
AACSB:
Learning Outcome: Identify the fundamental concepts and issues of international business and management

5) Credit card borrowings and mortgage loans are the largest securitization categories.
Answer: True
Page reference: 292
Difficulty: Easy
AACSB:
Learning Outcome: Identify the fundamental concepts and issues of international business and management

6) When a bank buys mortgage loans and issues new securities, it engineers the new securities so as to ensure that it alone benefits from the financial gain.
Answer: False
Page reference: 293
Difficulty: Moderate
AACSB:
Learning Outcome: Identify the fundamental concepts and issues of international business and management

7) The Federal Reserve is governed by a seven-member board of governors.
Answer: True
Page reference: 295
Difficulty: Easy
AACSB:
Learning Outcome: Identify the fundamental concepts and issues of international business and management

8) The Federal Reserve Bank of New York serves as overseer of banks and managed the bailout of banks during the financial crisis.
Answer: True
Page reference: 295
Difficulty: Easy
AACSB:
Learning Outcome: Identify the fundamental concepts and issues of international business and management

9) The Senate’s confirmation is not required for the appointment of the members of the board of governors of the Federal Reserve.
Answer: False
Page reference: 295
Difficulty: Easy
AACSB:
Learning Outcome: Identify the fundamental concepts and issues of international business and management

10) The Federal Reserve has rule-making authority over the practices of credit card companies.
Answer: True
Page reference: 295
Difficulty: Easy
AACSB: