part 10 banking and the supervision of financial
Factors Creating Financial Entrée
1) A major interruption in financial markets characterized by razor-sharp declines in asset prices and organization failures is named a A) financial crisis.
2) A financial crisis occurs when an increase in uneven information from a disruption in the financial system A) causes serious adverse collection and meaningful hazard problems that make economical markets not capable of channeling funds efficiently.
3) A serious consequence of a financial meltdown is
A) a contraction in economic activity.
4) A sharp decline in the stock market implies that the ________ of corporations has gone down making loan providers ________ happy to lend.
A) net worth; fewer
5) A clear , crisp stock market fall increases meaningful hazard offers A) as borrowing firms have significantly less to lose if their investments are unsuccessful.
6) A great unanticipated drop in the selling price level increases the burden of personal debt on credit firms although does not enhance the real worth of asking for firms’ assets. The result is A) that net worth in true terms diminishes.
7) If perhaps debt contracts are denominated in foreign currency, then an unanticipated drop in the worth of the household currency results in A) a decline in a firm’s fortune.
8) Factors that lead to deteriorating conditions in financial markets include: C) the deterioration in banks’ stability sheets.
9) In a traditional bank panic, the source of contamination is the
D) uneven information difficulty.
10) A bank stress can lead to a severe anxiété in economic activity because of D) a decline in lending pertaining to productive expenditure.
11) Furthermore to having a direct impact on increasing adverse selection problems, boosts in rates of interest also enhance financial entrée by ________ firms’ and households’ interest rates, thereby ________ their income. B) increasing; decreasing
12) In emerging economies, government fiscal imbalances may cause fears of B) standard on authorities debt.
9. 2 Characteristics of Previous U. S. Financial Entrée
1) When financial institutions go on a lending spree and increase their financing at an instant pace they are participating in a A) credit rating boom.
2) When the worth of loans begins to drop, the net really worth of financial institutions falls triggering them to cut back on lending within a process referred to as A) deleveraging.
3) Once financial intermediaries deleverage, companies cannot account investment opportunities resulting in A) a contraction of financial activity.
4) A credit rating boom can lead to a(n) ________ such as all of us saw inside the tech stock exchange in the late 1990s. A) asset-price bubble
5) Many nineteenth century U. S. financial crises were started by
A) spikes in interest rates.
6) Most U. S. economic crises have got started during periods of ________ either after the begin of a economic depression or a stock market crash. A) high uncertainty
7) In the event that uncertainty regarding banks’ wellness causes depositors to begin to withdraw their very own funds by banks, the nation experiences a(n) A) financial crisis.
8) Debt deflation occurs once
A) an economic economic downturn causes the price level to fall and a deterioration in firms’ net worth as a result of increased responsibility of indebtedness.
9) A substantial decline in the aggregate selling price level that reduces firms’ net worth might stall a recovery from a recession. This method is called A) debt decrease.
10) A possible sequence intended for the three levels of a financial crisis in the U. S. could possibly be ________ leads to ________ brings about ________. A) asset cost declines; financial crises; unexpected decline in price level 11) The economy stabilizes quickly coming from most recessions, but the increase in adverse selection and ethical hazard problems in the credit markets caused by ________ resulted in the serious economic compression known as The 1930s. A) debts deflation
9. 3 The Subprime Financial disaster of 2007-2008
1) Monetary innovations that emerged following 2000 in the mortgage marketplaces included all of the following apart from A) adjustable-rate mortgages.
2) ________ is actually a process of bundling together smaller sized loans (like mortgages) in standard financial debt securities. A) Securitization
3) A ________ pays out funds flows by subprime mortgage-backed securities in various tranches, with the highest-rated tranch paying out initially, while decrease ones paid out less if there were deficits on the mortgage-backed securities. A) Collateralized financial debt obligation (CDO)
4) The expansion of the subprime mortgage market led to
A) increased demand for houses and helped fuel the boom in housing rates.
5) The originate-to-distribute business model has a serious ________ problem since the mortgage broker has no profit to make sure that the mortgagee is a good credit risk. A) principal-agent
6) Lenders often would not make a very good effort to judge whether the lender could repay the loan. This created a A) severe adverse selection problem.
7) Company problems inside the subprime home loan market included all of the following except A) homeowners could refinance their particular houses with larger financial loans when all their homes valued in worth.
8) When ever housing prices began to fall after their particular peak 5 years ago, many subprime borrowers found that their very own mortgages had been “underwater. This resulted in A) the value of the house chop down below the quantity of the mortgage loan.
9) Even though the subprime mortgage market issue began in america, the first indication in the seriousness of the crisis began in A) Europe.
10) Like a CDO, a structured investment vehicle takes care of cash goes from private pools of resources, however , rather than long-term debts the organised investment vehicle backs A) commercial paper.
11) Which usually investment financial institution filed intended for bankruptcy about September 12-15, 2008 making it the largest individual bankruptcy filing in U. T. history? A) Lehman Brothers
12) The greatest bank failing in U. S. background was ________ which entered receivership by the FDIC about September twenty-five, 2008. A) Washington Mutual
13) Credit market problems of adverse variety and meaningful hazard elevated as a result of each of the following apart from A) increase in housing market prices.
14) The Economic Restoration Act of 2008 had several procedures to promote recovery from the subprime financial crisis. These provisions included all of the following except A) guaranteed all the deposits of the commercial banking institutions.
15) The us government bailout of troubled financial institutions occurred in the
U. S. and many other countries. Which in turn country noticed their financial system failure requiring the federal government to take over its three largest banks? A) Iceland
being unfaithful. 4 Characteristics of Financial Crises in Appearing Market Financial systems
1) Economical crises generally develop along two fundamental paths: A) mismanagement of financial liberalization/globalization and severe fiscal imbalances.
2) In appearing market countries, the destruction in bank’s balance linens has more ________ effects in lending and economic activity than in advanced countries. A) negative
3) The mismanagement of financial liberalization in rising market countries can be recognized as a serious ________. A) principal/agent issue
4) Elements likely to result in a financial crisis in emerging marketplace countries consist of A) fiscal imbalances.
5) The two essential factors that trigger risky attacks on emerging market currencies are A) degeneration in financial institution balance bedding and serious fiscal imbalances.
6) Serious fiscal unbalances can directly trigger a currency catastrophe since A) investors dread that the federal government may not be in a position to pay back the debt and so begin to sell domestic currency.
7) In rising market countries, many organizations have personal debt denominated in foreign currency such as the dollar or perhaps yen. A depreciation of the domestic foreign currency A) results in increases in the firm’s indebtedness in home currency conditions, even though the benefit of their assets remains the same. 8) A sharp depreciation of the domestic money after a foreign currency crisis leads to A) higher inflation.
9) The key factor leading to the financial downturn in South america and the East
Parts of asia was A) a damage in banks’ balance bedding because of elevating loan loss.
10) Elements that resulted in worsening conditions in Mexico’s 1994-1995 economic markets contain C) increased uncertainty via political shock absorbers.
11) Factors that triggered worsening economical market circumstances in East Asia in 1997-1998 contain A) weak supervision simply by bank government bodies.
12) Factors that led to worsening circumstances in Mexico’s 1994-1995 economic markets, yet did not cause worsening economic market conditions in East Asia in 1997-1998 include A) rise in interest rates in another country.
13) Argentina’s financial crisis was due to
C) financial imbalances.
14) A feature of debt markets in emerging-market countries is the fact debt agreements are typically ________. A) extremely short term
15) The monetary hardship as a result of a financial entrée is extreme, however , additionally, there are social implications such as A) increased crime.
16) Before the South Korean financial crisis, sales by the top five chaebols (family-owned conglomerates) had been A) nearly 50% of GDP.
17) The chaebols encouraged the Korean government to open up Korean financial markets to foreign capital. The Korean government reacted by A) allowing unlimited short-term international borrowing although maintained volume restrictions on long-term foreign borrowing by financial institutions.
18) At the time of the South Korean financial crisis, the us government allowed many chaebol possessed finance companies to convert to product owner banks. Finance companies ________ permitted to borrow overseas and service provider banks ________. A) were not; could get abroad
19) At the time of the South Korean financial crisis, the merchant banking institutions were A) almost practically unregulated.