Question 1

Prudential supervision is,in essence,the monitoring of ________.

Accepted Answer

The answer of Prudential supervision is,in essence,the monitoring of ________.
...

Question 2

Prudential regulation ________.

Accepted Answer

Prudential regulation involves setting rules and standards for financial institutions to ensure their safety and stability. This helps to discourage risky behaviors and encourage responsible banking practices. Customers are more likely to trust and do business with banks that follow these regulations, while those that engage in excessively risky behaviors may lose customers.

Question 3

How might government-directed credit help poor entrepreneurs to escape the "tyranny of collateral"? What side-effects might undermine the effectiveness of such a program?

Accepted Answer

The answer of How might government-directed credit help poor entrepreneurs...

Question 4

Overall,government intervention in the financial system ________.

Accepted Answer

Government intervention in the financial system is considered essential to prevent market failures and stabilizing the economy. However, it is not always perfect and may result in unintended consequences. Therefore, option A, "is both essential and imperfect" is the best choice.

Question 5

When is a firm more likely to engage in excessively risky behaviors,when business is well,or when it is facing financial distress?

Accepted Answer

The answer of When is a firm more likely to...

Question 6

Financial deepening is synonymous with ________.

Accepted Answer

Financial deepening refers to the process of financial development that leads to an increase in the level and scope of financial services in an economy. It includes the expansion and sophistication of financial markets, institutions, and instruments, as well as the enhancement of financial intermediation and access to finance. Issuing equities (A), borrowing funds from world capital markets (C), and holding a well-diversified portfolio (D) are all aspects of financial activity but do not necessarily imply financial deepening.

Question 7

The U.S.Securities and Exchange Commission ________.

Accepted Answer

The U.S. Securities and Exchange Commission (SEC) is responsible for promoting transparency in direct finance transactions. It oversees securities markets and ensures that companies provide full disclosure of information to investors. It does not oversee lending policies at commercial banks, direct credit to underserved segments of the financial sector, or advise households and businesses on the best companies in which to invest.

Question 8

What problem is addressed by a government safety net for the banking system? What problem is caused by the safety net?

Accepted Answer

The answer of What problem is addressed by a government...

Question 9

Over the past two decades,the saving rate in China has been approximately ________%.

Accepted Answer

The saving rate in China has been approximately 40% over the past two decades. This means that on average, people in China save 40% of their income, which is a very high rate compared to other countries.

Question 10

An inherent weakness of ________ is the absence of the profit incentive.

Accepted Answer

Government-directed credit is a type of credit that is monopolized by the government in order to promote certain social or economic goals. However, because there is no profit incentive, there is less of a drive to ensure that loans are given to those who are most likely to use them effectively and pay them back. This can lead to a higher default rate, which can be detrimental to the overall health of the economy.

Question 11

An example of a government-based approach to improve the quality of information in financial markets is ________.

Accepted Answer

Mandatory disclosures require companies to disclose relevant and accurate financial information to the public, which helps to improve the quality of information in financial markets. This is a government-based approach because it is enforced through regulations and laws. Financial news networks (A) provide information but do not necessarily improve the quality of that information. Government-directed credit (C) and government safety nets (D) are not directly related to improving the quality of information in financial markets.

Question 12

An important consequence of financial deepening is ________.

Accepted Answer

The answer of An important consequence of financial deepening is...

Question 13

Prudential regulation ________.

Accepted Answer

Prudential regulation is necessitated by the government's safety net for the banking system. This safety net includes deposit insurance and access to the central bank's discount window. In exchange for this protection, banks are subject to prudential regulations that aim to ensure their financial soundness and stability. It includes regulations related to capital adequacy, liquidity requirements, risk management, and asset quality. This helps protect depositors and prevent financial crises.

Question 14

The collapse of Enron Corporation is a reminder of the importance of ________.

Accepted Answer

The collapse of Enron Corporation highlights the need for transparency in corporate practices and financial reporting. Enron's fraudulent accounting practices and lack of transparency led to its downfall and the loss of billions of dollars for its investors. Therefore, transparency is of utmost importance to prevent such scandals in the future.

Question 15

A key objective of a government safety net for the banking system is to ensure ________.

Accepted Answer

The main objective of a government safety net for the banking system is to ensure that depositors have confidence in the safety of their money in the bank. This is important for financial stability as well as to prevent bank runs. While promoting access to bank services and an efficient allocation of credit may be desirable outcomes, they are not the primary objectives of a safety net for the banking system. Bank profitability is also not the primary objective, although a healthy banking system is important for overall economic growth.

Question 16

Economic growth in China ________.

Accepted Answer

China's economic growth has occurred despite limited domestic financial development. While China has made significant strides in financial development, particularly in recent years, its economic growth was initially driven by other factors such as a large supply of cheap labor and government investment in infrastructure. Additionally, China's domestic saving rate is relatively high, which has helped to support investment and economic growth.

Question 17

Per capita income in China is approximately ________% of the U.S.level.

Accepted Answer

The answer of Per capita income in China is approximately...

Question 18

Information asymmetries may make it difficult for important sectors of the economy to receive the funding they need to keep the economy growing.In many economies,this problem is addressed with ________.

Accepted Answer

Government-directed credit involves the government directing funds towards sectors of the economy that may be struggling to access funding due to information asymmetries. This can help to promote economic growth and stability by ensuring that important sectors receive the support they need. Prudential regulation and government-backed deposit insurance can also play a role in promoting financial stability, but they are not directly related to addressing information asymmetries in funding allocation. Adverse selection is a related concept that refers to the tendency for those with the greatest need for funding to be the ones least able to access it, but it does not address how to overcome information asymmetries in funding allocation.

Question 19

The collapse of one bank might lead easily to the failure of several others,because ________.

Accepted Answer

The collapse of one bank can lead to a loss of confidence among depositors in other banks, causing them to withdraw their funds, a phenomenon known as a bank run. This loss of confidence is not about depositors trusting each other but rather their collective trust in the banking system's stability.

Question 20

Evidence suggests that financial deepening is of greatest benefit to ________.

Accepted Answer

Financial deepening, or the increase in availability of financial services and products, is most beneficial to industries that are highly dependent on external sources of funds. This is because financial deepening provides greater access to financing, which can be especially important for industries that require large amounts of capital to operate or expand. Family-owned enterprises and established firms may also benefit from financial deepening, but the evidence suggests that industries dependent on external funding see the most significant improvements. Child workers are not relevant to this topic.

Quiz 14: The Financial System and Economic Growth

Prudential supervision is,in essence,the monitoring of ________.

Prudential regulation ________.

How might government-directed credit help poor entrepreneurs to escape the "tyranny of collateral"? What side-effects might undermine the effectiveness of such a program?

Overall,government intervention in the financial system ________.

When is a firm more likely to engage in excessively risky behaviors,when business is well,or when it is facing financial distress?

Financial deepening is synonymous with ________.

The U.S.Securities and Exchange Commission ________.

What problem is addressed by a government safety net for the banking system? What problem is caused by the safety net?

Over the past two decades,the saving rate in China has been approximately ________%.

An inherent weakness of ________ is the absence of the profit incentive.

An example of a government-based approach to improve the quality of information in financial markets is ________.

An important consequence of financial deepening is ________.

Prudential regulation ________.

The collapse of Enron Corporation is a reminder of the importance of ________.

A key objective of a government safety net for the banking system is to ensure ________.

Economic growth in China ________.

Per capita income in China is approximately ________% of the U.S.level.

Information asymmetries may make it difficult for important sectors of the economy to receive the funding they need to keep the economy growing.In many economies,this problem is addressed with ________.

The collapse of one bank might lead easily to the failure of several others,because ________.

Evidence suggests that financial deepening is of greatest benefit to ________.