exam 3 key

Feb 3rd, 2012
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1) Although the FDIC was created to prevent bank failures, its existence encourages banks to A)take too much risk. B)hold too much capital. C)open too many branches. D)buy too much stock. 2) Deposit insurance has not worked well in countries with A) a weak institutional environment. B) strong supervision and regulation. C) a tradition of the rule of law. D) few opportunities for corruption. 3) The government safety net creates ________ problem because risk-loving entrepreneurs might find banking an attractive industry. A)an adverse selection B)a moral hazard C)a lemons D)a revenue 4) If the FDIC decides that a bank is too big to fail, it will use the ________ method, effectively ensuring that ________ depositors will suffer losses. A) payoff; large B) payoff; no C) purchase and assumption; large D) purchase and assumption; no 5) The result of the too-big-to-fail policy is that ________ banks will take on ________ risks, making bank failur

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