Which of the following is not a goal of financial regulation?

2.7 Regulation of the Financial System
1) Which of the following is not a goal of financial regulation?
A) Ensuring the soundness of the financial system
B) Reducing moral hazard
C) Reducing adverse selection
D) Ensuring that investors never suffer losses
Answer: D
Ques Status: Previous Edition
2) Increasing the amount of information available to investors helps to reduce the problems of
________ and ________ in the financial markets.
A) adverse selection; moral hazard
B) adverse selection; risk sharing
C) moral hazard; transactions costs
D) adverse selection; economies of scale
Answer: A
Ques Status: New
3) A goal of the Securities and Exchange Commission is to reduce problems arising from
A) competition.
B) banking panics.
C) risk.
D) asymmetric information.
Answer: D
Ques Status: Previous Edition
4) The purpose of the disclosure requirements of the Securities and Exchange Commission is to
A) increase the information available to investors.
B) prevent bank panics.
C) improve monetary control.
D) protect investors against financial losses.
Answer: A
Ques Status: Previous Edition
5) Government regulations to reduce the possibility of financial panic include all of the following
except
A) transactions costs.
B) restrictions on assets and activities.
C) disclosure.
D) deposit insurance.
Answer: A
Ques Status: New
6) Which of the following do not provide charters?
A) The Office of the Comptroller of the Currency
B) The Federal Reserve System
C) The National Credit Union Administration
D) State banking and insurance commissions
Answer: B
Ques Status: Previous Edition
7) A restriction on bank activities that was repealed in 1999 was
A) the prohibition of the payment of interest on checking deposits.
B) restrictions on credit terms.
C) minimum down payments on loans to purchase securities.
D) separation of commercial banking from the securities industries.
Answer: D
Ques Status: Revised
8) In order to reduce risk and increase the safety of financial institutions, commercial banks and
other depository institutions are prohibited from
A) owning municipal bonds.
B) making real estate loans.
C) making personal loans.
D) owning common stock.
Answer: D
Ques Status: Previous Edition
9) The primary purpose of deposit insurance is to
A) improve the flow of information to investors.
B) prevent banking panics.
C) protect bank shareholders against losses.
D) protect bank employees from unemployment.
Answer: B
Ques Status: Previous Edition
10) The agency that was created to protect depositors after the banking failures of 1930 -1933 is the
A) Federal Reserve System.
B) Federal Deposit Insurance Corporation.
C) Treasury Department.
D) Office of the Comptroller of the Currency.
Answer: B
Ques Status: Previous Edition
11) Savings and loan associations are regulated by the
A) Federal Reserve System.
B) Securities and Exchange Commission.
C) Office of the Comptroller of the Currency.
D) Office of Thrift Supervision.
Answer: D
Ques Status: Previous Edition
12) The regulatory agency that sets reserve requirements for all banks is
A) the Federal Reserve System.
B) the Federal Deposit Insurance Corporation.
C) the Office of Thrift Supervision.
D) the Securities and Exchange Commission.
Answer: A
Ques Status: New
13) Asymmetric information is a universal problem. This would suggest that financial regulations
A) in industrial countries are an unqualified failure.
B) differ significantly around the world.
C) in industrialized nations are similar.
D) are unnecessary.
Answer: C
Ques Status: Previous Edition
14) How do regulators help to ensure the soundness of financial intermediaries?
Answer: Regulators restrict who can set up a financial intermediary, conduct regular
examinations, restrict assets, and provide insurance to help ensure the soundness of
financial intermediaries.
Ques Status: Previous Edition