the economics of money, banking, and financial markets

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21. 
    

    If the CDIC 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
    Answer: D
    Diff: 2 Type: MC Page Ref: 213 - 214
    Skill: Recall
    Objective List: 10.1 Explain bank regulation in the context of asymmetric information problems

    
    


22. 
    

    Acquiring information on a bank's activities in order to determine a bank's risk is difficult for
    depositors and is another argument for government ____.
    A) regulation
    B) ownership
    C) recall
    D) forbearance
    Answer: A
    Diff: 2 Type: MC Page Ref: 214
    Skill: Recall
    Objective List: 10.1 Explain bank regulation in the context of asymmetric information problems

    
    


23. 
    

    The result of the too-big-to-fail policy is that ____ banks will take on ____ risks,
    making bank failures more likely.
    A) small; fewer
    B) small; greater
    C) big; fewer
    D) big; greater
    Answer: D
    Diff: 1 Type: MC Page Ref: 213 - 214
    Skill: Recall
    Objective List: 10.1 Explain bank regulation in the context of asymmetric information problems

    
    


24. 
    

    A problem with the too-big-to-fail policy is that it ____ the incentives for ____ by
    big banks.
    A) increases; moral hazard
    B) decreases; moral hazard
    C) decreases; adverse selection
    D) increases; adverse selection
    Answer: A
    Diff: 1 Type: MC Page Ref: 213 - 214
    Skill: Recall
    Objective List: 10.1 Explain bank regulation in the context of asymmetric information problems