1. In the summer of 1920, the ratio of gold reserves to Federal ReserveNotes reached a peak of 88%.2. From June 1920 to June 1921, hundreds of both state banks and nationalbanks failed.3. Grant...

1. In the summer of 1920, the ratio of gold reserves to Federal ReserveNotes reached a peak of 88%.2. From June 1920 to June 1921, hundreds of both state banks and nationalbanks failed.3. Grant attributes part of the credit for the recovery in 1922 to businessesboosting production to replenish depleted inventories.4. During the 1920s, Great Britain suffered extended unemployment due towages not falling as much as prices fell.5. As the U.S. economy began to face the challenges following the stockmarket crash of 1929, President Hoover followed a policy of keepinggovernment spending low and encouraging prices to fall as had happenedduring the depression of 1921.6. The authors of the M&B text suggest that financiers get a bad image inpopular culture, as exhibited by Shakespeare’s “Romeo and Juliet.”7. Someone who enjoys taking risks is referred to as a “hedger.”8. External finance refers just to funds that come from outside of a firm.9. “Primary” markets are where people trade their stocks and bonds with oneanother, such as the New York Stock Exchange.10. “Capital” markets involve exchanges motivated differently than those in“money” markets.11. Investors primarily analyze the tradeoff between risk and return orbetween return and liquidity but never between risk and liquidity.12. The credit default swap involves four parties – the seller, the buyer, the issuerand the judge.13. The “public choice” model assumes that government officials work in theinterest of the public.14. According the authors of the text, deposit insurance is essentially costfree and has been successful at decreasing asymmetric informationproblems.15. Continental Illinois was the 17th largest bank in the U.S. at the time thatit failed.16. In the years leading up to its collapse, the ratio of loans to assets atContinental Illinois rose from a bit less than 60% to almost 70%, making itless exposed to default risk.17. The differential treatment of a large bank like Continental Illinois has beenreferred to as TTBF.18. The First National Bank of Keystone was located in the western portion ofNew York state. 19. The problems at the First National Bank of Keystone can be traced to arather simple clerical error.20. According to Alloway, index based credit default swaps suffer frominability to hedge against specific defaults.