Question

1. The U.S. banks have been facing greater competition from the Eurocurrency market because of the establishment of international banking facilities.

-T or F

2. If the reserve requirement is 33.3 percent, what is the approximate value of deposit expansion multiplier?

-0.33

-0.667

-3

-1.5

-3.33

3.People in developing countries may want to participate in a rotating savings and credit association (ROSCAS) because:

-most governments encourage it.

-such associations allow all but the last member to receive funds faster than they could save on their own.

-such associations promise a guaranteed return unlike other banking institutions.

-such associations allow participating individuals to invest their savings abroad.

-such associations are part of the black market and they offer attractive returns.

Answer 1

1) True

(There was increase in competition liberalisation process as well as the establishment of interaction banking facilities.sizable increases in the bank failures is a sign of that.)

2 )answer is 3

reseve requirement ratio = 33.3 percent= 0.333

Deposit expansion multiplier= 1/.333= 3.003

Approximate value=3

3) Such associations allow all but the last member to receive funds faster than they could save their own.

(Most of the people become a part of rotating Savings and credit associations because it allows them to save money and recieve loans quickly.They are able to meet their needs faster)

* Government doesn't encourage such groups. They also don't invest abroad and don't offer very attractive returns as if ima black market.