Why Might Monetary Policy Authorities Be Concerned When Non-Bank Financial

question 174

Multiple Choice

Why might monetary policy authorities be concerned when non-bank financial intermediaries account for a growing share of an economy's financial assets?

• A) Monetary policy authorities fear that this situation might erode the value of the U.S. dollar in foreign exchange markets.
• B) Monetary policy authorities are concerned that this situation might promote income inequality since high income individuals are more likely to use the services of non-bank financial intermediaries, compared to low-income individuals.
• C) Monetary policy authorities fear that this situation might lessen their ability to control money supply because non-bank financial intermediaries are not as heavily regulated as banks.
• D) It will be more difficult for monetary policy authorities to monitor those assets that are most closely related to the level of economic activity.

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Definitions:

Internal Control

Procedures and policies implemented by a company to ensure the integrity of financial and accounting information, promote accountability, and prevent fraud.

Debt Investments

Investments made in securities that require the issuer to repay the principal along with interest.

Cash Equivalents

Short-term, highly liquid investments that are readily convertible to known amounts of cash and close to their maturity.

Internal Audits

Evaluations conducted internally to assess the effectiveness of a company's operations, controls, and compliance with regulations and policies.