The Basel III framework proposes:

	a.	using the gap ratio to set the capital ratio.
	b.	relying on the rating agencies to assess the risk of bank assets.
	c.	increased capital requirements and liquidity requirements for banks.
	d.	lower capital requirements for banks to enable them to generate higher earnings to make up for their losses during the credit crisis.

Lehman Brothers commonly used _________ as collateral when borrowing short-term funds, but its funding was cut off because prospective creditors questioned the quality of the collateral.

	a.	Treasury securities
	b.	commercial paper
	c.	mortgages
	d.	its stock

If U.S. interest rates suddenly become much higher than European interest rates (and if this does not cause concern about higher inflation in the United States), the U.S. demand for euros would ____, and the supply of euros to be exchanged for dollars would ____, other factors held constant.

	a.	increase; increase
	b.	decrease; increase
	c.	decrease; decrease
	d.	increase; decrease