Archives
Finance Chapter 1 1 A bank lending depositors’ money to a local business and a pension fund investing contributions in shares of
Copyright © 2012 Pearson Education, Inc. Money, Banking, and the Financial System (Hubbard/O’Brien) Chapter 1 Introducing Money and the Financial System 1.1 Key Components of the Financial System 1) The financial system is primarily a means by which A) borrowers […]
Finance Chapter 10 1 Which of the following helps explain why depositors sometimes put their funds in demand deposits rather than NOW accounts
Copyright © 2012 Pearson Education, Inc. Money, Banking, and the Financial System (Hubbard/O’Brien) Chapter 10 The Economics of Banking 10.1 The Basics of Commercial Banking: The Bank Balance Sheet 1) A balance sheet A) is a statement showing an individual’s […]
Finance Chapter 10 2 The difference between the interest a bank earns on loans and securities and the interest paid on deposits and debt divided by the total
Copyright © 2012 Pearson Education, Inc. 11) The difference between the interest a bank earns on loans and securities and the interest paid on deposits and debt divided by the total value of its assets is called A) interest spread. […]
Finance Chapter 11 1 The development of new financial securities or investment strategies using sophisticated models is known as
Copyright © 2012 Pearson Education, Inc. Money, Banking, and the Financial System (Hubbard/O’Brien) Chapter 11 Investment Banks, Mutual Funds, Hedge Funds, and the Shadow Banking System 11.1 Investment Banking 1) Investment banks A) lease machinery and equipment to business firms. […]
Finance Chapter 12 1 Research by Reinhart and Rogoff indicate that most of the increase in national debt as a result of a financial crisis is due to
Copyright © 2012 Pearson Education, Inc. Money, Banking, and the Financial System (Hubbard/O’Brien) Chapter 12 Financial Crises and Financial Regulation 12.1 The Origins of Financial Crises 1) Congress created the Federal Reserve System A) to serve as a lender of […]
Finance Chapter 13 1 Why has the Federal Reserve chairman often been called the second most important person in the nation
Copyright © 2012 Pearson Education, Inc. Money, Banking, and the Financial System (Hubbard/O’Brien) Chapter 13 The Federal Reserve and Central Banking 13.1 The Structure of the Federal Reserve System 1) In January 2006, President Bush appointed which of the following […]
Finance Chapter 13 2 What is included in the public statement released by the FOMC following the conclusion of its meeting
Copyright © 2012 Pearson Education, Inc. 44) The Banking Acts of 1933 and 1935 A) established the Federal Reserve System. B) increased central control of the Federal Reserve System. C) eliminated the authority of the Board of Governors to set […]
Finance Chapter 14 1 Although open market operations and discount loans both change the monetary base, the Fed has
Copyright © 2012 Pearson Education, Inc. Money, Banking, and the Financial System (Hubbard/O’Brien) Chapter 14 The Federal Reserve‘s Balance Sheet and the Money Supply Process 14.1 The Federal Reserve’s Balance Sheet and the Monetary Base 1) The monetary base is […]
Finance Chapter 14 2 What impact did this have on the money multiplier? How would the Fed change the monetary base if it wanted to maintain a stable money supply
Copyright © 2012 Pearson Education, Inc. 40) Suppose the Fed makes a $5 million discount loan to a bank. Illustrate how this affects the balance sheets of the Fed and the banking system. 12 Answer: The Fed’s assets increase as […]
Finance Chapter 15 1 If John Smith is unemployed while searching for a job in California, economists would consider him to be
Copyright © 2012 Pearson Education, Inc. Money, Banking, and the Financial System (Hubbard/O’Brien) Chapter 15 Monetary Policy 15.1 The Goals of Monetary Policy 1) Which of the following is NOT considered to be a goal of monetary policy? A) fair […]
Finance Chapter 15 2 Temporary, short-term discount loans to banks in areas in which agriculture and tourism are important are known as
Copyright © 2012 Pearson Education, Inc. 18) A Federal Reserve repurchase agreement involves A) an agreement by a bank to repay a discount loan on a specific day. B) an agreement by a dealer to buy back securities she has […]
Finance Chapter 16 1 When the Fed allows the monetary base to respond to the purchase or sale of domestic currency in the foreign exchange market
Copyright © 2012 Pearson Education, Inc. Money, Banking, and the Financial System (Hubbard/O’Brien) Chapter 16 The International Financial System and Monetary Policy 16.1 Foreign Exchange Intervention and the Monetary Base 1) International financial transactions are most likely to affect the […]
Finance Chapter 16 2 The gold standard probably made the Great Depression more severe in the United States because
Copyright © 2012 Pearson Education, Inc. 2) The current account balance plus the financial account balance A) equals the trade balance. B) equals the net outflow of currency from the domestic economy. C) will be negative during economic expansions and […]
Finance Chapter 17 1 According to the new classical approach to the aggregate supply curve, the aggregate supply curve slopes upward because
Copyright © 2012 Pearson Education, Inc. Money, Banking, and the Financial System (Hubbard/O’Brien) Chapter 17 Monetary Theory I: The Aggregate Demand and Aggregate Supply Model 17.1 The Aggregate Demand Curve 1) Which of the following is NOT included in aggregate […]
Finance Chapter 17 2 Make use of the misperceptions theory to explain why the short-run aggregate supply curve is upward sloping
Copyright © 2012 Pearson Education, Inc. 32) Which of the following is most likely to have an impact on the growth of productivity? A) a decrease in the price level B) an increase in government regulation of workplace safety C) […]
Finance Chapter 18 1 The series of induced changes in consumption spending that result from an initial change in autonomous expenditure is called the
Copyright © 2012 Pearson Education, Inc. Money, Banking, and the Financial System (Hubbard/O’Brien) Chapter 18 Monetary Theory II: The IS-MP Model 18.1 The IS Curve 1) If AE > Y, which of the following will NOT occur? A) inventories will […]
Finance Chapter 2 1 Andy has a Alex Rodriguez baseball card and would like to trade it to Danny for Danny’s Albert Pujols card
Copyright © 2012 Pearson Education, Inc. Money, Banking, and the Financial System (Hubbard/O’Brien) Chapter 2 Money and the Payments System 2.1 Do We Need Money? 1) An important reason why economies at an early stage of development tend to operate […]
Finance Chapter 2 2 According to the equation of exchange, how can national income grow even though the amount of money does not
Copyright © 2012 Pearson Education, Inc. 4) Which of the following is an example of fiat money? A) A cowry shell used as money on a South Pacific island. B) A gold coin used as money in nineteenth century England. […]
Finance Chapter 3 1 What is the yield to maturity on a simple loan that requires payment of $500 plus $30 in interest one year from now
Copyright © 2012 Pearson Education, Inc. Money, Banking, and the Financial System (Hubbard/O’Brien) Chapter 3 Interest Rates and Rates of Return 3.1 The Interest Rate, Present Value, and Future Value 1) Suppose Matt’s New Cars issues a discount bond with […]
Finance Chapter 3 2 For bonds issued at the same point in time, which of the following is likely to have the highest coupon
Copyright © 2012 Pearson Education, Inc. 6) A one-year discount bond with a par value of $5000 sold today, at issuance, for $4750 has a yield to maturity of A) 5.00%. B) 5.26%. C) 2.50%. D) 9.75%. Answer: B Diff: […]
Finance Chapter 4 1 As wealth decreases, which of the following is likely to account for a larger fraction of a saver’s portfolio
Copyright © 2012 Pearson Education, Inc. Money, Banking, and the Financial System (Hubbard/O’Brien) Chapter 4 Determining Interest Rates 4.1 How to Build an Investment Portfolio 1) Investors value liquidity in an asset because A) liquid assets tend to have high […]
Finance Chapter 4 2 Make use of a graph of the bond market to show how this affected the price of mortgage-backed securities
Copyright © 2012 Pearson Education, Inc. 33) Studies by economists suggest that A) households do not increase their saving as the government’s dissaving increases. B) households increase their saving, but not by the full amount of an increase in government […]
Finance Chapter 5 1 Investors often pay professional analysts to gather and monitor information on the creditworthiness of borrowers because
Copyright © 2012 Pearson Education, Inc. Money, Banking, and the Financial System (Hubbard/O’Brien) Chapter 5 The Risk Structure and Term Structure of Interest Rates 5.1 The Risk Structure of Interest Rates 1) The risk structure of interest rates refers to […]
Finance Chapter 5 2 global investors began to regain confidence in the financial system and reversed the flight to safety that had taken place during the depths
Copyright © 2012 Pearson Education, Inc. 47) Which bond would someone in a 35% tax bracket choose to buy: a municipal bond with an interest rate of 7% or a corporate bond with an interest rate of 10%? Answer: The […]
Finance Chapter 6 1 According to the Gordon-Growth model, which of the following can cause the value of a stock to decline
Copyright © 2012 Pearson Education, Inc. Money, Banking, and the Financial System (Hubbard/O’Brien) Chapter 6 The Stock Market, Information, and Financial Market Efficiency 6.1 Stocks and the Stock Market 1) Limited liability can best be defined as the legal provision […]
Finance Chapter 6 2 According to the efficient markets hypothesis, who is most likely to benefit from frequently moving funds from one asset to another
Copyright © 2012 Pearson Education, Inc. 15) In an efficient market with rational expectations, the actual price of an asset A) will equal its expected price. B) will often be below its expected price. C) will often be above its […]
Finance Chapter 7 1 Suppose you are a manager for a company that produces grape jelly. Which of the following is the best way for you to reduce your risk
Copyright © 2012 Pearson Education, Inc. Money, Banking, and the Financial System (Hubbard/O’Brien) Chapter 7 Derivatives and Derivative Markets 7.1 Derivatives, Hedging, and Speculating 1) In derivative markets, trade takes place in A) assets such as bonds or common stock […]
Finance Chapter 7 2 If it chooses to hedge against future changes in fuel prices, what positions (long or short) will it take in the spot and futures markets
Copyright © 2012 Pearson Education, Inc. 29) A speculator who believes strongly that interest rates will rise would be likely to A) buy futures contracts on Treasury bills. B) sell futures contracts on Treasury bills. C) buy Treasury bonds in […]
Finance Chapter 8 1 Speculators who think the euro is likely to decline over the next year can take all of the following actions EXCEPT
Copyright © 2012 Pearson Education, Inc. Money, Banking, and the Financial System (Hubbard/O’Brien) Chapter 8 The Market for Foreign Exchange 8.1 Exchange Rates and Trade 1) About what percentage of the goods and services purchased by U.S. consumers, businesses, and […]
Finance Chapter 8 2 Though useful, purchasing power parity does not completely explain long-run movements in exchange rates due to
Copyright © 2012 Pearson Education, Inc. 14) The law of one price does not hold for A) agricultural goods. B) tradeable goods. C) differentiated goods. D) goods whose production causes pollution. Answer: C Diff: 2 Page Ref: 234 Topic: Law […]
Finance Chapter 9 1 What are the various ways that financial intermediaries can take advantage of economies of scale
Copyright © 2012 Pearson Education, Inc. Money, Banking, and the Financial System (Hubbard/O’Brien) Chapter 9 Transactions Costs, Asymmetric Information, and the Structure of the Financial System 9.1 Obstacles to Matching Savers and Borrowers 1) Transactions costs are A) zero in […]
Finance Chapter 9 2 Suppose one person buys a copy of Consumer Reports and gives away free copies to all who request one. This is an example of
Copyright © 2012 Pearson Education, Inc. 29) Private information-collection firms fail to eliminate the adverse selection problem because A) the law does not allow them to disclose private information about the creditworthiness of firms. B) they do not monitor borrowers […]