External financing by ________ should be more important in developing countries than
in industrialized countries because information about private firms is more difficult to
collect in developing countries.
A) financial intermediaries
B) bonds
C) stock
D) direct lending
The total collection of pieces of property that serve to store value is a person’s
A) wealth.
B) income.
C) money.
D) credit.
All but the most primitive societies use money as a medium of exchange, implying that
A) the use of money is economically efficient.
B) barter exchange is economically efficient.
C) barter exchange cannot work outside the family.
D) inflation is not a concern.
The entry of AT&T and GM into the credit card business is an indication of
A) government’s efforts to deregulate the provision of financial services.
B) the rising profitability of credit card operations.
C) the reduction in costs of credit card operations since 1990.
D) the sale of unprofitable operations by Bank of America and Citicorp.
________ bubble is driven entirely by unrealistic optimistic expectations.
A) An irrational exuberance
B) A credit-driven
C) A stock
D) A debt-driven
Under Alan Greenspan and Ben Bernanke, the Federal Reserve was successful in
pursuing a ________ policy.
A) preemptive
B) inflation targeting
C) exchange rate targeting
D) monetary targeting
The monetarist-Keynesian debate on the importance of monetary policy is unresolved
because monetarists and Keynesians focus on two different types of evidence that
generate conflicting conclusions. Monetarists tend to focus on
A) structural-model evidence, while Keynesians focus on reduced-form evidence.
B) reduced-form evidence, while Keynesians focus on structural-model evidence.
C) reduced-form evidence, while Keynesians focus on direct-model evidence.
D) structural-model evidence, while Keynesians focus on direct-model evidence.
Privatization of Social Security involves
A) tax reductions.
B) benefit reductions.
C) increasing the retirement age.
D) investing portions of the trust fund in corporate securities.
A shift in tastes toward American goods ________ net exports in the U.S. and causes
the IS curve to shift to the ________ in the U.S., everything else held constant.
A) decreases; right
B) decreases; left
C) increases; right
D) increases; left
When bad storms slow the check-clearing process, float tends to ________ causing the
Fed to initiate defensive open market ________.
A) decrease; sales
B) decrease; purchases
C) increase; sales
D) increase; purchases
Which policy measure increases the punishment for white-collar crime and obstruction
of official investigations?
A) Sarbanes-Oxley Act of 2002
B) Global Legal Settlement of 2002
C) Gramm-Leach-Bliley Act of 1999
D) Riegle-Neal Act of 1994
One factor contributing to the rapid growth of the commercial paper market since 1970
is
A) the fact that commercial paper has no default risk.
B) improved information technology making it easier to screen credit risks.
C) government regulation.
D) FDIC insurance for commercial paper.
Savings and loan regulators allowed S&Ls to include in their capital calculations a high
value for intangible capital called
A) goodwill.
B) salvation.
C) kindness.
D) retribution.
Bank holding companies that rival money center banks in size, but are not located in
money center cities are
A) superregional banks.
B) bank clearing houses.
C) international banks.
D) local banks.
Credit risk management tools include
A) deductibles.
B) collateral.
C) interest rate swaps.
D) duration analysis.
Everything else held constant, a credit-drive bubble is generally considered to have the
potential to cause ________ damage to an economy compared to an irrational
exuberance bubble.
A) less
B) about the same amount of
C) more
D) either more, less, or the same amount of
In recent years the interest paid on checkable and nontransaction deposits has accounted
for around ________ of total bank operating expenses, while the costs involved in
servicing accounts have been approximately ________ of operating expenses.
A) 45 percent; 55 percent
B) 55 percent; 4 percent
C) 25 percent; 50 percent
D) 50 percent; 30 percent
Based on the Taylor Principle, a central bank’s endogenous response of decreasing
interest rates when inflation falls
A) causes an upward movement along the monetary policy curve.
B) causes a downward movement along the monetary policy curve.
C) shifts the monetary policy curve upward.
D) shifts the monetary policy curve downward.
On January 25, 2009, one U.S. dollar traded on the foreign exchange market for about
0.75 euros. Therefore, one euro would have purchased about ________ U.S. dollars.
A) 0.75
B) 1.00
C) 1.33
D) 1.75
Which of the following is a disadvantage to monetary targeting?
A) It relies on a stable money-inflation relationship.
B) There is a delayed signal about the achievement of a target.
C) It implies larger output fluctuations.
D) It implies a lack of transparency.
Suppose the economy is producing at the natural rate of output. Assuming a fixed
natural rate of output and everything else held constant, the development of a new,
more productive technology will cause ________ in the unemployment rate in the long
run and ________ in inflation in the short run.
A) an increase; an increase
B) a decrease; a decrease
C) no change; a decrease
D) no change; no change
A positive spending shock ________ real interest rates and ________ output in the
short run, thereby its effect on stock prices is ________.
A) raises; lowers; positive
B) raises; raises; ambiguous
C) lowers; raises; negative
D) lowers; raises; positive
When the economy suffers a permanent negative supply shock and the central bank
does not respond by changing the autonomous component of monetary policy, then
A) inflation will be higher.
B) output will be at its potential.
C) output will be unchanged.
D) inflation will be unchanged.
E) both A and B.
The reduction of brokerage commissions for trading common stocks that occurred in
1975 caused the demand for bonds to ________ and the demand curve to shift to the
________.
A) fall; right
B) fall, left
C) rise; right
D) rise; left
________ in the expected future domestic exchange rate causes the demand for
domestic assets to shift to the ________ and the domestic currency to appreciate,
everything else held constant.
A) An increase; right
B) An increase; left
C) A decrease; right
D) A decrease; left
Keynes believed that changes in autonomous spending were dominated by unstable
fluctuations in ________, which are influenced by emotional waves of optimism and
pessimism—factors he referred to as “animal spirits.”
A) unplanned investment spending
B) actual investment spending
C) planned investment spending
D) autonomous consumer expenditures
Financial crises in advanced economies might start from a
A) debt deflation.
B) currency crisis.
C) mismanagement of financial innovations.
D) currency mismatch.
If, for a $1000 premium, you buy a $100,000 put option on bond futures with a strike
price of 110, and at the expiration date the price is 114, your ________ is ________.
A) profit; $1000
B) loss; $1000
C) profit; $3000
D) loss; $3000
If Toyota sells a $1000 bond in the United States, the bond is a
A) foreign bond.
B) Eurobond.
C) Tokyo bond.
D) currency bond.
When you deposit $50 in currency at Old National Bank
A) its assets increase by less than $50 because of reserve requirements.
B) its reserves increase by less than $50 because of reserve requirements.
C) its liabilities increase by $50.
D) its liabilities decrease by $50.
An increase in the riskiness of corporate bonds will ________ the price of corporate
bonds and ________ the price of Treasury bonds, everything else held constant.
A) increase; increase
B) reduce; reduce
C) reduce; increase
D) increase; reduce
Sustained downward movements in the business cycle are referred to as
A) inflation.
B) recessions.
C) economic recoveries.
D) expansions.
The monetary base declines when
A) the Fed extends discount loans.
B) Treasury deposits at the Fed decrease.
C) float increases.
D) the Fed sells securities.