1) If the required reserve ratio is 15 percent, the simple deposit multiplier is
A) 150
B) 15
C) 667
D) 333
2) Suppose that from a new checkable deposit, First National Bank holds two million
dollars in vault cash, nine million dollars in excess reserves, and faces a required
reserve ratio of ten percent Given this information, we can say First National Bank has
________ million dollars on deposit with the Federal Reserve
A) one
B) two
C) eight
D) ten
3) Government regulations to reduce the possibility of financial panic include all of the
following except
A) transactions costs
B) restrictions on assets and activities
C) disclosure
D) deposit insurance
4) Most of a bank’s operating income results from
A) interest on assets
B) service charges on deposit accounts
C) off-balance-sheet activities
D) fees from standby lines of credit
5) The two key factors that trigger speculative attacks on emerging market currencies
are
A) deterioration in bank balance sheets and severe fiscal imbalances
B) deterioration in bank balance sheets and low interest rates abroad
C) low interest rates abroad and severe fiscal imbalances
D) low interest rates abroad and rising asset prices
6) If the required reserve ratio is 10 percent, the simple deposit multiplier is
A) 50
B) 25
C) 1000
D) 100
7) In the simple deposit expansion model, if the required reserve ratio is 20 percent and
the Fed increases reserves by $100, checkable deposits can potentially expand by
A) $100
B) $250
C) $500
D) $1,000
8) Financial innovations that grew out of the bank branching restrictions were
A) bank holding companies and automatic teller machines
B) bank holding companies and securitization
C) automatic teller machines and sweep accounts
D) automatic teller machines and bank credit cards
9) The bond demand curve is ________ sloping, indicating a(n) ________ relationship
between the price and quantity demanded of bonds
A) downward; inverse
B) downward; direct
C) upward; inverse
D) upward; direct
10) Because information is scarce
A) helps explain why equity contracts are used so much more frequently to raise capital
than are debt contracts
B) monitoring managers gives rise to costly state verification
C) government regulations, such as standard accounting principles, have no impact on
problems such as moral hazard
D) developing nations do not rely heavily on banks for business financing
11) A central bank ________ of domestic currency and corresponding ________ of
foreign assets in the foreign exchange market leads to an equal increase in its
international reserves and the monetary base, everything else held constant
A) sale; purchase
B) sale; sale
C) purchase; sale
D) purchase; purchase
12) The policy of ________ exacerbated ________ problems as savings and loans took
on increasingly huge levels of risk on the slim chance of returning to solvency
A) regulatory forbearance; moral hazard
B) regulatory forbearance; adverse hazard
C) regulatory agnosticism; moral hazard
D) regulatory agnosticism; adverse hazard
13) Thrift institutions include
A) commercial banks
B) brokerage firms
C) insurance companies
D) mutual savings banks
14) Periodic payments of net earnings to shareholders are known as
A) capital gains
B) dividends
C) profits
D) interest
15) Everything else held constant, a decrease in autonomous consumer spending will
cause the IS curve to shift to the ________ and aggregate demand will ________
A) right; increase
B) right; decrease
C) left; increase
D) left; decrease
16) Evidence from the United States during the period 1973-2002 indicates that the
value of the dollar and the measure of the ________ interest rate rose and fell together
A) real
B) nominal
C) expected
D) actual
17) ________ in the expected future domestic exchange rate causes the demand for
domestic assets to shift to the ________ and the domestic currency to depreciate,
everything else held constant
A) An increase; right
B) An increase; left
C) A decrease; right
D) A decrease; left
18) An increase in stock prices ________ the size of people’s wealth and may ________
their willingness to spend, everything else held constant
A) increases; increase
B) increases; decrease
C) decreases; increase
D) decreases; decrease
19) The fact that banks operate on a ‘sequential service constraint” means that
A) all depositors share equally in the bank’s funds during a crisis
B) depositors arriving last are just as likely to receive their funds as those arriving first
C) depositors arriving first have the best chance of withdrawing their funds
D) banks randomly select the depositors who will receive all of their funds