1) Although it has a population about half that of the United States, Japan has
A) many more banks
B) about 25 percent of the number of banks
C) more than 5000 commercial banks
D) fewer than 100 commercial banks
2) All else equal, the ________ the coupon rate on a bond, the ________ the bond’s
duration
A) higher; longer
B) higher; shorter
C) lower; shorter
D) greater; longer
3) 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
4) The modern commercial banking system began in America when the
A) Bank of United States was chartered in New York in 1801
B) Bank of North America was chartered in Philadelphia in 1782
C) Bank of United States was chartered in Philadelphia in 1801
D) Bank of North America was chartered in New York in 1782
5) Which of the following is included in both M1 and M2?
A) Currency
B) Savings deposits
C) Small-denomination time deposits
D) Money market deposit accounts
6) When you deposit $50 in your account at First National Bank and a $100 check you
have written on this account is cashed at Chemical Bank, then
A) the assets of First National rise by $50
B) the assets of Chemical Bank rise by $50
C) the reserves at First National fall by $50
D) the liabilities at Chemical Bank rise by $50
7) When one party to a transaction has incentives to engage in activities detrimental to
the other party, there exists a problem of
A) moral hazard
B) split incentives
C) ex ante shirking
D) pre-contractual opportunism
8) If a banker expects interest rates to fall in the future, her best strategy for the present
is
A) to increase the duration of the bank’s liabilities
B) to buy short-term bonds
C) to sell long-term certificates of deposit
D) to increase the duration of the bank’s assets
9) Special Drawing Rights (SDRs) are issued to governments by the ________ to settle
international debts and have replaced ________ in international transactions
A) Federal Reserve System; gold
B) Federal Reserve System; dollars
C) International Monetary Fund; gold
D) International Monetary Fund; dollars
10) Everything else held constant, if a central bank makes an unsterilized ________ of
foreign assets, then the domestic money supply will ________ and the domestic
currency will depreciate
A) purchase; increase
B) purchase; decrease
C) sale; increase
D) sale; decrease
11) One way the venture capital firm avoids the free-rider problem is by
A) prohibiting the sale of equity in the firm to anyone except the venture capital firm
B) prohibiting members from serving on the board of directors
C) prohibiting the borrowing firm from replacing management
D) requiring collateral equal to the value of the borrowed funds
12) Since Regulation Q has been abolished, there have been doubts raised about the size
of the effect of the ________ channel
A) balance sheet
B) bank lending
C) cash flow
D) unanticipated price level
13) When banks offer borrowers smaller loans than they have requested, banks are said
to
A) shave credit
B) rediscount the loan
C) raze credit
D) ration credit
14) If a bank has excess reserves of $15,000 and demand deposit liabilities of $80,000,
and if the reserve requirement is 20 percent, then the bank has total reserves of
A) $11,000
B) $21,000
C) $31,000
D) $41,000
15) When the Treasury acquires gold or SDRs, it issues certificates to the ________,
which are a claim on the gold or SDRs, and in turn is credited with deposit balances at
the ________
A) Federal Reserve System; Fed
B) Federal Reserve System; IMF
C) International Monetary Fund; Fed
D) International Monetary Fund; IMF
16) Recognizing the distinction between borrowed reserves and the nonborrowed
monetary base, the money supply model is specified as
A) M = m (MBn – BR)
B) M = m (MBn + BR)
C) M = m + (MBn – BR)
D) M = m – (MBn + BR)