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1) China is trying to move its banking system from being strictly ________ owned by
having them issue shares overseas
A) state
B) domestic investor
C) depositor
D) domestic corporate
2) ________ in the domestic interest rate causes the demand for domestic assets to
increase and the domestic currency to ________, everything else held constant
A) An increase; appreciate
B) An increase; depreciate
C) A decrease; appreciate
D) A decrease; depreciate
3) Suppose, at a given federal funds rate, there is an excess supply of reserves in the
federal funds market If the Fed wants the federal funds rate to stay at that level, then it
should undertake an open market ________ of bonds, everything else held constant If
the Fed does nothing, however, the federal funds rate will ________
A) sale; increase
B) purchase; increase
C) sale; decrease
D) purchase; decrease
4) When the exchange rate for the Mexican peso changes from 10 pesos to the US
dollar to 9 pesos to the US dollar, then the Mexican peso has ________ and the US
dollar has ________
A) appreciated; appreciated
B) depreciated; appreciated
C) appreciated; depreciated
D) depreciated; depreciated
5) An investment intermediary that lends funds to consumers is
A) a finance company
B) an investment bank
C) a finance fund
D) a consumer company
6) The total quantity of an economy's final goods and services demanded at different
inflation rates is
A) the aggregate supply curve
B) the aggregate demand curve
C) the Phillips curve
D) the aggregate expenditure function
7) When a lender refuses to make a loan, although borrowers are willing to pay the
stated interest rate or even a higher rate, the bank is said to engage in
A) coercive bargaining
B) strategic holding out
C) credit rationing
D) collusive behavior
8) The LM curve will be vertical and fiscal policy ineffective when
A) the demand for money is unaffected by changes in the interest rate
B) the demand for money is unaffected by changes in income
C) investment is unaffected by changes in the interest rate
D) investment is unaffected by changes in income
9) The East Asia currency crisis in 1997 started in
A) Japan
B) Thailand
C) South Korea
D) the Philippines
10) Everything else held constant, when the current value of the domestic exchange rate
increases, the ________ of domestic assets ________
A) quantity supplied; does not change
B) supply; decreases
C) quantity supplied; increases
D) supply; increases
11) Which of the following is a long-term financial instrument?
A) A negotiable certificate of deposit
B) A repurchase agreement
C) A US Treasury bond
D) A US Treasury bill
12) During hyperinflations,
A) the value of money rises rapidly
B) money no longer functions as a good store of value and people may resort to barter
transactions on a much larger scale
C) middle-class savers benefit as prices rise
D) money's value remains fixed to the price level; that is, if prices double so does the
value of money
13) The volume of loans that the Fed makes to banks is affected by the Fed's setting of
the interest rate on these loans, called the
A) federal funds rate
B) prime rate
C) discount rate
D) interbank rate
14) If uncertainty about banks' health causes depositors to begin to withdraw their funds
from banks, the country experiences a(n)
A) banking crisis
B) financial recovery
C) reduction of the adverse selection and moral hazard problems
D) increase in information available to investors
15) Everything else held constant, during a business cycle expansion, the supply of
bonds shifts to the ________ as businesses perceive more profitable investment
opportunities, while the demand for bonds shifts to the ________ as a result of the
increase in wealth generated by the economic expansion
A) right; left
B) right; right
C) left; left
D) left; right
16) An increase in the expected inflation rate will ________ the ________ for gold,
________ its price, everything else held constant
A) increase; demand; increasing
B) decrease; demand; decreasing
C) increase; supply; increasing
D) decrease; supply; increasing
17) Duration analysis involves comparing the average duration of the bank's ________
to the average duration of its ________
A) securities portfolio; non-deposit liabilities
B) assets; liabilities
C) loan portfolio; deposit liabilities
D) assets; deposit liabilities
18) If an individual moves money from a savings deposit account to a money market
deposit account,
A) M1 decreases and M2 stays the same
B) M1 stays the same and M2 increases
C) M1 stays the same and M2 stays the same
D) M1 increases and M2 decreases
19) Crowding out will be more pronounced the closer to vertical is the
A) IS curve
B) LM curve
C) consumption function
D) aggregate demand function
20) The theory of purchasing power parity states that exchange rates between any two
currencies will adjust to reflect changes in
A) the trade balances of the two countries
B) the current account balances of the two countries
C) fiscal policies of the two countries
D) the price levels of the two countries
