1) If the price of a euro (the European currency) increases from $1.00 to $1.10, then,
everything else held constant,
A) a European vacation becomes less expensive
B) a European vacation becomes more expensive
C) the cost of a European vacation is not affected
D) foreign travel becomes impossible
2) Everything else held constant, in the market for reserves, when the federal funds rate
is 5%, lowering the discount rate from 5% to 4%
A) lowers the federal funds rate
B) raises the federal funds rate
C) has no effect on the federal funds rate
D) has an indeterminate effect on the federal funds rate
3) Financial markets have the basic function of
A) getting people with funds to lend together with people who want to borrow funds
B) assuring that the swings in the business cycle are less pronounced
C) assuring that governments need never resort to printing money
D) providing a risk-free repository of spending power
4) If you sell a $100,000 interest-rate futures contract for 110, and the price of the
Treasury securities on the expiration date is 106, your ________ is ________.
A) profit; $4000
B) loss; $4000
C) profit; $6000
D) loss; $6000
5) In the long run, a rise in a country’s price level (relative to the foreign price level)
causes its currency to ________, while a fall in the country’s relative price level causes
its currency to ________.
A) appreciate; appreciate
B) appreciate; depreciate
C) depreciate; appreciate
D) depreciate; depreciate
6) A return to the gold standard, that is, using gold for money 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
7) Using the one-period valuation model, assuming a year-end dividend of $0.11, an
expected sales price of $110, and a required rate of return of 10%, the current price of
the stock would be
A) $110.11
B) $121.12
C) $100.10
D) $100.11
8) When the government has a surplus, as occurred in the late 1990s, the ________
curve of bonds shifts to the ________, everything else held constant.
A) supply; right
B) supply; left
C) demand; right
D) demand; left
9) An increase in interest rates might ________ saving because more can be earned in
interest income.
A) encourage
B) discourage
C) disallow
D) invalidate
10) During the 2007-2009 financial crisis the currency ratio
A) increased sharply
B) decreased sharply
C) increased slightly
D) decreased slightly
11) The purpose of the disclosure requirements of the Securities and Exchange
Commission is to
A) increase the information available to investors
B) prevent bank panics
C) improve monetary control
D) protect investors against financial losses
12) In the early 1970s, the U.S. ran large balance of payments ________, causing an
________ dollar and an ________ German mark.
A) deficits; undervalued; overvalued
B) deficits; overvalued; undervalued
C) surpluses; undervalued; overvalued
D) surpluses; overvalued; undervalued
13) In the United States, the government agency requiring that firms that sell securities
in public markets adhere to standard accounting principles and disclose information
about their sales, assets, and earnings is the
A) Federal Communications Commission
B) Federal Trade Commission
C) Securities and Exchange Commission
D) Federal Reserve System
14) A decrease in the brokerage commissions in the housing market from 6% to 5% of
the sales price will shift the ________ curve for bonds to the ________, everything else
held constant.
A) demand; right
B) demand; left
C) supply; right
D) supply; left
15) Which of the following has not resulted from more active liability management on
the part of banks?
A) Increased bank holdings of cash items
B) Aggressive targeting of goals for asset growth by banks
C) Increased use of negotiable CDs to raise funds
D) An increased proportion of bank assets held in loans
16) Because shifts in aggregate demand are not viewed as being particularly important
to aggregate output fluctuations, they do not see much need for activist policy to
eliminate high unemployment. “They” refers to proponents of
A) the natural rate hypothesis
B) monetarism
C) the Phillips curve model
D) real business cycle theory
17) The Federal Deposit Insurance Corporation Improvement Act of 1991
A) increased the FDIC’s ability to borrow from the Treasury to deal with failed banks
B) increased the FDIC’s ability to use the too-big-to-fail doctrine
C) eliminated governmentally-administered deposit insurance
D) eliminated restrictions on nationwide banking
18) Everything else held constant, if a central bank makes an unsterilized ________ of
foreign assets, then the domestic money supply will decrease and the domestic currency
will ________.
A) purchase; appreciate
B) purchase; depreciate
C) sale; appreciate
D) sale; depreciate
19) According to this theory of the term structure, bonds of different maturities are not
substitutes for one another.
A) Segmented markets theory
B) Expectations theory
C) Liquidity premium theory
D) Separable markets theory
20) When the federal funds rate equals the interest rate paid on excess reserves
A) the supply curve of reserves is vertical
B) the supply curve of reserves is horizontal
C) the demand curve for reserves is vertical
D) the demand curve for reserves is horizontal
21) At the time of the South Korean financial crisis, the merchant banks were
A) almost virtually unregulated
B) subject to heavy government regulation
C) engaged in long-term lending to the corporate sector
D) restricted to long-term foreign borrowing
22) A restriction on bank activities that was repealed in 1999 was
A) the prohibition of the payment of interest on checking deposits
B) restrictions on credit terms
C) minimum down payments on loans to purchase securities
D) separation of commercial banking from the securities industries
23) A(n) ________ in the liquidity of corporate bonds will ________ the price of
corporate bonds and ________ the yield on corporate bonds, all else equal.
A) increase; increase; decrease
B) increase; decrease; decrease
C) decrease; increase; increase
D) decrease; decrease; decrease
24) A balance of payments ________ is associated with a loss of international reserves,
while a balance of payments ________ is associated with a gain.
A) surplus; surplus
B) surplus; deficit
C) deficit; surplus
D) deficit; deficit
25) A balance of payments deficit is associated with a ________ of international
reserves, while a balance of payments surplus is associated with a ________.
A) loss; loss
B) loss; gain
C) gain; loss
D) gain; gain
26) 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
27) ________ and ________ may provide an explanation for stock market bubbles.
A) Overconfidence; social contagion
B) Underconfidence; social contagion
C) Overconfidence; social isolationism
D) Underconfidence; social isolationism
28) Everything else held constant, an increase in the money market fund ratio will mean
________ in the M2 money multiplier and ________ in the M2 money supply.
A) an increase; an increase
B) an increase; a decrease
C) a decrease; an increase
D) a decrease; a decrease
29) Prior to the 1980s, S&Ls and mutual savings banks were restricted almost entirely
to
A) commercial real estate loans
B) home mortgages
C) education loans
D) vacation loans
30) The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 created
an Office of Credit Ratings at the SEC with its own staff and the authority to fine
credit-rating agencies and to deregister an agency if it produces bad ratings. This is an
example of which remedy of conflicts of interest?
A) Regulate for transparency
B) Supervisory oversight
C) Leave it to the market
D) Socialization of information production
31) If, for a $1000 premium, you buy a $100,000 call option on bond futures with a
strike price of 110, and at the expiration date the price is 114, your ________ is
________.
A) profit; $4000
B) loss; $4000
C) profit; $3000
D) loss; $3000