The Second Bank of the United States
A) was disbanded in 1811 when its charter was not renewed.
B) had its charter renewal vetoed in 1832.
C) is considered to be the primary cause of the bank panic of 1907.
D) None of the above.
Answer:
The Keynesian theory of money demand predicts that people will increase their money
holdings if they believe that
A. interest rates are about to fall.
B. bond prices are about to rise.
C. expected inflation is about to fall.
D. bond prices are about to fall.
Answer:
________ in the foreign interest 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
Answer:
In the long-run ISLM model and with everything else held constant, as long as the level
of output ________ the natural rate level, the price level will continue to ________,
shifting the LM curve to the ________, until finally output is back at the natural rate
level.
A. exceeds; rise; right
B. exceeds; fall; left
C. remains below; fall; right
D. remains below; rise; left
Answer:
The finance of government spending through a Treasury sale of bonds which are then
purchased by the Fed
A. causes both reserves and the monetary base to rise.
B. causes both reserves and the monetary base to decline.
C. causes reserves to rise, but the monetary base to decline.
D. has no net effect on the monetary base.
Answer:
Dodd-Frank addressed many of the issues that led to the financial crisis. Which of the
following was NOT addressed by Dodd-Frank regulations?
A. stricter consumer protection laws
B. privately owned, government-sponsored enterprises (GSEs) such as Fannie mae and
Freddie Mac
C. resolution authority over the large financial institutions
D. higher requirements on firms dealing in derivatives
Answer:
According to the expectations theory of the term structure
A. when the yield curve is steeply upward sloping, short-term interest rates are expected
to remain relatively stable in the future.
B. when the yield curve is downward sloping, short-term interest rates are expected to
remain relatively stable in the future.
C. investors have strong preferences for short-term relative to long-term bonds,
explaining why yield curves typically slope upward.
D. yield curves should be equally likely to slope downward as slope upward.
Answer:
Which of the following statements is FALSE?
A. Checkable deposits are usually the lowest cost source of bank funds.
B. Checkable deposits are the primary source of bank funds.
C. Checkable deposits are payable on demand.
D. Checkable deposits include NOW accounts.
Answer:
When yield curves are steeply upward sloping
A. long-term interest rates are above short-term interest rates.
B. short-term interest rates are above long-term interest rates.
C. short-term interest rates are about the same as long-term interest rates.
D. medium-term interest rates are above both short-term and long-term interest rates.
Answer:
Disintermediation resulted from
A. interest rate ceilings combined with inflation-driven increases in interest rates.
B. elimination of Regulation Q (the regulation imposing interest rate ceilings on bank
deposits).
C. increases in federal income taxes.
D. reserve requirements.
Answer:
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
Answer:
The name economists give the process by which stockholders gather information by
frequent monitoring of the firm’s activities is
A) costly state verification.
B) the free-rider problem.
C) costly avoidance.
D) debt intermediation.
Answer:
In the basic closed-economy ISLM model, the money demand is a function of
A. output.
B. money supply.
C. interest rates.
D. both A and C.
Answer:
Which of the following statements about financial markets and securities is TRUE?
A. A bond is a long-term security that promises to make periodic payments called
dividends to the firm’s residual claimants.
B. A debt instrument is intermediate term if its maturity is less than one year.
C. A debt instrument is intermediate term if its maturity is ten years or longer.
D. The maturity of a debt instrument is the number of years (term) to that instrument’s
expiration date.
Answer:
The aggregate supply curve shows the relationship between
A. the level of inputs and aggregate output.
B. the inflation rate and the level of inputs.
C. the wage rate and the level of employment.
D. the inflation rate and the level of aggregate output supplied.
Answer:
Which of the following would a bank NOT hold as insurance against the highest cost of
deposit outflow-bank failure?
A. excess reserves
B. secondary reserves
C. bank capital
D. mortgages
Answer:
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.
Answer:
Which of the following is not a conflict of interest in accounting firms?
A. The firm provides consulting as well as rating creditworthiness.
B. Auditors may be pressured to skew their opinions so the client will stay with the
firm.
C. Auditors may be reluctant to criticize advice put into place by nonaudit personnel of
the firm.
D. Auditors release an overly favorable audit in order to solicit business.
Answer:
The riskiness of an asset that is unique to the particular asset is
A. systematic risk.
B. portfolio risk.
C. investment risk.
D. nonsystematic risk.
Answer:
If firms and households form their expectations about inflation by looking at past
inflation, this form of expectations formation is known as ________ expectations.
A. adaptive
B. forward-looking
C. rational
D. perfect
Answer:
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.
Answer:
A ________ pays the owner a fixed coupon payment every year until the maturity date,
when the ________ value is repaid.
A. coupon bond; discount
B. discount bond; discount
C. coupon bond; face
D. discount bond; face
Answer:
The National Bank Act of 1863, and subsequent amendments to it
A. created a banking system of state-chartered banks.
B. established the Office of the Comptroller of the Currency.
C. broadened the regulatory powers of the Federal Reserve.
D. created insurance on deposit accounts.
Answer:
Everything else held constant, a decrease in the value of the dollar relative to all foreign
currencies means that the price of foreign goods purchased by Americans
A. increases
B. decreases.
C. remains unchanged.
D. either increases, decreases, or remains unchanged.
Answer:
Which of the following statements are TRUE?
A. Checkable deposits are payable on demand.
B. Checkable deposits do not include NOW accounts.
C. Checkable deposits are the primary source of bank funds.
D. Checkable deposits are assets for the bank.
Answer:
Before 1970, mutual funds invested almost solely in
A. corporate bonds.
B. corporate common stocks.
C. United States government bonds.
D. municipal bonds and money market securities.
Answer:
Prior to 1863, all commercial banks in the United States
A. were chartered by the U.S. Treasury Department.
B. were chartered by the banking commission of the state in which they operated.
C. were regulated by the Federal Reserve.
D. were regulated by the central bank.
Answer:
________ within the U.S. can make loans to foreigners but cannot make loans to
domestic residents.
A) Edge Act corporations
B) International Banking Facilities
C) Universal banks
D) Euro banks
Answer:
The nonactivists who opposed the recent fiscal stimulus package argue that
A. fiscal stimulus would take too long to work because of long implementation lags.
B. fiscal stimulus might kick in after the economy had already recovered.
C. fiscal stimulus could lead to increased volatility in inflation and economic activity.
D. all of the above.
E. none of the above.
Answer:
To promote an economic expansion and an exit from the deflationary environment that
the Japanese had been experiencing for the past fifteen years, the “Abenomics” aims at
A. increasing inflation target.
B. increasing inflation expectations.
C. purchasing long-term bonds.
D. all of the above.
E. none of the above.
Answer: