1) If a bank has $200,000 of checkable deposits, a required reserve ratio of 20 percent,
and it holds $80,000 in reserves, then the maximum deposit outflow it can sustain
without altering its balance sheet is
A) $50,000
B) $40,000
C) $30,000
D) $25,000
2) A decrease in the foreign interest rate causes the demand for domestic assets to
________ and the domestic currency to ________, everything else held constant.
A) increase; appreciate
B) increase; depreciate
C) decrease; appreciate
D) decrease; depreciate
3) Everything else held constant, an increase in marginal tax rates would likely have the
effect of ________ the demand for municipal bonds, and ________ the demand for
U.S. government bonds.
A) increasing; increasing
B) increasing; decreasing
C) decreasing; increasing
D) decreasing; decreasing
4) If there are four goods in a barter economy, then one needs to know ________ prices
in order to exchange one good for another.
A) 8
B) 6
C) 5
D) 4
5) Options on futures contracts are referred to as
A) stock options
B) futures options
C) American options
D) individual options
6) The U.S. banking system is considered to be a dual system because
A) banks offer both checking and savings accounts
B) it actually includes both banks and thrift institutions
C) it is regulated by both state and federal governments
D) it was established before the Civil War, requiring separate regulatory bodies for the
North and South
7) The primary reason for the recent reduction in the number of banks is
A) bank failures
B) re-regulation of banking
C) restrictions on interstate branching
D) mergers and acquisitions
8) The East Asia currency crisis in 1997 started in
A) Japan
B) Thailand
C) South Korea
D) the Philippines
9) A change in perceived risk of a stock changes
A) the expected dividend growth rate
B) the expected sales price
C) the required rate of return
D) the current dividend
10) Everything else held constant, a stronger dollar benefits ________ and hurts
________.
A) American businesses; American consumers
B) American businesses; foreign businesses
C) American consumers; American businesses
D) foreign businesses; American consumers
11) When the economy is hit by a negative demand shock and the central bank does not
respond by changing the autonomous component of monetary policy, then
A) inflation will be lower
B) output will be at its potential
C) output will be lower
D) inflation will not change
E) both A and B
12) In the loanable funds framework, the ________ curve of bonds is equivalent to the
________ curve of loanable funds.
A) demand; demand
B) demand; supply
C) supply; supply
D) supply; equilibrium
13) You would be more willing to buy AT&T bonds (holding everything else constant)
if
A) the brokerage commissions on bond sales become cheaper
B) interest rates are expected to rise
C) your wealth has decreased
D) you expect diamonds to appreciate in value
14) Assuming initially that rr = 15%, c = 40%, and e = 5%, an increase in e to 10%
causes the M1 money multiplier to ________, everything else held constant.
A) increase from 2.15 to 2.33
B) decrease from 2.33 to 2.15
C) increase from 1.54 to 1.67
D) decrease from 1.67 to 1.54
15) The components of the U.S. M1 money supply are demand and checkable deposits
plus
A) currency
B) currency plus savings deposits
C) currency plus travelers checks
D) currency plus travelers checks plus money market deposits
16) ________ are financial intermediaries that acquire funds by selling shares to many
individuals and using the proceeds to purchase diversified portfolios of stocks and
bonds.
A) Mutual funds
B) Investment banks
C) Finance companies
D) Credit unions
17) A country that dollarizes
A) maximizes its seignorage
B) earns the same amount of seignorage as it would with a currency board
C) earns the same amount of seignorage as it would with exchange-rate targeting
D) eliminates its seignorage
E) must pay seignorage to other governments to use their currency
18) If the expected return on bonds increases, all else equal, the demand for bonds
increases, the price of bonds ________, and the interest rate ________.
A) increases; decreases
B) increases; increases
C) decreases; decreases
D) decreases; increases
19) From 1980 to 1985 the dollar appreciated relative to the British pound. Holding
everything else constant, one would expect that, when compared to 1980,
A) fewer Britons traveled to the United States in 1985
B) Britons imported more wine from California in 1985
C) Americans exported more wheat to England in 1985
D) more Britons traveled to the United States in 1985