A bond has a coupon rate of 8 percent, has 3 years to maturity, and sells for $1,200. Its
yield to maturity is:
a. 12.21 percent
b. 6.67 percent
c. 5.55 percent
d. 1.11 percent
Answer:
Which of the following is not a provision of FIRREA?
a. creation of the OTS
b. limitations on brokered deposits
c. reimposing restrictions on S&L activities
d. all of the above were provisions of FIRREA
Answer:
If a banking panic occurs:
a. the nation’s level of output and income may decrease
b. there may be a contraction of credit available to legitimate borrowers
c. the nation’s level of unemployment may increase
d. all of the above may occur
Answer:
In the 1970s, in the United States,
a. the inflation rate rose sharply
b. interest rates rose sharply
c. both of the above are true
d. neither of the above is true
Answer:
The existence of financial intermediaries
a. benefits savers, but makes borrowers worse off by increasing the yield they must pay
b. benefits borrowers, but makes savers worse off by taking part of their return
c. benefits both borrowers and savers
d. benefits neither borrowers nor savers–intermediaries simply add to the costs of
channeling funds from one to the other
Answer:
The Federal Reserve bond support program of 1942-1951 resulted in
a. a dramatic increase in the Fed securities portfolio (P)
b. excessive growth of M1 and M2
c. extremely low real interest rates
d. all of the above
Answer:
The deposit insurance system in place during the banking crises of the late 1980s and
early 1990s probably
a. reduced the moral hazard problem and reduced risk taking
b. reduced the moral hazard problem and increased risk taking
c. increased the moral hazard problem and reduced risk taking
d. increased the moral hazard problem and increased risk taking
Answer:
A persistent decline in a nation’s price level is known as
a. inflation
b. disinflation
c. deflation
d. none of the above
Answer:
It is clear that the Great Depression
a. was attributable entirely to incompetent monetary policy
b. was caused chiefly by the stock market crash of 1929
c. was caused primarily by the Smoot-Hawley Tariff Act
d. is properly characterized by none of the above
Answer:
The Federal Reserve tightened monetary policy in the late 1920s in large part to
a. encourage more building of homes and business facilities
b. lower unemployment while avoiding inflation
c. counter overvaluation in the stock market
d. do none of the above
Answer:
If the nation’s price level is initially above the equilibrium level, then which of the
following occurs?
a. inventories rise involuntarily and firms boost prices
b. inventories rise involuntarily and firms cut output and prices
c. inventories fall involuntarily and firms boost prices
d. inventories rise involuntarily and firms reduce prices
Answer:
Which of the following is counted among the sources of the monetary base?
a. Cb
b. Cp
c. Fb
d. none of the above
Answer:
The most variable component of GDP expenditures is
a. C (consumption)
b. I (investment)
c. G (government purchases)
d. NX (net exports)
Answer:
Data support the argument that the origins of the Great Depression lie in
a. adverse demand shocks
b. adverse supply shocks
c. positive demand shocks
d. positive supply shocks
Answer:
The bank credit channel of influence assumes that
a. banks often use non-interest-rate criteria to ration loanable funds
b. changes in interest rates can affect the adverse selection problem
c. loanable funds are rationed through changes in interest rates
d. none of the above
Answer:
Statistical evidence from early studies shows that, to optimize efficiency, banks should
be no larger than
a. $1 billion
b. $100 billion
c. $125 million
d. $500 million
Answer:
Suppose that the Okun’s Law relationship is given by the following:
(GDP – GDPpotential)/GDP = 2(U – 5%). If actual output is below potential output by 6
percent, the unemployment rate must be
a. -1 percent
b. 2 percent
c. 8 percent
d. 11 percent
Answer:
The Federal Reserve System is:
a. the central bank of the United States
b. another name for the U.S. Treasury
c. a large commercial bank
d. the organization that insures bank deposits in the U.S.
Answer:
In general, a dollar that is gaining value (appreciating) in foreign exchange markets
results in ____ domestic inflation and ____ attractive exports to the rest of the world.
a. higher; more
b. higher; less
c. lower; more
d. lower; less
Answer:
Alexander Hamilton was
a. an Antifederalist and opposed formation of the Bank of the United States
b. an Antifederalist and supported formation of the Bank of the United States
c. a Federalist and opposed formation of the Bank of the United States
d. a Federalist and supported formation of the Bank of the United States
Answer:
A strong appreciation of the U.S. dollar, such as occurred during 1980-1985, has the
following consequences:
a. it tends to help U.S. industries competing in world markets
b. it tends to boost U.S. inflation
c. it tends to reduce the U.S. trade deficit
d. none of the above
Answer:
The Fed regularly conducts open market operations by purchasing and selling
a. commercial paper
b. municipal bonds
c. Treasury securities
d. all of the above
Answer:
Market risk:
a. is virtually nonexistent in common stocks and corporate bonds
b. refers to the risk of not receiving contractual interest payments in a timely manner
c. refers to the risk of fluctuations in the market value of a financial instrument
d. none of the above
Answer:
The U.S. banking system has traditionally differed from those of other industrialized
nations in
a. its structure
b. the scope of activities in which banks are permitted to engage
c. both of the above
d. neither of the above
Answer:
The bulk of the Fed’s open market transactions are
a. dynamic in nature
b. sterilized via the purchase or sale of foreign currencies
c. conducted via outright transactions
d. conducted via repurchase agreements or reverse repos
Answer:
Prior to maturity, a $1,000 face value zero coupon bond’s selling price will
a. always be less than $1,000
b. sometimes be exactly $1,000
c. sometimes be greater than $1,000
d. none of the above
Answer:
Monetary policy actions by the Fed are capable of inducing major changes in all of the
following except
a. consumption
b. government expenditures
c. investment
d. net exports
Answer:
Major industrial nations met at Bretton Woods, New Hampshire, in 1944 and
established
a. the International Monetary Fund
b. a system of adjustable-pegged exchange rates
c. the World Bank
d. all of the above
Answer:
The Bretton Woods exchange rate system proved to be an arrangement in which
a. exchange rates were fixed permanently
b. exchange rates floated erratically
c. exchange rates were fixed in the short run, but were sometimes adjusted and then
fixed at the new level
d. exchange rates floated in a very stable manner
Answer:
If the Fed reduces reserve requirements, all other factors equal, this action would serve
to
a. increase the monetary base
b. increase the money supply multiplier
c. reduce the monetary base
d. reduce the money supply multiplier
Answer:
A particular type of financial intermediary issues shares and uses the funds principally
to purchase commercial paper and Treasury bills. This institution is:
a. a money market mutual fund
b. a credit union
c. a finance company
d. a mutual savings bank
Answer:
In the credit view, bank loans are ‘special” in that
a. they are a more important source of funding to large businesses than the bond market
b. individuals and small businesses often rely exclusively on bank loans for funding
c. the quantity of bank loans is unaffected by actions of the Federal Reserve
d. none of the above is correct
Answer:
The pure expectations theory of term structure:
a. asserts that long-term and short-term assets are very close substitutes
b. implies that expected holding period returns are the same on all maturities
c. indicates that long-term interest rates are the average of successive expected
short-term rates
d. does all of the above
Answer:
The Keynesian interpretation of the 1930s emphasizes the view that
a. Fed policy was highly restrictive in the 1930s
b. you “can’t push on a string”
c. the Federal Reserve is always accountable for the money supply
d. the money supply is more important in influencing economic activity than is the level
of interest rates
Answer: