At an interest rate of 6%, how much will need to be invested today to have $10,000 in 5
years?
A) $5,000
B) $7,473
C) $10,000
D) $13,382
Answer:
How did Operation Twist affect the monetary base?
A) reduced
B) increased
C) no change
D) indeterminate
Answer:
Forward transactions
A) provide little risk sharing.
B) are very liquid.
C) have information problems.
D) are widely used by sellers of commodities, but rarely used by buyers of
commodities.
Answer:
A decline in the output gap causes the demand for real balances
A) to rise and the interest rate to fall.
B) to fall and the interest rate to rise.
C) and the interest rate to fall.
D) and the interest rate to rise.
Answer:
The bond supply curve
A) shows the quantity of bonds lenders are willing to supply as bond prices change.
B) shows the quantity of bonds lenders are willing to supply as interest rates change.
C) shows the quantity of bonds borrowers are willing to supply as bond prices change.
D) is represented by a downward-sloping line when the price of bonds is on the vertical
axis and the quantity of bonds supplied is on the vertical axis.
Answer:
When a bank issues a checkable deposit and loans the funds out to a business, it has
transformed
A) a financial asset for a saver into a liability for a borrower.
B) a financial liability for a saver into a financial asset for a borrower.
C) a short-term liability to a borrower into a long-term asset to a saver.
D) one liability into another liability.
Answer:
By 2012, what share of U.S. assets were held by the 10 largest banks in the United
States?
A) 10%
B) 29%
C) 55%
D) 68%
Answer:
Moral hazard can contribute to high bank leverage in all of the following ways
EXCEPT
A) having high capital requirements.
B) bank managers are compensated in part on providing shareholders with high returns
on equity.
C) high bank leverage provides shareholders with a potential for a higher return on
equity.
D) federal deposit insurance has reduced the incentive of depositors to monitor the
behavior of bank managers.
Answer:
The demand for U.S. dollars represents:
A) the demand for U.S. goods and financial assets by households and firms outside the
United States.
B) the demand for foreign goods and financial assets by households and firms within
the United States.
C) the demand for U.S. goods and financial assets by households and firms within the
United States.
D) the willingness of households and firms that own dollars to exchange them for
foreign currency.
Answer:
The largest institutional participants in capital markets are
A) pension funds.
B) insurance companies.
C) consumer finance companies.
D) business finance companies.
Answer:
The “lemons problem” is overcome in the used car market by
A) strict government regulation of private deals between individual buyers and sellers
of used cars.
B) most used cars selling for well below their true values.
C) “lemon insurance” policies being offered by insurance companies.
D) the existence of used car dealers who are concerned about maintaining their
reputations.
Answer:
An interest rate swap involving the exchange of floating-rate obligations for fixed-rate
obligations is known as
A) swaption.
B) swap option.
C) forward swaps.
D) plain vanilla.
Answer:
The main role of financial intermediaries is to
A) provide funds to the federal government to cover the budget deficit.
B) borrow funds from savers and lend them to borrowers.
C) provide advice to consumers on how they should handle their finances.
D) help ensure that there is enough money in circulation.
Answer:
The first Fed chair to hold a press conference was:
A) Paul Volcker
B) Alan Greenspan
C) Ben Bernanke
D) Mario Draghi
Answer:
If you buy a bond issued by Intel, the bond is a(n):
A) liability to Intel and an asset to you.
B) liability to you and an asset to Intel.
C) liability to both you and Intel.
D) asset to both you and Intel.
Answer:
Discount loans available to health banks which can be used for any purpose are called
A) primary credit.
B) secondary credit.
C) seasonal credit.
D) repo loans.
Answer:
In January 2010, President Obama appointed which of the following to be chair of the
Federal Reserve?
A) Greenspan
B) Bernanke
C) Geithner
D) Trichet
Answer:
Which of the following countries does NOT use the U.S. dollar as its official currency?
A) Panama
B) El Salvador
C) Ecuador
D) Guatemala
Answer:
Assuming a required reserve ratio of 8%, interest rate on reserves of 5%, and interest
rate on loans of 4%, what is the effective cost of the reserve requirement on a $1000
deposit?
A) 0.05%
B) 0.28%
C) 0.32%
D) 4%
Answer:
Money market mutual funds
A) hold portfolios of stocks.
B) hold portfolios of short-term assets.
C) are always load funds.
D) hold only U.S. Treasury securities.
Answer:
Financial intermediaries emerged
A) to make loans to governments.
B) to provide a market for municipal bonds.
C) to reduce transactions costs for small savers and borrowers.
D) to reduce transactions costs for traders in stocks and bonds.
Answer:
Suppose the required reserve ratio is 8% and the Fed purchases $100 million worth of
Treasury bills from Wells Fargo. By how much is Wells Fargo able to increase its loans?
A) $8 million
B) $92 million
C) $100 million
D) $1.25 billion
Answer:
The Fed was created
A) after financial panics in the late 1800s and early 1900s.
B) after the stock market crash of 1929.
C) to help finance government expenditures during World War II.
D) to help channel funds to the residential mortgage market.
Answer:
The difference between the interest a bank earns on loans and securities and the interest
paid on deposits and debt divided by the total value of its assets is called
A) interest spread.
B) net interest margin.
C) return on assets.
D) return on equity.
Answer:
The fourth stage in the regulatory process is
A) a crisis.
B) response by the financial system.
C) regulation.
D) regulatory response.
Answer:
The equilibrium real interest rate in Belgium will be
A) generally above the world real interest rate.
B) generally below the world real interest rate.
C) equal to the world real interest rate.
D) determined by the equilibrium between desired domestic saving and desired
domestic investment.
Answer:
In an article, “Preparing for the Next Black Swan” (Wall Street Journal, Aug 21, 2010),
the point is made that diversification may be insufficient in protecting one’s portfolio
during a “Black Swan” event. Why may this be true?
A) virtually all asset classes may decline at the same time
B) investors may be unable to buy different assets during a “Black Swan” event
C) some assets may rise while others decline during a “Black Swan” event
D) Black Swan events are surprises and thus one cannot prepare for such an event.
Answer:
In a closed economy, the total quantity of goods demanded equals the sum of
A) consumption spending, investment spending, and government spending.
B) consumption spending, national saving, and taxes.
C) consumption spending, government spending, and taxes.
D) investment spending, national saving, and taxes.
Answer:
When economists refer to the role of money as a unit of account, they mean that
A) most accounting systems reflect that goods are purchased with currency.
B) most accounting systems reflect that goods are purchased with checks.
C) money gives traders a way of measuring value in the economy.
D) money makes it possible for specialization to take place.
Answer:
What determines the acceptability of dollar bills as a medium of exchange?
A) our society’s willingness to use green paper notes issued by the Federal Reserve as
money
B) the willingness of the Federal Reserve to redeem dollar bills for gold
C) the willingness of the U.S. Treasury to redeem dollar bills for gold
D) the public’s fear that failing to accept dollar bills will trigger a hyperinflation
Answer:
Fiat money
A) is money that would have no value if it were not usable as money.
B) is illegal in most advanced, industrial countries.
C) is usually some type of precious metal.
D) will generally be accepted in trade for less than its face value.
Answer:
The Fed has the greatest control over which of the following?
A) the money multiplier
B) discount loans
C) the amount of excess reserves
D) the nonborrowed monetary base
Answer:
A rise in the real interest rate will cause which of the components of aggregate demand
to decline?
A) Only C
B) Only C and I
C) Only C, I, and NX
D) C, I, G, and NX
Answer:
How many times is GDP for a particular quarter estimated?
A) once
B) twice
C) three times
D) more than three times
Answer: