A reduction in housing starts, typically due to __________ interest rates, is often
thought to precede __________.
A) rising; an expansion
B) rising; a recession
C) falling; an expansion
D) falling; a recession
If the Treasury borrows from the public and makes an expenditure of an equal amount,
it will affect
A) the supply of currency.
B) the money supply.
C) the supply of government securities.
D) bank reserves.
A __________ is a “thrift institution.”
A) credit union
B) commercial bank
C) consumer finance company
D) life insurance company
The increase in interest rates that shook depository institutions began in the
A) 1950s.
B) 1960s.
C) 1970s.
D) 1980s.
Which of the following is not a determinant of option premiums?
A) The volatility of the underlying stock
B) The price of the underlying stock
C) The time to expiration of the option
D) All of the above are determinants of option premiums.
Which of the following is not a reason for regulation of U.S. financial markets?
A) Protection of individual investors
B) Disclosure of information about securities is the best way to safeguard investors
C) Full disclosure broadens investor’s participation in the financial markets
D) The operation of financial markets requires government regulation if they are to be
efficient in channeling funds from savers to borrowers.
Non-traded securities are part of
A) direct but not indirect finance.
B) indirect but not direct finance.
C) direct and indirect finance.
D) neither direct nor indirect finance.
If only a small volume of trading can be absorbed without producing wide price swings,
a market is
A) liquid.
B) thin.
C) broad.
D) resilient.
A comprehensive measure of a bond’s maturity that takes into account the timing of
both coupon and principal payments is
A) term structure.
B) risk premium.
C) current coupon.
D) duration.
Suppose a bank has total assets of $3,000,000,000 and total deposits and other liabilities
of $2,800,000,000. The bank’s leverage ratio is
A) 6.7%.
B) 7.1%.
C) 5.6%.
D) 93.3%.
In terms of informal power within the Federal Reserve, which of the following groups
do experts regard as the most powerful?
A) The Federal Advisory Council
B) The economic staff of the U.S. Department of Commerce
C) The economic staff of the Board of Governors
D) Federal Reserve Bank directors
“LIBOR” is the rate at which U.S. banks
A) lend to their best customers.
B) borrow in the Eurodollar market.
C) lend in the Eurodollar market.
D) borrow in the jumbo CD market.
A wide variety of purchasers buy securities issued by all of the following government
agencies except
A) Federal Home Loan Banks and Federal Land Banks.
B) the Federal National Mortgage Association.
C) the U.S. Treasury.
D) the Federal Reserve.
The natural rate of interest falls with a __________ shift of the __________ curve.
A) rightward; IS
B) rightward; LM
C) leftward; IS
D) leftward; LM
In a(n) __________ insurance policy, there is no savings component.
A) whole
B) term
C) universal
D) variable
If orders exist in large volume, then the market has
A) depth.
B) breadth.
C) resiliency.
D) None of the above.
The natural rate of interest is the interest rate that
A) is determined by the intersection of the IS and LM curves.
B) equates investment and saving at full employment.
C) equates the supply and demand for money.
D) is changed only by changes in the money supply.
A horizontal LM curve implies that the expenditure multiplier, when compared with the
simple Keynesian expenditure multiplier, is
A) smaller.
B) larger.
C) equal.
D) equal to the inverse of the simple multiplier.
Which of the following countries did not adopt the euro as their currency?
A) Greece
B) Belgium
C) Great Britain
D) Finland
A bank run __________ possibly mushroom into a bank panic because the quality of a
bank’s portfolio of loans __________ made public information by bank examining
agencies.
A) can; is
B) can; is not
C) cannot; is
D) cannot; is not
Which of the following statements is not true?
A) Portfolio diversification implies that investors earn a return above the risk-free rate
that compensates for the risk inherent in each and every security.
B) The risk of the market portfolio is less than the sum of each security’s risk.
C) The risk premium depends the systematic risk of securities.
D) All of the statements above are true.
Financial intermediaries participate in the money and capital markets as
A) lenders only.
B) borrowers only.
C) both lenders and borrowers.
D) trustees only.
If the interest rate fell below the equilibrium rate, people would attempt to __________
bonds. Bond prices would __________ and the interest rate would __________.
A) sell; rise; fall
B) buy; rise; fall
C) sell; fall; rise
D) buy; fall; rise
Extrapolating past values of a variable to the present is the practice of __________
expectations, which is fairly common among __________ economists.
A) adaptive; New Classical
B) adaptive; Keynesian
C) rational; New Classical
D) rational; Keynesian