An indication to the Open Market Account Manager that commercial banks are
experiencing a liquidity shortage would be a
A) falling federal funds rate.
B) rising federal funds rate.
C) falling discount rate.
D) rising discount rate.
“Bad news” about an expenditure-related indicator means that
A) it is lower than its previous value.
B) it is lower that it was expected to be.
C) it is higher than it was expected to be.
D) it rose more slowly than the rate of inflation.
Assume a portfolio in which there is equal investment in two assets that are perfectly
negatively correlated, with equally expected returns of 10 percent and 6 percent for
asset A and 8 percent and 4 percent for asset B. The expected yield on this portfolio is
A) 8 percent.
B) 7 percent.
C) 6 percent.
D) 5 percent.
The velocity of money is assumed to be constant in the Classical model because
A) the payment habits of the community.
B) fixed level of real GDP.
C) the demand for money varies with the level of real output.
D) aggregate demand is constant.
Which of the following entities does not have an extensive bank examination staff?
A) Office of the Comptroller of the Currency
B) Federal Deposit Insurance Corporation
C) Federal Reserve
D) Securities and Exchange Commission
One type of financial intermediary now rising in relative importance is
A) pension funds.
B) banks.
C) savings-and-loan associations (S&Ls).
D) life insurance companies.
The __________ the price of the underlying stock, the __________ the call option
premium will be.
A) higher; lower
B) lower; higher
C) lower; lower
D) None of the above.
The demand deposit multiplier __________ as the required reserve ratio __________.
A) increases; increases
B) increases; decreases
C) does not change; increases
D) does not change; decreases
Long-term interest rates are an example of
A) an intermediate target.
B) an operating target.
C) a monetary policy objective.
D) a monetary policy tool.
The change in demand deposits varies directly with
A) the currency ratio.
B) the reserve ratio on demand deposits.
C) the monetary base.
D) the reserve ratio on time deposits.
An unexpected fall in New Home Sales should send bond prices __________ and stock
prices __________.
A) up; up
B) up; down
C) down; up
D) down; down
Pat Bosky just paid $843 to repay the principal and interest for a six-month, $800 loan.
Pat paid a simple annual interest rate of __________ percent.
A) 4.3
B) 8.6
C) 10.8
D) 16.8
Stock options for corporate managers plays a part in handling the conflict between
management and __________ in __________-oriented financial systems.
A) bankers; markets
B) bankers; banking
C) stockholders; markets
D) stockholders; banking
A speculator becomes the fixed-rate payer in an interest rate swap. He expects that
A) long rates rise.
B) long rates fall.
C) short rates rise.
D) short rates fall.
All financial intermediaries acquire funds by
A) selling bonds.
B) selling stocks.
C) issuing their own liabilities.
D) charging interest.
A salesperson does not
A) monitor market conditions and alter quotes so he does not get stuck with an
unwanted inventory.
B) try to uncover information about securities that institutional investors are most
interested in.
C) provide information to traders about the sentiment within the investment community.
D) convince bank customers to buy securities that the bank has already acquired
through the activities of its traders.
In the Keynesian system a drop in investment __________ cause the interest rate to
__________.
A) will; fall
B) will; rise
C) does not; rise
D) does not necessarily; fall
The Secretary of the Treasury
A) serves as Chairman of the Board of Governors.
B) serves as a member of the Board of Governors.
C) serves as a member of the Federal Open Market Committee.
D) does not serve on the Board of Governors.
If labor contracts prevent wage flexibility, the aggregate supply curve will be
A) vertical.
B) horizontal.
C) negatively sloped.
D) positively sloped.
The “primary” market is the market for
A) hostile takeovers.
B) newly-issued securities.
C) equities of “blue chip” companies.
D) league tables.