What economist in the early 20th century refined the use of the equation of exchange?
A) Jean-Baptiste Say
B) Irving Fisher
C) Thomas Malthus
D) Adam Smith
A graphic depiction of the relationship between yield and maturity is
A) the term structure of interest rates.
B) the yield curve.
C) the Phillips curve.
D) the risk-reward curve.
Which of the following will have the highest yield at any point in time?
A) A five-year Aaa-rated corporate bond
B) A five-year Baa-rated corporate bond
C) A five-year C-rated corporate bond
D) A five-year U.S. Treasury bond
The assumption that wages change more slowly than prices implies that the
A) aggregate demand curve has a positive slope.
B) aggregate demand curve has a negative slope.
C) Phillips Curve has a negative slope.
D) Phillips Curve has a positive slope.
According to rational expectations theory,
A) increasing the money supply to reduce unemployment will always be successful.
B) decreasing the money supply to reduce unemployment will usually be successful.
C) increasing the money supply to reduce unemployment will not be successful because
of an offsetting decrease in prices.
D) increasing the money supply to reduce unemployment will not be successful because
of an offsetting increase in prices.
Investors usually __________, because long-term securities have a greater risk of
capital loss than do short-term securities.
A) require a higher yield on long-term securities
B) require a lower yield on long-term securities
C) pay a higher price for long-term securities
D) avoid long-term securities
At the beginning of the year an investor pays $1,100 for a bond with a face value of
$1,000. The bond pays a coupon payment of $60, and the investor sells it for $1,150 at
the end of the year. The return is
A) 5.5 percent.
B) 6.0 percent.
C) 10.0 percent.
D) 10.5 percent.
The required reserve ratio is 10 percent, and the potential change in demand deposits is
$100 million. What are original excess reserves?
A) $10 million
B) $100 million
C) $1 million
D) $1 billion
The United States and __________ are two major markets-oriented systems.
A) Germany
B) Japan
C) France
D) the United Kingdom
Which of the following usually has the highest yield at a given point in time?
A) Corporate bonds
B) Municipal bonds
C) Commercial paper
D) U.S. Treasury bonds
The __________ is the interest rate that makes the sum of present values for all future
payments equal to a security’s purchase price.
A) yield to maturity
B) current yield
C) coupon rate
D) capital gain
Are bank lines of credit to small firms collateralized?
A) All of them are.
B) Some of them are, especially if the firm is risky.
C) Some of them are, especially if the firm is safe.
D) None of them are.
Assuming a fully loaned-up banking system and a deposit expansion multiplier of 2, a
$10 million government expenditure financed by sales of securities to the banking
system will cause the money supply to
A) remain unchanged.
B) rise by $5 million.
C) rise by $10 million.
D) rise by $20 million.
The underground economy refers to
A) transactions in mineral and mining activity.
B) cash payments made in lieu of credit cards.
C) cash payments made in order to avoid documentation of taxable income.
D) hoarding of dollar bills in high-inflation countries.
A securities dealer, or trader, earns a profit by
A) charging a commission.
B) buying at the offer price and selling at the bid price.
C) buying at the bid price and selling at the offer price.
D) None of the above.
Which of the following is not a financial institution?
A) A mutual fund
B) An insurance company
C) A pension fund
D) A mining company
Long-term debt financing to midsize companies at the smaller end of the midsize range
is provided by
A) commercial banks.
B) individual investors.
C) mutual funds.
D) mezzanine debt funds.
Which of the following is not a member of the Federal Open Market Committee
(FOMC)?
A) The entire board of governors
B) Five reserve bank presidents
C) The chairman of the SEC
D) All of the above are members of the FOMC.
A Purchasing Manager’s Index above 50 indicates
A) an expanding manufacturing sector.
B) a downturn in economic activity.
C) an increase in bond prices in the near future.
D) an expanding retail sector.
Private placements avoid
A) restrictive agreements.
B) SEC registration costs.
C) the need for collateral.
D) the primary market.
The origins of modern monetarism lie in the work of the
A) Classical economists.
B) Keynesians.
C) Malthusians.
D) Mercantilists.
A borrower’s willingness to sign a personal guarantee is
A) one form of the moral hazard problem.
B) one form of the adverse selection problem.
C) a signal of a high-quality borrower.
D) a signal of a low-quality borrower.
If the inflation rate is expected to be 5 percent and nominal interest rate is 9 percent,
then the real interest rate will be
A) 14 percent.
B) 9 percent.
C) 5 percent.
D) 4 percent.