According to the pure expectations approach to term structure, investors view securities
with different maturities as
A) close substitutes.
B) complements.
C) inversely related.
D) independent.
Savings-and-loans were originally federally insured through the
A) FDIC.
B) FSLIC.
C) NCUSIF.
D) Comptroller of the Currency.
Suppose that IS and LM intersect at full-employment output. A rightward shift of IS
will be followed by a __________ price level that shifts LM to the __________ in a
return to full-employment.
A) rising; right
B) rising; left
C) falling; right
D) falling; left
When the Federal Reserve sells $100 worth of government securities, bank reserves
A) rise by $100.
B) rise by $100 times the deposit expansion multiplier.
C) fall by $100.
D) fall by $100 times the deposit expansion multiplier.
A __________ yield to maturity implies a __________ bond price.
A) lower; lower
B) higher; lower
C) higher; higher
D) None of the above.
Compared with long-term securities, the prices of short-term securities are always
A) more volatile.
B) less volatile.
C) higher.
D) lower.
Institutional traders do not typically engage in which of the following activities?
A) Quote bids and offers for securities on a continuous basis
B) Accommodate incoming purchase and sale orders from financial institutions
C) Alter quotes in response to changing market conditions
D) Act as stockbrokers
An important role of financial institutions is to
A) provide borrowers with low interest rates.
B) provide information to lenders about the quality of financial claims issued.
C) buy primary securities.
D) control the money supply.
Which of the following is not reflected in the constant term associated with the
marginal propensity to consume?
A) The level of C if Y were zero
B) People’s consumption with zero income
C) All other influences on consumption besides income
D) All of the above are reflected in the constant term.
Commercial bank ownership of corporate stock is prohibited by regulators in
A) the United States.
B) the United Kingdom.
C) Germany.
D) Japan.
Monetarists believe in a relatively unstable __________ curve, and thus recommend a
monetary policy targeting the __________.
A) IS; money supply
B) IS; interest rate
C) LM; money supply
D) LM; interest rate
According to Classical interest rate theory, rising interest rates will
A) increase the demand for money.
B) decrease the demand for money.
C) increase investment expenditures.
D) increase the saving rate.
Abandonment of continual active discretionary counter-cyclical policies is advocated
by
A) Keynesians.
B) Monetarists.
C) both Keynesians and Monetarists.
D) neither Keynesians nor Monetarists.
The ratio of cash and securities to total assets is a traditional measure of __________
risk.
A) credit
B) leverage
C) interest rate
D) liquidity
A share of stock expected to pay an annual dividend of $10 forever has a market price
of __________ when the Treasury bond rate is 6% and the stock has a risk premium of
4%.
A) $100.00
B) $166.67
C) $250.00
D) $500.00
Do underwriters normally run any kind of risk?
A) They risk being unable to sell the bonds they underwrite.
B) They risk receiving a lower price than the commitment price to the bond issuer.
C) They risk default on the bonds.
D) No, their operations are generally risk-free.
When forecasting interest rates and the direction of monetary policy, economists often
examine the
A) Federal Deposit Insurance Corporation Report.
B) Economic Report of the President.
C) Federal Advisory Council Statement.
D) Federal Open Market Committee directive.
When the aggregate demand curve shifts to the left, real GDP falls unless the aggregate
supply curve is
A) horizontal.
B) upward-sloping.
C) vertical.
D) upward-sloping or vertical.
Which type of thrift institution was relatively unaffected by the traumas of deregulation
in the 1980s?
A) credit unions
B) savings-and-loans
C) mutual savings banks
D) IBFs