Which type of financing requires the largest minimum size of the borrower?
A) mezzanine funds
B) public debt
C) venture capital funds
D) public equity
Property and casualty insurance companies tend to invest heavily in municipal bonds
because
A) the bonds have higher yields than corporate bonds.
B) property and casualty insurance companies are required by regulators to hold at least
20 percent of their assets in the form of municipal bonds.
C) the bonds are tax-exempt.
D) they hold large state and local government pension funds, thus requiring them to
hold an equal amount of municipal bonds.
A bank with some monopoly power may be able to __________ the rate on its deposits
and so __________ its net interest income.
A) lower, lower
B) lower, raise
C) raise, lower
D) raise, raise
Which of the following is not a financial intermediary?
A) A commercial bank
B) A commercial finance company
C) An index fund
D) An investment bank
When hyperinflation occurs,
A) GDP falls to zero.
B) interest rates fall.
C) savings rates rise.
D) money is a less effective medium of exchange.
Account executives work for
A) commercial banks.
B) securities firms.
C) thrift institutions.
D) corporations.
A one-year Treasury bill that sells for $943.40 and has a face value of $1,000 has an
annual yield of
A) 8 percent.
B) 7 percent.
C) 6 percent.
D) 5 percent.
Relative to life insurance companies, the liabilities of property and casualty insurance
companies are
A) longer-term.
B) more unpredictable.
C) less risky.
D) subject to higher taxes.
The possibility that a borrower will break a promise made to the lender after the loan is
made is one form of
A) the moral hazard problem.
B) the adverse selection problem.
C) outside collateral.
D) inside collateral.
The Federal Reserve’s ability to control the amount of demand deposits in the system
depends on its ability to
A) clear checks.
B) charter national banks.
C) print currency.
D) regulate bank reserves.
Which of the following statements is incorrect?
A) Whatever causes U.S. residents to buy more foreign goods shifts the demand curve
for the foreign currency to the right.
B) Whatever causes U.S. residents to buy fewer foreign goods shifts the supply curve of
the foreign currency to the left.
C) Whatever causes foreigners to buy fewer foreign goods shifts the supply curve of the
foreign currency to the left.
D) Whatever causes foreigners to buy more foreign goods shifts the supply curve of the
foreign currency to the right.
Which of the following is not a thrift?
A) a savings-and-loan
B) a commercial bank
C) a credit union
D) a mutual savings bank
A bank’s excess reserves can be calculated as
A) total reserves times the reserve ratio.
B) demand deposits times the reserve ratio.
C) total reserves minus required reserves.
D) demand deposits minus total reserves.
The assumption that wages adjust more slowly than prices implies that the Phillips
Curve
A) exists in the short-run.
B) exists in the long-run.
C) is vertical.
D) does not exist.
The manager-stockholder conflict generally becomes worse
A) the smaller the firm.
B) the larger the firm.
C) the more the firm borrows from banks.
D) the less the firm borrows from banks.
Assume a money multiplier of 3. If the Treasury finances a $30 million expenditure by
selling securities to the Fed, the effect of this transaction on the money supply is that it
will
A) remain unchanged.
B) rise by $3 million.
C) rise by $30 million.
D) rise by $90 million.
The definition of money does not refer to
A) coins and currency.
B) the monetary economy.
C) unemployment.
D) a tool used by the central bank to influence aggregate economic activity.
The __________ serves as a practical reference point for all other securities markets.
A) commercial paper market
B) New York Stock Exchange
C) over-the-counter market
D) U.S. government securities market
Asymmetric information problems are less severe the __________ the borrowing firm,
since there is __________ publicly available information about those firms.
A) larger; more
B) larger; less
C) smaller; more
D) smaller; less