Assume that excess reserves are $35 million, demand deposits are $500 million, and
total reserves are $135 million. The required reserve ratio is
A) .07.
B) .2.
C) .25.
D) .27.
The annual dollar interest payment of a security is equal to $60, and the security
currently sells for $400. The current yield of this security is equal to
A) 7 percent.
B) 10 percent.
C) 15 percent.
D) 24 percent.
Credit unions are federally insured through the
A) FDIC.
B) FSLIC.
C) NCUSIF.
D) Comptroller of the Currency.
“Medium term notes” have a maturity ranging up to
A) one year.
B) two years.
C) five years.
D) ten years.
If an inflation forecast is based on expected monetary growth, it is likely to be
A) historical.
B) rational.
C) logical.
D) adaptive.
About what percentage of marketable national debt is held by foreigners?
A) 5 percent
B) 15 percent
C) 25 percent
D) 50 percent
Traditionally, bonds have been issued with coupons that bondholders redeem every
A) year.
B) quarter.
C) six months.
D) month.
According to pure expectations theory, the yield curve should on average be
A) upward sloping.
B) downward sloping.
C) flat.
D) vertical.
We can be more confident that standard deviation is a good measure of the risk of an
asset (held in isolation) when
A) the number of different possible returns on the asset rises.
B) the probabilities attached to the possible returns on the asset are less equal.
C) the possible returns on the asset are distributed symmetrically around the mean.
D) the asset has a longer maturity.
A contractionary monetary policy can reduce the inflation rate without causing a rise in
unemployment if expectations are formed rationally and monetary policy is
A) combined with expansionary fiscal policy.
B) carried out in total secrecy.
C) publicly announced and credible.
D) combined with contractionary fiscal policy.
Which of the following would not cause an increase in the demand for loanable funds?
A) An increase in business borrowing
B) An increase in consumer borrowing
C) An increase in the public debt
D) A decrease in interest rates
The primary incentive for economic agents to formulate expectations rationally is to
A) increase earnings.
B) increase prices.
C) reduce prices.
D) ensure that all expectations are realized.
The most actively traded government securities in the secondary market are
A) the oldest securities outstanding.
B) securities issued more than one year but less than five years ago.
C) the securities associated with the current coupon issue.
D) the securities with the longest maturity.
Keynesians argue that the stabilizing effects of a fall in investment and the resulting
decline in the price level assumed by the monetarists
A) will not happen because the price level will actually rise.
B) will happen.
C) is not likely to happen because the price level rarely ever falls.
D) may or may not happen depending on what happens to interest rates.
A decrease in the money supply shifts the aggregate __________ curve to the
__________.
A) demand; left
B) demand; right
C) supply; left
D) supply; right
A Treasury expenditure financed through borrowing from the Federal Reserve will
cause the money supply
A) and bank reserves to rise by an equal amount.
B) and bank reserves to fall by an equal amount.
C) to rise but bank reserves to rise by a greater amount.
D) to rise by a greater amount than the rise in bank reserves.
The primary job of a financial economist within the fixed-income division of a major
financial institution is to
A) conduct statistical analyses.
B) provide instant analysis to traders and salespeople.
C) alert traders and salespeople of the expected activities of the Federal Reserve.
D) construct concrete strategies for institutional investors based on expected interest
rate movements.
An unexpected rise in New Home Sales should send bond prices __________ and stock
prices __________.
A) up; up
B) up; down
C) down; up
D) down; down
Suppose that one-year Treasury bills yield 4 percent in the United States and 5 percent
in Germany. Investors will be indifferent between them if they expect the dollar over
the next year to
A) depreciate against the euro by approximately 1 percent.
B) appreciate against the euro by approximately 1 percent.
C) depreciate against the euro by exactly 20 percent.
D) appreciate against the euro by exactly 20 percent.
A major reason for the existence of financial intermediaries is
A) transactions costs that would be incurred without their existence.
B) the fees charged by dealers and brokers in direct finance are so high.
C) the problem of symmetric information.
D) to assist borrowers in buying securities in financial markets.
As of the end of 1994 which of the countries in our survey had the largest proportion of
stock held by the government?
A) The United Kingdom
B) The United States
C) Japan
D) Germany
In the Keynesian model, a build-up of unwanted inventories leads to
A) rising interest rates.
B) falling unemployment.
C) falling output.
D) falling money wages.