Among state member and national banks, __________ have federal deposit insurance
through the FDIC.
A) all
B) virtually all
C) a minority
D) none of them
Regulation Q was responsible for the drop in importance of __________ as a source of
bank funds.
A) time deposits
B) transactions deposits
C) savings deposits
D) equity
If investment spending is interest-sensitive and highly unstable, the Federal Reserve
could minimize fluctuations in income by targeting
A) velocity.
B) the interest rate.
C) the money supply.
D) government debt.
Which of the following institutions is eligible to borrow from the Federal Reserve at the
discount rate?
A) Property and casualty insurance companies
B) Money market mutual funds
C) Credit unions
D) Investment banks
A vertical LM curve means that
A) monetary policy has no impact on the interest rate.
B) monetary policy has no impact on income.
C) fiscal policy has no impact on the interest rate.
D) fiscal policy has no impact on income.
The main reason for the rising market value of corporate stock is
A) falling interest rates.
B) changes in tax laws.
C) increases in the prices of existing stock.
D) the increased supply of new stock.
A major reason for regulating the financial sector is to facilitate __________ policy.
A) monetary
B) fiscal
C) antitrust
D) merger
Relative to a bond with a shorter maturity, a bond with a longer maturity has greater
A) interest rate volatility.
B) marketability.
C) price volatility.
D) default risk.
Prior to the 1970s, the demand for money (M1) was
A) relatively stable.
B) unpredictable.
C) constant.
D) unmeasurable.
Commercial banks
A) buy private placements for their own portfolio of assets.
B) help firms sell private placements.
C) sell their own private placements.
D) have nothing to do with private placements.
Which of the following statements is not true?
A) Financial and intermediated markets are conduits through which funds are
channeled.
B) Borrower-spenders benefit from financial and intermediated markets because they
earn interest or dividends on their funds.
C) Without financial and intermediated markets, savers would have no choice but to
hoard their excess money.
D) When funds flow through intermediaries, the process is indirect.
The Keynesians argue that even if the interest rate does __________ in response to a
decrease in investment, there is __________ guarantee that spending will increase very
much.
A) increase; no
B) increase; a
C) decrease; no
D) decrease; a
“Bootstrap financings” are buyouts financed by
A) the company managers’ own assets.
B) finance companies.
C) junk bonds.
D) new issuance of bonds.
If the Federal Reserve eliminated all reserve requirements the most likely result would
be
A) a large number of depository institution failures because they would not have
enough liquidity.
B) the Federal reserve would be unable to control the money supply.
C) banks would no longer be able to clear checks at the Federal Reserve because there
would be no required reserves.
D) the size of the money multiplier might fluctuate considerably making the Federal
Reserve’s job of controlling the money supply more difficult.
An asset that can be quickly turned into the medium of exchange without taking a loss
is said to be very
A) accountable.
B) liquid.
C) divisible.
D) profitable.
A bank has total assets of $3,000,000. Of these assets, $200,000 are cash and $300,000
are Treasury securities. Furthermore, the bank holds municipal revenue bonds of
$600,000, residential mortgages of $1,000,000, and consumer and commercial loans of
$900,000. This bank’s risk-adjusted assets are
A) $3,000,000.
B) $1,900,000.
C) $1,250,000.
D) $1,070,000.
If an increase in the money supply causes people to buy more financial assets,
A) securities prices go up, interest rates will fall, and spending on plant and equipment
falls.
B) securities prices go up, interest rates will rise, and spending on plant and equipment
falls.
C) securities prices go up, interest rates will fall, and spending on plant and equipment
rises.
D) securities prices go up, interest rates will rise, and spending on plant and equipment
rises.
In markets-oriented systems an under-performing “entrenched” management is often
replaced by
A) SEC regulators.
B) a hostile takeover.
C) stockholders electing a new board of directors to fire the managers.
D) the bank that owns the firm firing them.
An unexpected rise in Retail Sales should send bond prices __________ and stock
prices __________.
A) up; up
B) up; down
C) down; up
D) down; down