The purchasing power of money
A) rises when prices fall.
B) rises when prices rise.
C) is set by the Fed in January of each year.
D) is constant.
Answer:
Which of the following statements concerning seasonal credit is true?
A) It tends to have a lower interest rate than federal funds.
B) It has become increasingly more important in recent years.
C) Only firms receiving secondary credit are eligible to receive seasonal credit.
D) Improvements in credit markets have reduced the need for a seasonal credit facility.
Answer:
The era of bank panics in the United States was effectively ended by
A) establishing the Fed as lender of last resort.
B) implementing the gold standard.
C) abandoning the gold standard.
D) introducing deposit insurance.
Answer:
The due diligence process is
A) the process by which a firm chooses an investment bank.
B) when an investment bank researches a firm’s value.
C) how an investment bank underwrites large issues.
D) the review of a prospectus by the SEC.
Answer:
The reduction in transactions costs brought about by financial intermediaries benefits
A) small savers, but not small borrowers.
B) small borrowers, but not small savers.
C) both small savers and small borrowers.
D) society through greater economic efficiency; small savers and borrowers do not gain
directly.
Answer:
A simple loan involves
A) interest payments from the borrower to the lender periodically during the life of the
loan.
B) no payment of interest by the borrower to the lender.
C) payment of interest by the borrower to the lender only at the time the loan matures.
D) payment only of principal. by the borrower to the lender at maturity.
Answer:
Why may a central bank intervene in the foreign exchange market when its currency is
appreciating?
A) concerns about the country’s exports becoming less competitive
B) concerns about inflation
C) concerns about imports becoming less competitive
D) to sterilize the effects on the domestic economy
Answer:
The first Fed chair to hold a press conference was:
A) Paul Volcker
B) Alan Greenspan
C) Ben Bernanke
D) Mario Draghi
Answer:
If major traders believe the price of a stock should be higher than its current market
price,
A) they have an incentive to sell the stock.
B) their actions will result in the information they possess being incorporated into the
price of the stock.
C) there is little they can do because government regulation precludes their acting on
what they know.
D) they should petition the Securities and Exchange Commission to authorize an
adjustment in the price of the stock.
Answer:
The Troubled Asset Relief Program (TARP) allowed
A) the Treasury to inject funds into commercial banks in return for stock in the banks.
B) the Fed to provide funds to commercial banks in return for stock.
C) the Treasury to insure bank deposits at major U.S. banks.
D) the Fed to make loans to banks as the lender of last resort.
Answer:
Many economists and policymakers have raised concerns about crowd funding due to
the existence of:
A) information costs facing small investors
B) information costs facing business start ups
C) transaction costs facing business start ups
D) increased competition for banks in funding business start ups
Answer:
If the Fed sells foreign assets, the monetary base will
A) fall by the amount of the sale, only if the Fed buys domestic bank deposits with the
proceeds.
B) fall by the amount of the sale, only if the Fed buys domestic currency with the
proceeds.
C) fall by the amount of the sale, whether the Fed buys domestic bank deposits or
domestic currency with the proceeds.
D) rise by the amount of the sale.
Answer:
Which of the following is NOT an implication of the theory of purchasing power
parity?
A) Exchange rates move to equalize the purchasing power of different currencies.
B) Exchange rates should be at a level that makes it possible to buy the same amount of
goods and services with the equivalent amount of any country’s currency in the long
run.
C) A country with a higher inflation rate should experience an appreciation of its
currency.
D) The real exchange rate should equal one.
Answer:
The sensitivity of bank capital to market interest rates is measured by
A) gap analysis.
B) duration analysis.
C) leverage ratio.
D) capital analysis.
Answer:
The Federal Reserve issues a report indicating that future inflation will be higher than
had previously seemed likely. As a result
A) the supply curve for bonds shifts to the right.
B) the demand curve for loanable funds shifts to the left.
C) the equilibrium interest rate falls.
D) the equilibrium price of bonds rises.
Answer:
Which of the following statements is correct?
A) Open market purchases are expansionary and open market sales are contractionary.
B) Open market purchases are contractionary and open market sales are expansionary.
C) Both open market purchases and open market sales are expansionary.
D) Both open market purchases and open market sales are contractionary.
Answer:
According to the liquidity premium theory, if market participants expect that inflation in
the future will be lower than it currently is, the yield curve will
A) slope upward.
B) be flat.
C) be inverted.
D) be vertical.
Answer:
If the expected gains on stocks rise, while the expected returns on bonds do not change,
then
A) the demand curve for bonds will shift to the right.
B) the supply curve for loanable funds will shift to the right.
C) the equilibrium interest rate will fall.
D) the equilibrium interest rate will rise.
Answer:
A closed economy is one in which
A) investment spending is zero.
B) government spending is zero.
C) there are no imports or exports.
D) demand equals supply in every market.
Answer:
Apart from the United States, in countries where central bank board members serve
fixed terms of office,
A) none have terms as long as fourteen years.
B) many serve for life or good behavior.
C) all have terms longer than fourteen years.
D) the head of the central bank rarely has a term longer than one year.
Answer:
Suppose that you own $10,000 worth of stock in General Motors. Adding stock in
which of the following companies would be least likely to reduce the risk in your
portfolio?
A) Google
B) Walmart
C) Ford
D) General Electric
Answer:
Which of the following accurately describes possible positions taken by hedgers?
A) may take a short position in the futures market to offset a long position in the spot
market
B) may take a short position in the spot market to offset a long position in the futures
market
C) may take a long position in the spot market to offset a short position in the futures
market
D) may take a long position in the futures market to offset a long position in the spot
market
Answer:
As of October 2012, the value of currency in circulation was about
A) $1.1 billion.
B) $11 billion.
C) $1.1 trillion.
D) $11 trillion.
Answer:
The difference between money and income is that whereas income is an individual’s
A) flow of earnings over a period of time, money is an individual’s stock of currency
and currency substitutes.
B) stock of all assets, money is an individual’s stock of currency and currency
substitutes.
C) flow of earnings over a period of time, money is an individual’s stock of all assets.
D) stock of currency and currency substitutes, money is an individual’s stock of all
assets.
Answer:
Which of the following is the lowest rating given to an investment-grade bond by
Moody’s?
A) Aa
B) A
C) Baa
D) B
Answer:
If the Fed wants to increase the value of the dollar, it will
A) sell foreign securities and buy dollars in international currency markets.
B) buy foreign securities and sell dollars in international currency markets.
C) buy foreign securities and also buy dollars in international currency markets.
D) sell foreign securities and also sell dollars in international currency markets.
Answer:
On the books of the Fed the difference between borrowed reserves and discount loans is
equal to
A) excess reserves.
B) required reserves.
C) currency in circulation.
D) zero; they are the same thing.
Answer:
Forward transactions would be useful to
A) a government wanting to know the size of its future debt.
B) a household wanting to reduce its future tax liability.
C) a business wanting to know the cost of its funds on future loans.
D) a business wanting to expand its operations in overseas markets.
Answer:
Banks use repurchase agreements to
A) ensure that payments on consumer loans are made on time.
B) borrow funds from business firms or other banks.
C) guard against price fluctuations on long-term bonds.
D) ensure that they always have enough funds on hand to meet their federal tax
liabilities.
Answer:
Speculators in derivatives markets
A) reduce the efficiency of these markets.
B) are acting contrary to U.S. securities laws.
C) accept risk transferred to them by hedgers.
D) reduce the liquidity of these markets.
Answer:
How is the interest rate that prevails in the bond market determined?
A) by the interaction of stock prices and bond prices
B) by the decision of the president, in consultation with Congress
C) by the demand for and supply of bonds
D) by the Board of Governors of the New York Stock Exchange
Answer: