Financial intermediaries are specialists in the production of
A) market failure.
B) information.
C) traded assets.
D) commercial paper.
Firm ownership in the United Kingdom is largest for
A) individuals.
B) financial institutions ‘ agents.
C) financial institutions ‘ ownership/control.
D) nonfinancial corporations.
A stock life insurance company is owned and controlled by its
A) partners.
B) managers.
C) stockholders.
D) policyholders.
The natural rate of interest is the rate
A) which equates saving and investment under any employment condition.
B) which equates saving and investment with acceptable, but low, unemployment.
C) which equates saving and investment at an unemployment rate of 5 percent or less.
D) which equates saving and investment at full employment.
Which of the following statements is incorrect?
A) Regulation Q was eliminated as a result of DIDMCA and the Garn-St. Germain Act.
B) S&Ls in the early 1980s were primarily invested in deposits.
C) The rate spread between the average yield on assets and the average cost of funds for
S&Ls in the early 1980s was negative.
D) In the early 1980s, the value of S&L assets fell below the value of S&L liabilities.
Which of the following is not a derivative?
A) Treasury bond futures
B) Common stock
C) Swaps
D) Options
Expansions of aggregate demand cause the economy to move along what is essentially
a vertical aggregate supply curve when
A) wage increases catch up to inflation.
B) higher prices can reduce interest rates no further.
C) money supply growth rises to equal the rate of aggregate demand expansion.
D) from a recession level of output, full employment is reached.
You just bought a new car. In this transaction, you used money as a
A) form of credit.
B) source of income.
C) means of payment.
D) standard of value.
Suppose that one-year Treasury bills yield 6 percent in the United States and 4 percent
in Britain. Investors will be indifferent between them if they expect the dollar to
A) depreciate against the pound by approximately 2 percent.
B) appreciate against the pound by approximately 2 percent.
C) depreciate against the pound by approximately 33 percent.
D) appreciate against the pound by approximately 33 percent.
A decrease in German Treasury interest rates, all else held constant, causes a leftward
shift in the __________ euros and causes the dollar to __________ against the euro.
A) supply of; appreciate
B) supply of; depreciate
C) demand for; appreciate
D) demand for; depreciate
Most bank loans are __________ maturity by the bank because of the __________ in
monitoring how the borrower maintains his obligations.
A) held to; ease
B) held to; difficulty
C) sold before; ease
D) sold before; difficulty
The more we pay for a euro, the __________ European goods are to us and the
__________ European assets are to us.
A) cheaper; cheaper
B) cheaper; more expensive
C) more expensive; cheaper
D) more expensive; more expensive
Assume the federal government collects $20 billion in taxes and spends them on the
public. If the money multiplier is 2.5, bank reserves
A) and the money supply still increase by only $20 billion.
B) increase by $20 billion and the money supply increase by $50 billion.
C) and the money supply both increase by $50 billion.
D) and the money supply are unaffected.
If the consensus in securities markets is that a previous increase in the money supply
will be inflationary, the likely result will be
A) higher real interest rates.
B) higher nominal interest rates.
C) lower real interest rates.
D) lower nominal interest rates.
Suppose that during a given month 200,000 persons who had been self-employed leave
their business and get jobs working for other businesses. This will cause
A) the unemployment rate to rise.
B) the unemployment rate to fall.
C) payroll employment to rise.
D) payroll employment to fall.
E) no change in either the unemployment rate or payroll employment.
A large business finds it __________ than a small business to pursue secretly a
high-risk investment in violation of the terms of its loan agreement, and so the large
business is __________ beset by the moral hazard problem.
A) more difficult; more
B) more difficult; less
C) easier; more
D) easier; less
Moral hazard can be a problem in lending since lenders share __________ in the
__________ risk.
A) proportionately; upside
B) proportionately; downside
C) disproportionately; upside
D) disproportionately; downside
The Federal Reserve views commercial bank use of the discount window as
A) something to be used only by commercial banks.
B) completely up to the borrower.
C) a privilege, not a right for eligible borrowers.
D) something to be used only in financial panics.
When considering the velocity of money, the Federal Reserve is most concerned about
its
A) stability.
B) absolute size.
C) determinants.
D) sign.
A consol has an annual coupon payment of $100 and a price of $800. The yield on this
security is equal to __________ percent
A) 6
B) 10
C) 12.5
D) 14
A reduced risk premium __________ the discount factor in the stock price valuation
formula, and __________ stock prices.
A) raises; raises
B) raises; lowers
C) lowers; raises
D) lowers; lowers
An important market for overnight borrowing and lending is the
A) commercial paper market.
B) repo market.
C) Treasury bill market.
D) Treasury bond market.
The Federal Reserve cannot always control the level of total spending in the economy
using monetary policy because it cannot control
A) the money supply.
B) velocity.
C) total reserves.
D) total bank lending.