The most widely used measure of interest rates in bond markets is the
A) coupon rate.
B) discount rate.
C) yield to maturity.
D) current yield.
An effective way to restore credibility to monetary authorities after a period of
hyperinflation is
A) the introduction of a new monetary unit.
B) the introduction of wage and price controls.
C) a reduction in bank reserve requirements.
D) the centralization of monetary and fiscal policy under a single governmental unit.
Empirical evidence suggests that there are economics of __________ in banking for all
bank sizes.
A) scale and scope
B) scale but not scope
C) scope but not scale
D) neither scale nor scope
A negatively sloped yield curve indicates that the economy
A) is likely to show strong growth in the coming months.
B) will not change noticeably in the coming months.
C) is likely to show significant weakness in the coming months.
D) None of the above.
Puts and calls are the choices available to participants in the
A) options market.
B) futures market.
C) swap market.
D) stock market.
If an investor paid $900 for a bond with a $1,000 face value and a current yield of 10
percent, then the coupon rate is
A) 9 percent.
B) 10 percent.
C) 12 percent.
D) 15 percent.
When the Fed tightens monetary policy during business expansions, the __________
loanable funds shifts to the __________.
A) demand for; right
B) demand for; left
C) supply of; left
D) supply of; right
Which of the following is not a theory used to explain the term structure of interest
rates?
A) Liquidity premium theory
B) Pure expectations theory
C) Preferred habitat theory
D) Pure liquidity theory
The amount of investment demand at each interest rate suddenly falls. If the Fed holds
to an unchanged money supply target, the change in GDP is __________ if it had held
to an unchanged interest rate target.
A) greater than
B) less than
C) the same as
Keynesian picture the aggregate demand curve as rather __________, partly because
interest rates may be __________ to changes in the real money supply.
A) flat; highly responsive
B) flat; quite unresponsive
C) steep; highly responsive
D) steep; quite unresponsive
A mutual fund that purchases a wide variety of stocks will
A) eliminate systematic risk.
B) minimize nonsystematic risk.
C) minimize market risk.
D) minimize default risk.
In IS-LM analysis, the nominal interest rate is
A) purely a monetary phenomenon.
B) purely a real phenomenon.
C) both a monetary and a real phenomenon.
D) neither a real nor a monetary phenomenon, but determined by government policy.
A contractionary monetary policy can reduce real GDP 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.
In Germany the three largest banks or Grossbanken are
A) commercial banks.
B) savings banks.
C) cooperative banks.
D) specialized banks.
Paul would like to buy a consol promising an interest rate of 8 percent and paying $90
annually. Paul should not pay more than $__________ for the console.
A) 90
B) 1,000
C) 1,125
D) 900
A one-year Treasury bill that sells for $952.38 and has a face value of $1,000 has an
annual yield of
A) 10 percent.
B) 8 percent.
C) 6 percent.
D) 5 percent.
Along an LM curve at lower interest rates there is __________ money demanded, so
income must be lower to __________ the demand for transactions balances if the total
demand for money is to equal the fixed supply.
A) less; decrease
B) less; increase
C) more; decrease
D) more; increase