If the yield on short-term securities is greater than the yield on comparable long-term
securities, the yield curve will have a
A) positive slope.
B) negative slope.
C) constant slope.
D) zero slope.
With a rise in government expenditure we
A) move up along an aggregate demand curve.
B) move down along an aggregate demand curve.
C) shift the aggregate demand curve to the right.
D) shift the aggregate demand curve to the left.
Which of the following assumptions indicates that there is no trade-off between
inflation and unemployment?
A) A vertical aggregate demand curve
B) A vertical Phillips Curve
C) Constant velocity
D) Constant money supply growth rate
Savings banks are very similar to
A) finance companies.
B) savings and loan associations (S&Ls).
C) bond mutual funds.
D) money market mutual funds.
Monetarists consider timing variations in the relationship between money supply
changes and income changes to be
A) a fundamental problem of counter-cyclical monetary policy.
B) inconsequential relative to the problem of instability in the velocity of money.
C) a fundamental long-run problem but not a significant problem in the short run.
D) offset by predictable changes in the money multiplier.
Because loans to small and midsized businesses are rather __________, they have been
relatively __________ to securitize.
A) standardized; easy
B) standardized; difficult
C) not standardized; easy
D) not standardized; difficult
Assume that the M1 multiplier is 4. If the Federal Reserve purchases $200 worth of
government securities, the money supply will
A) rise by $200.
B) rise by $800.
C) fall by $200.
D) fall by $800.
The strike price of a put option for a particular stock is $48. If the stock is selling for
$45 on the expiration date, a put option on this stock has an intrinsic value of
__________ per share.
A) $48
B) $45
C) $3
D) $0
The expenditure multiplier is smallest when the
A) LM curve is positively sloped.
B) LM curve is horizontal.
C) IS curve is vertical.
D) LM curve is vertical.
The largest item on the liability side of the Federal Reserve’s balance sheet is
A) commercial bank deposits.
B) U.S. government securities.
C) cash items in the process of collection.
D) Federal Reserve notes outstanding.
A $1,000, 7 percent deposit pays interest compounded monthly. After six months, the
deposit balance is $__________.
A) 1,036
B) 1,501
C) 1,350
D) 1,420
As a factor explaining yield differences among U.S. government bonds, default risk is
A) always an important consideration.
B) important, but other factors such as market risk are more critical.
C) more important than soverign risk.
D) practically never a consideration.
An important difference between offering prospectus in a public bond issue and the
offering memorandum in a private placement is
A) all relevant factual information about the firm and its financing is required in the
prospectus but not in the offering memorandum.
B) evidence of due diligence is required in the offering memorandum but not in the
prospectus.
C) the prospectus may not contain any projections about the company’s future while an
offering memorandum has no such restriction.
D) There are no differences between these two documents.
When currency outstanding decreases,
A) gold certificates rise.
B) the money supply increases.
C) Fed assets decline.
D) bank deposits at the Fed increase.
When the Federal Reserve sells $500 worth of government securities, the money supply
A) rises by $500.
B) rises by more than $500.
C) falls by $500.
D) falls by more than $500.
Along an IS curve as income levels __________, saving is smaller, so the interest rate
must be __________ to reduce the level of investment so it will be equal to saving.
A) increase; higher
B) increase; lower
C) decrease; higher
D) decrease; lower
Paul is a people-oriented person. Paul would probably function best as a
A) trader.
B) salesperson.
C) financial economist.
D) researcher.
With a change in the money supply, a vertical LM curve shifts a horizontal distance
equal to
A) that change.
B) that change times velocity.
C) that change divided by velocity.
D) that change times the simple Keynesian multiplier.
According to Classical interest rate theory, which of the following will decrease the
equilibrium real interest rate?
A) A decrease in investment
B) A decrease in saving
C) An increase in money demand
D) A decrease in money demand
With an upward sloping LM curve, a rising interest rate __________ money demand, so
that a contractionary monetary policy is __________ than in the case of a vertical LM
curve.
A) raises; stronger
B) raises; weaker
C) lowers; stronger
D) lowers; weaker
A __________ will review a commercial bank’s books to determine whether loans with
delinquent payments impair a bank’s capital.
A) loan officer
B) bank examiner
C) broker
D) bank teller
“Good news” about an expenditure-related indicator means that
A) it is higher than its previous value.
B) it is higher than it was expected to be.
C) it is lower than its previous value.
D) it rose faster than the rate of inflation.
The country in which banks are classified as city banks, regional banks, and special
purpose financial institutions is
A) the United Kingdom.
B) the United States.
C) Japan.
D) Germany.
Consumer finance companies, because of the __________-term nature of their
liabilities, prefer to hold __________-term assets.
A) long; long
B) long; short
C) short; long
D) short; short