A put option is said to be in the money if
(a) it is written on a Treasury bill or other money-market asset.
(b) it has increased in price since it was first written.
(c) the price of the underlying asset is currently less than the strike price.
(d) the price of the underlying asset is currently less than the strike price plus the option
premium.
Answer:
Most of the Fed’s portfolio of securities consists of
(a) U.S. Treasury securities.
(b) securities issued by foreign governments.
(c) securities issued by state and local governments in the United States.
(d) corporate bonds.
Answer:
About what fraction of bank assets is made up of cash items?
(a) 4%
(b) 25%
(c) 50%
(d) 75%
Answer:
When deciding between domestic and foreign financial investments, investors typically
consider
(a) domestic and foreign inflation rates and expected changes in the exchange rate.
(b) domestic and foreign budget deficits.
(c) shifts in the relative demand for foreign and domestic goods.
(d) domestic and foreign interest rates and expected changes in the exchange rate.
Answer:
Between 1965 and 2002, the percentage of U.S. output exported to foreigners
(a) remained about the same.
(b) more than doubled.
(c) increased by more than ten times.
(d) declined by about half.
Answer:
If credit card companies imposed a per purchase charge for using their cards,
(a) money balances would fall, and the velocity of money would rise.
(b) money balances would rise, and the velocity of money would fall.
(c) both money balances and the velocity of money would fall.
(d) both money balances and the velocity of money would rise.
Answer:
The main role of financial intermediaries is to
(a) provide funds to the federal government to cover the budget deficit.
(b) borrow funds from savers and lend them to borrowers.
(c) provide advice to consumers on how they should handle their finances.
(d) help ensure that there is enough money in circulation.
Answer:
By 2003, international bank lending in the United States, Western Europe, and Japan
amounted to
(a) less than $100 million.
(b) about $500 million.
(c) about $1 billion.
(d) several trillion dollars.
Answer:
The accounts the Treasury has in local commercial banks are called
(a) the General Accounts.
(b) Treasury debit accounts.
(c) Treasury credit accounts.
(d) Treasury tax and loan accounts.
Answer:
The typical firm will find that its payoff to reducing price increases after the
announcement of a disinflation policy
(a) increases if it believes that the policy will actually be carried out.
(b) decreases if it believes that the policy will actually be carried out.
(c) is independent of whether the policy is actually carried out.
(d) depends on movements in the LRAS curve.
Answer:
During a business cycle expansion, output grows until it reaches
(a) the physical maximum of production.
(b) the level at which inflation begins.
(c) a trough.
(d) a peak.
Answer:
The relative illiquidity of corporate bonds is reflected in their having
(a) higher prices than U.S. government securities.
(b) smaller coupons than U.S. government securities.
(c) higher bid-asked spreads than U.S. government securities.
(d) more active secondary markets than U.S. government securities.
Answer:
Financial intermediaries
(a) include banks and other depository institutions.
(b) include the New York and American Stock exchanges.
(c) directly issue claims on individual borrowers to savers.
(d) are owned and operated by the federal government.
Answer:
Divisa aggregates
(a) are another name for weighted aggregates.
(b) differ from weighted aggregates in that they do not include components of M1.
(c) weight the inflation rate, as well as monetary aggregates.
(d) provide a poor fit when estimating money demand equations.
Answer:
Negotiable certificates of deposit differ from demand deposits in that they
(a) are not subject to early withdrawal penalties.
(b) may be bought and sold in the secondary market.
(c) generally have lower interest rates.
(d) are not subject to state and local income taxes.
Answer:
Merchant banking refers to
(a) banking services available only to retail merchants.
(b) banking services available to businesses but not to the general public.
(c) investment banks investing their own funds in companies.
(d) banking activities being carried out by companies that are not banks.
Answer:
The members of Federal Reserve district bank boards of directors who are bankers are
known as Class
(a) A directors.
(b) B directors.
(c) C directors.
(d) D directors.
Answer:
Financial futures contracts are regulated by
(a) the Commodity Futures Trading Commission.
(b) the Federal Trade Commission.
(c) the Interstate Commerce Commission.
(d) the Options and Futures Commission.
Answer:
Suppose First National Bank makes a one-year simple loan of $10,000 at 5% interest to
Acme Widget. At the end of one year Acme Widget will pay First National
(a) $9500.
(b) $9523.81.
(c) $10,050.
(d) $10,500.
Answer:
What fraction of commercial bank deposits are held by bank holding companies?
(a) 5%
(b) 25%
(c) 75%
(d) 90%
Answer:
If the equilibrium price in the bond market for a one-year discount bond is $9400, then
the equilibrium interest rate in the loanable funds market must be
(a) 4%.
(b) 6%.
(c) 6.4%.
(d) 9.4%.
Answer:
Which of the following countries has the longest history of international banking?
(a) The United States
(b) Japan
(c) Switzerland
(d) Canada
Answer:
Which of the following statements about branching restrictions on banks is true?
(a) Restrictions on branching are much weaker currently than they were in the 1970s.
(b) Several large banks now have branches in every state.
(c) Restrictions on branching are greater currently than they were in the mid-1970s.
(d) Superregional banks exist only in the West.
Answer:
A decrease in the price level will lead to
(a) a decrease in the real interest rate and an increase in net exports.
(b) an increase in the real interest rate and an increase in net exports.
(c) a decrease in the real interest rate and a decrease in net exports.
(d) an increase in the real interest rate and a decrease in net exports.
Answer:
In the long run a permanent increase in the nominal money supply will
(a) lead to a permanently higher level of real output.
(b) lead to a permanently higher price level.
(c) lead to a permanently higher level of investment spending.
(d) have no effect on the level of output, the price level, or the level of investment
spending.
Answer:
In the early nineteenth century in the United States
(a) financial markets were actually more integrated than they are today.
(b) substantial differences existed in the interest rates charged to borrowers in different
parts of the country.
(c) high-quality investment projects were much easier to finance.
(d) federal law prohibited the payment of interest on loans.
Answer:
If the United States puts a tariff on the import of golf balls,
(a) the price of U.S.-produced golf balls will fall.
(b) the dollar will depreciate.
(c) the dollar will appreciate.
(d) the price of foreign-produced golf balls sold in the United States will fall.
Answer:
What do many economists blame for the severity of the Great Depression?
(a) The collapse of the banking system
(b) The lack of a definitive money in the U.S. monetary system
(c) The issuing of an excessively large amount of currency by the Federal Reserve
(d) The collapse of the electronic funds transfer system
Answer:
The fee charged by the seller of an option is referred to as the
(a) market price.
(b) option premium.
(c) futures fee.
(d) call price.
Answer:
Which of the following organizations main role is check clearing?
(a) CHIPS
(b) SEC
(c) FDIC
(d) COMEX
Answer:
Suppose that your marginal federal income tax rate is 30%, the sum of your marginal
state and local tax rates is 5%, and the yield on a thirty-year corporate bond is 10%. You
would be indifferent between buying this corporate bond and buying a thirty-year
municipal bond (ignoring differences in liquidity, risk, and costs of information) if the
municipal bond has a yield of
(a) 6.5%.
(b) 7.0%.
(c) 9.5%.
(d) 10.0%.
Answer:
In order to buy in 2003 a bundle of goods that cost $100 in 1965, you would need
roughly
(a) $104.
(b) $200.
(c) $400.
(d) $2400.
Answer:
If you look at the financial page listings for futures contracts and find that futures prices
on Treasury bonds are falling over a particular time period, futures market investors
must expect that
(a) Treasury bond prices will be higher in the future.
(b) Treasury bond yields will be higher in the future.
(c) Treasury bond yields will be lower in the future.
(d) futures prices will rise again at the end of the period.
Answer: