This basic pattern emerges in the United States: financial institutions are more heavily
regulated
A) the smaller is their typical contributor.
B) the larger is their typical contributor.
C) the riskier are their assets.
D) the larger they are in total asset size.
Banks are prohibited from holding __________ in their portfolio of assets.
A) commercial paper
B) local government securities
C) farm mortgages
D) corporate stock
The interest rate charged on overnight loans between banks is the
A) discount rate.
B) federal funds rate.
C) Treasury bill rate.
D) prime rate.
As a bank’s assets become less risky, its
A) risk-based capital ratio rises.
B) risk-based capital ratio falls.
C) leverage ratio rises.
D) leverage ratio falls.
The impact lag is the time between
A) a change in the money supply and a change in interest rates.
B) a change in the money supply and a change in GDP.
C) the use of a Federal Reserve tool and its effect on GDP.
D) the use of a Federal Reserve tool and its effect on the money supply.
The LM curve shows points of equilibrium in the money market and combinations of
A) inflation and unemployment.
B) aggregate supply and aggregate demand.
C) income and the interest rate.
D) money supply and money demand.
An investor pays 20 percent of his income in taxes and purchases a $1,000 corporate
bond yielding 10 percent. The after-tax yield on this bond is
A) 9 percent.
B) 8 percent.
C) 7 percent.
D) 6 percent.
The M1 definition of money includes
A) currency outside banks plus checkable deposits and Eurodollars.
B) currency outside banks plus checkable deposits plus retail money market deposit
accounts.
C) currency outside banks plus checkable deposits plus traveler’s checks.
D) currency outside banks plus checkable deposits plus small-denomination time
deposits.
Which of the following is not a characteristic of “perfect” markets?
A) Buyers and sellers can transact with each other directly if transaction costs are set at
an appropriate level.
B) Securities are infinitely divisible.
C) Buyers and sellers know the true quality of what they are buying and selling.
D) All of the above are characteristics of perfect markets.
The risk-shifting problem tends to be __________ for __________ firms than for
__________ firms.
A) greater; small; large
B) greater; large; small
C) the same; large; small
D) None of the above.
Keynesians believe that to help ensure full employment production, we should use
A) both counter-cyclical monetary and fiscal policy.
B) a money supply rule and counter-cyclical fiscal policy.
C) counter-cyclical fiscal policy only.
D) counter-cyclical monetary policy only.
An anticipated change in the money supply will result in a(n) __________ level of
economic activity and a __________ price level.
A) increased; higher
B) decreased; higher
C) unchanged; lower
D) unchanged; higher
Empirical evidence reveals a(n) __________ relationship between money and stock
prices.
A) positive and consistent
B) negative and consistent
C) completely independent
D) inconsistent
A mutual fund that charges a sales commission is a
A) load fund.
B) no-load fund.
C) closed-end fund.
D) premium fund.
Parker bank is fully loaned up. Which of the following is not an option Parker has to
obtain additional reserves?
A) Call in loans
B) Buy securities
C) Sell securities
D) Borrow through the federal funds market
Which of the following will change the position of the IS curve?
A) An increase planned investment spending
B) An increase in interest rates
C) An increase in money demand
D) An increase in the money supply
The clearing corporation associated with the Chicago Board of Trade consists of
A) government regulatory bodies.
B) major commercial banks.
C) members of the exchange.
D) major corporations.
Evidence that most investors are risk averse is that they
A) buy a diversified portfolio.
B) buy different bonds with the same yield and maturity.
C) put most of their funds in one company’s stock.
D) like to gamble.
The crowding out effect of expansionary fiscal policy when the money supply is not
increased is confirmed by
A) the Keynesian econometric models only.
B) the Monetarist models only.
C) both the monetarist and Keynesian econometric models.
D) neither the Monetarist nor the Keynesian econometric models.