Which of the following is a fixed payment loan?
A) a home mortgage
B) a U.S. Treasury bill
C) a U.S. Treasury note
D) a zero-coupon bond
Answer:
The “greater fool” theory assumes that
A) markets are efficient.
B) bubbles cannot exist in well-organized markets.
C) it makes sense for an investor to buy an asset as long as there is someone else to buy
it later for a higher price.
D) bond market returns are always above stock market returns.
Answer:
Which of the following statements is correct?
A) New classicals believe that the aggregate supply curve is a vertical line in both the
short run and the long run.
B) Both new classicals and new Keynesians believe that the aggregate supply curve is
vertical in the long run.
C) New Keynesians believe that the aggregate supply curve is vertical in the short run
but not in the long run.
D) New Keynesians believe that the aggregate supply curve slopes upward in the long
run.
Answer:
If you buy a futures contract for U.S. Treasury bills and on the delivery date the interest
rate on T-bills is lower than you expected, you will have
A) lost money on your long position.
B) gained money on your long position.
C) lost money on your short position.
D) gained money on your short position.
Answer:
Regulation Q was intended to
A) maintain banks’ profitability by limiting competition for funds.
B) increase the reserves banks would hold against demand deposits.
C) increase the reserves banks would hold against time deposits.
D) eliminate the need for discount loans.
Answer:
Which of the following is NOT a company that collects information on individual
borrowers and sells it to savers?
A) Moody’s Investor Service
B) Value Line
C) NASDAQ
D) Dun and Bradstreet
Answer:
According to the efficient markets hypothesis, the difference between today’s price for a
share of stock and tomorrow’s price is
A) predictable given currently available information.
B) equal to today’s price minus yesterday’s price.
C) unforecastable.
D) zero.
Answer:
Since Germany is a large open economy, the increase in German borrowing and
investment in what was formerly East Germany in the early 1990s resulted in
A) a decline in the world real interest rate.
B) a shift to the right in the German supply of loanable funds curve.
C) an increase in the real interest rate in the United States.
D) a shift to the left in the German demand for loanable funds curve.
Answer:
Federal Reserve districts
A) conform to state boundaries.
B) group together economically similar states.
C) have equal populations.
D) cut across state and economic boundaries.
Answer:
Which of the following is NOT considered one of the four groups in the Federal
Reserve System?
A) Federal Reserve banks
B) Federal Deposit Insurance Corporation
C) Board of Governors
D) Federal Open Market Committee
Answer:
An order from an exchange for a seller to add enough funds to meet the minimum
balance in a margin account is called:
A) maintenance margin
B) margin option
C) margin call
D) margin put
Answer:
Suppose that there is concern about the stability of the global financial system causing a
flight to the safety of U.S. government bonds. Which of the following is NOT a likely
consequence?
A) higher price of U.S. government bonds
B) lower interest rate on U.S. government bonds
C) increased demand for U.S. government bonds
D) reduced supply of U.S. government bonds
Answer:
What is the name of the pension plan under which employees can make tax-deductible
contributions through regular payroll deductions?
A) 401(k) plans
B) Social Security plans
C) Early retirement plans
D) 486(b) plans
Answer:
If Sony keeps the price of PlayStation 3 constant in terms of dollars, what is the impact
on Sony of a stronger yen?
A) a decline in exports to the United States
B) an increase in imports from the United States
C) lower profit
D) higher profit
Answer:
One implication of the efficient markets hypothesis is that investors should
A) concentrate their investments in just a few well-chosen assets.
B) hold a diversified portfolio of assets.
C) buy stocks rather than bonds.
D) buy bonds rather than stocks.
Answer:
Which type of bond would you purchase if you expected higher rates of inflation during
the life of the bond?
A) Treasury bond
B) TIPS
C) corporate bond
D) municipal bond
Answer:
Noise traders
A) pursue trading strategies based on inflated view of their ability to understand the
significance of a piece of news.
B) make use of inside information.
C) reduce the amount of risk in the market.
D) help to ensure that asset prices reflect the fundamental values of the securities being
traded.
Answer:
The coupon rate is the
A) annual coupon payment divided by the face value of the bond.
B) annual coupon payment divided by the market value of the bond.
C) difference between the face value of the bond and its par value.
D) coupon paid every 6 months divided by par value.
Answer:
The process by which investment banks guarantee a certain price to a firm issuing
stocks or bonds is known as:
A) underwriting
B) securitization
C) proprietary trading
D) microlending
Answer:
Which of the following is true of the segmented markets theory?
A) It assumes that borrowers have particular periods for which they want to borrow.
B) It assumes that lenders always lend for short periods.
C) It provides a good explanation for why yield curves usually slope upward.
D) It assumes that instruments with different maturities are perfect substitutes.
Answer:
All of the following statements about secondary credit are true EXCEPT
A) they are temporary, short-term loans to satisfy seasonal requirements.
B) the secondary credit interest rate is set above the primary credit rate.
C) it is intended for banks not eligible for primary credit.
D) borrowers of secondary credit are less financially healthy.
Answer:
The intrinsic value of an option
A) is equal to the option premium.
B) is the amount the option actually is worth if it is immediately exercised.
C) is the amount the option is expected to be worth on its expiration date.
D) is impossible to determine in the absence of information on the future prices of the
underlying asset.
Answer:
All of the following were reasons that the Fed increase the required reserve ration in
1936 EXCEPT:
A) concerns over the possibility of future inflation
B) to eliminate the high level of excess reserves
C) fears that the economy was overheating
D) concerns over a speculative bubble
Answer:
Which of the following statements is NOT true?
A) Each Federal Reserve bank maintains its own discount window.
B) Before 1980, the Fed rarely made loans to banks which were not members of the
Federal Reserve System.
C) Since 1980, all depository institutions have had access to the discount window.
D) Each Federal District Bank can charge a different discount rate.
Answer:
The facts show that the political business cycle theory
A) does a good job of explaining monetary policy during presidential election years.
B) is unable to explain monetary policy during presidential election years.
C) doesn’t generally support the political business cycle theory.
D) explains monetary policy best during years in which the President is running for
reelection.
Answer:
All of the following are problems cited by Warren Buffet as problems with derivatives
not traded on exchanges EXCEPT
A) they are thinly traded which makes it difficult to determine their value.
B) firms do not set aside reserves against potential losses.
C) they involve substantial counterparty risk.
D) they were not flexible enough due to lack of standardization.
Answer:
Which of the following types of mortgage loans became more common during the
housing boom of the early-to-mid 2000s?
A) those with flawed credit histories
B) thirty-year, fixed-rate mortgages
C) prime Mortgages
D) those with down payments of at least 20%
Answer:
Which of the following is a liability of the Fed?
A) U.S. government securities
B) currency in circulation
C) discount loans to banks
D) checkable deposits in commercial banks
Answer:
Excess reserves equal
A) total reserves less required reserves.
B) required reserves less total reserves.
C) total reserves plus required reserves.
D) required reserves divided by total reserves.
Answer:
Economists generally agree that in the long run changes in aggregate demand affect
A) aggregate output but not the price level.
B) the price level but not aggregate output.
C) both the price level and aggregate output.
D) neither the price level nor aggregate output.
Answer:
A bank’s remaining value after it has met all its liabilities is known as a
A) bank’s assets.
B) bank’s liabilities.
C) bank capital.
D) bank’s income.
Answer:
An advantage of a swap over futures and options is that
A) they can be written for long periods.
B) they are more liquid.
C) they carry less default risk.
D) there is no need to assess the creditworthiness of participants.
Answer:
When economists and policymakers refer to the Fed’s dual mandate, they are referring
to:
A) price and exchange rate stability.
B) price stability and maximum employment.
C) moderate long-term interest rates and maximum employment.
D) price stability and moderate long-term interest rates.
Answer:
In 2012, the House of Representatives voted to have what type of audit of the Fed?
A) auditing of financial statements
B) auditing lending policy that took place during the financial crisis of 2007-2009
C) auditing of monetary policy decisions
D) auditing of personal finances of members of the Board of Governors
Answer:
As of October 2012, approximately what portion of U.S. currency is held outside of the
United States?
A) 1/10
B) 1/3
C) 1/2
D) 2/3
Answer: