The life insurance industry’s share of total financial intermediary assets fell from 15.3%
at the end of 1970 to 11.5% at the end of 1980 because of
A) poor investment returns in the 1970s.
B) widespread failures of life insurance companies.
C) federal regulations limiting the sale of life insurance.
D) unpredictability of payouts.
When a corporation wishes to sell new securities, it usually employs
A) a takeover specialist.
B) a finance company.
C) an investment bank.
D) a commercial bank.
Compared to commercial banks and thrift institutions, finance companies are
A) heavily regulated.
B) able to attract small depositors.
C) prevented from making relatively small loans.
D) virtually unregulated.
Which of the following statements is TRUE?
A) State and local governments cannot default on their bonds.
B) Bonds issued by state and local governments are called municipal bonds.
C) All government issued bonds€local, state, and federal€are federal income tax
exempt.
D) The coupon payment on municipal bonds is usually higher than the coupon payment
on Treasury bonds.
Parties who have sold a futures contract and thereby agreed to ________ (deliver) the
bonds are said to have taken a ________ position.
A) sell; short
B) buy; short
C) sell; long
D) buy; long
A ________ makes investments in new start-up businesses.
A) capital buyout fund
B) sovereign wealth fund
C) venture capital fund
D) hedge fund
With a 10 percent interest rate on dollar deposits, and an expected appreciation of 7
percent over the coming year, the expected return on dollar deposits in terms of the
dollar is
A) 3 percent.
B) 10 percent.
C) 13.5 percent.
D) 17 percent.
The steeply upward sloping yield curve in the figure above indicates that ________
interest rates are expected to ________ in the future.
A) short-term; rise
B) short-term; fall moderately
C) short-term; remain unchanged
D) long-term; fall moderately
Which of the following bank assets is the most liquid?
A) consumer loans
B) reserves
C) state and local government securities
D) U.S. government securities
A speculative attack involves massive sales of a currency or purchases of a currency
that cause a sharp change in the exchange rate under a exchange rate system.
A) weak; strong; fixed
B) strong; weak; fixed
C) weak; strong; floating
D) strong; weak; floating
The channels through which monetary policy affects economic activity are called the
________ of monetary policy.
A) transmission mechanisms
B) flow mechanisms
C) distribution mechanisms
D) allocational mechanisms
The monetarist-Keynesian debate on the importance of monetary policy is unresolved
because monetarists and Keynesians focus on two different types of evidence that
generate conflicting conclusions. Monetarists tend to focus on
A) structural-model evidence, while Keynesians focus on reduced-form evidence.
B) reduced-form evidence, while Keynesians focus on structural-model evidence.
C) reduced-form evidence, while Keynesians focus on direct-model evidence.
D) structural-model evidence, while Keynesians focus on direct-model evidence.
All bonds that will not be held to maturity have interest rate risk which occurs because
of the change in the price of the bond as a result of
A) interest-rate changes.
B) changes in the coupon rate.
C) default of the borrower.
D) changes in the asset’s maturity date.
Which of the following long-term bonds has the highest interest rate?
A) corporate Baa bonds
B) U.S. Treasury bonds
C) corporate Aaa bonds
D) municipal bonds
A model that is composed of many equations that show the channels through which
monetary and fiscal policy affect aggregate output and spending is called a
A) reduced-form model.
B) median-voter model.
C) informed median-voter model.
D) structural model.