Collateral is
A) the interest rate that banks charge high-quality borrowers.
B) assets pledged to the bank in the event the borrower defaults.
C) the difference between the value of a bank’s assets and the value of a bank’s
liabilities.
D) required reserves minus excess reserves.
Answer:
In Wall Street Jargon, a “Bear Market” typically means
A) stock prices have declined by at least 20%.
B) stock prices have declined by at least 50%.
C) stock prices have risen by at least 20%.
D) stock prices have risen by at least 50%.
Answer:
The segmented markets theory
A) explains upward-sloping yield curves as resulting from the demand for long-term
bonds being high relative to the demand for short-term bonds.
B) explains upward-sloping yield curves as resulting from the demand for long-term
bonds being low relative to the demand for short-term bonds.
C) explains upward-sloping yield curves as resulting from the favorable tax treatment
of long-term bonds.
D) is unable to account for upward-sloping yield curves.
Answer:
All of the following were significant changes in the mortgage market in the 2000s
EXCEPT
A) investment banks became significant participants in the secondary mortgage market.
B) lenders loosened lending standards.
C) mortgage-backed securities became more popular with investors.
D) borrowers tended to increase the amount of their down payments.
Answer:
When a bank issues a checkable deposit and loans the funds out to a business, it has
transformed
A) a financial asset for a saver into a liability for a borrower.
B) a financial liability for a saver into a financial asset for a borrower.
C) a short-term liability to a borrower into a long-term asset to a saver.
D) one liability into another liability.
Answer:
The period over which a call or put option exists is
A) determined by its delivery date.
B) determined by its expiration date.
C) determined by whether the contract is written for a commodity or for a financial
instrument.
D) indeterminate; options contracts continue in existence until either the buyer or the
seller desires to discontinue it.
Answer:
Suppose the GDP implicit price deflator was 112.7 in 2013 and 116.0 in 2014.
Therefore, the inflation rate in 2014 would be
A) 2.8%.
B) 2.9%.
C) 3.3%.
D) 16%.
Answer:
If you buy a bond issued by Intel, the bond is a(n):
A) liability to Intel and an asset to you.
B) liability to you and an asset to Intel.
C) liability to both you and Intel.
D) asset to both you and Intel.
Answer:
For how long must most hedge fund investors wait before withdrawing funds?
A) 1 to 3 days
B) 1 to 3 weeks
C) 1 to 3 months
D) 1 to 3 years
Answer:
Economists define money as
A) cash in circulation.
B) deposits in commercial banks.
C) anything that people are willing to accept in payment for goods and services or to
pay off debts.
D) bonds issued by large corporations.
Answer:
On a bank’s balance sheet, “borrowings” are
A) loans to households.
B) loans to businesses.
C) nondeposit liabilities.
D) U.S. Treasury securities.
Answer:
Which of the following groups is an investment bank NOT likely to visit during a “road
show”?
A) institutional investors
B) individual investors
C) university endowments
D) mutual funds
Answer:
Which of the following will take place in the foreign exchange market if there is an
increase in the demand for products made in the United States?
A) The supply of dollars will decrease.
B) The demand for dollars will decrease.
C) The demand for dollars will increase.
D) The dollar will decrease in value.
Answer:
How many prices would there be in a barter economy with 100 goods?
A) 100
B) 1,000
C) 4,950
D) 10,000
Answer:
Indirect quotations in terms of foreign currency refers to:
A) expressing exchange rates as units of foreign currency in terms of domestic currency
B) expressing exchange rates as units of domestic currency in terms of foreign currency
C) expressing exchange rates of less traded currency by using a “major” currency
D) expressing exchange rates in terms of commodities such as gold
Answer:
Which of the following would cause the nominal exchange rate to depreciate?
A) The real exchange rate appreciates.
B) The domestic inflation rate increases.
C) The foreign inflation rate increases.
D) The government budget deficit increases.
Answer:
In the bond market, the seller is considered to be
A) the lender.
B) the borrower.
C) the lender or the borrower depending upon the use to which the funds are put.
D) the lender or the borrower depending upon whether interest rates are rising or
falling.
Answer:
Profits from speculation arise because of
A) the spread between the bid and ask prices on bonds.
B) the illiquidity of markets for derivative instruments.
C) the high information costs in markets for derivative instruments.
D) disagreements among traders about future prices of a commodity or financial
instrument.
Answer:
Under which chair did the Fed implement the policy of inflation targeting?
A) Volcker
B) Bernanke
C) Greenspan
D) Geithner
Answer:
In which of the following assets are commercial banks in the United States NOT
allowed to invest checkable deposits?
A) home mortgages
B) corporate bonds
C) municipal bonds
D) U.S. Treasury bonds
Answer:
The fourth stage in the regulatory process is
A) a crisis.
B) response by the financial system.
C) regulation.
D) regulatory response.
Answer:
Which function of money eliminates the need for multiple prices for each good as in a
barter system?
A) store of value
B) standard of deferred payment
C) unit of account
D) valuable relative to its weight
Answer:
What is the rate of return on a bond with a coupon of $38 payable in one year that was
purchased for $950 and sold one year later for $931?
A) 2%
B) 4%
C) 6%
D) 19%
Answer:
In the bank lending channel, an important reason for output increases in the short run
after an expansionary monetary policy is that
A) the funds directly available for households and firms to spend will increase.
B) prices will increase, making increased production more profitable for firms.
C) the increase in government spending from an expansionary monetary policy
increases output through the multiplier effect.
D) the ability of banks to make loans will increase.
Answer:
If a member of the Board of Governors is limited to one 14-year term, how did Alan
Greenspan serve 19 years on the Board of Governors?
A) A special exemption was approved for him.
B) The rule was not in place at the time.
C) He completed the remaining years left on someone else’s term and then served one
14-year term.
D) He didn’t serve consecutive terms.
Answer:
Money eliminates the need for
A) any government role in the economy.
B) specialization.
C) people to have a double coincidence of wants.
D) the market system.
Answer:
Behavioral economics can best be described as
A) the study of situations in which people’s choices do not appear to be economically
rational.
B) the study of human economic behavior.
C) the basis for efficient markets.
D) the study of how the economy affects human behavior.
Answer:
An increase in the output gap causes the demand for real balances
A) to rise and the interest rate to fall.
B) to fall and the interest rate to rise.
C) and the interest rate to fall.
D) and the interest rate to rise.
Answer:
The greatest appeal of U.S. Treasury securities is that
A) they have high yields.
B) they have no default risk.
C) the U.S. Treasury will repurchase them at any time.
D) their market prices fluctuate very little.
Answer:
The main reason why banks are the leading source of external finance for businesses is
A) the interest rates on bank loans are usually lower than interest rates on corporate
bonds.
B) banks have an information-cost advantage in reducing adverse selection problems.
C) interest paid on bank loans is deductible against the corporate income tax, whereas
interest paid on corporate bonds is not.
D) government regulators encourage small businesses to obtain funding from banks.
Answer:
Economists define liquidity as
A) the difference between the return on the asset and the return on a long-term U.S.
Treasury bond.
B) the fraction the asset makes up of an investor’s portfolio.
C) the ease with which an asset can be exchanged for money.
D) the difference between the total demand for an asset and the total supply of the asset.
Answer:
The official settlement balance
A) is an amount that the IMF requires each member country to pay annually.
B) must by definition always be zero.
C) equals the current account balance divided by the capital account balance.
D) equals the net increase in a country’s official reserve assets.
Answer: