The ultimate source of liquidity in a modern industrial economy is the
A) government Treasury.
B) central bank.
C) capital market.
D) liquidity market.
“A rise in government expenditures raised output in the short run, but left output
unaffected in the long run.” This statement implies that the price level __________ in
the long run, causing the interest rate to __________.
A) rose; rise
B) rose; fall
C) fell; rise
D) fell; fall
If the fraction of the economy’s nominal GDP held by the public in the form of money
is 20 percent, income velocity in the economy is
A) 5.
B) 80 percent.
C) 0.20.
D) 20.
Combining commercial banking and investment banking in the same organization
produces a risk for that organization
A) that must be above that of investment banking.
B) that is the same as investment banking, the riskier of the two activities.
C) somewhere in between the risk of the two activities.
D) that may be below that of commercial banking.
Large-size bank CDs are most likely to appear on the balance sheet of a
A) pension fund.
B) life insurance company.
C) mutual fund.
D) money market mutual fund.
The ratio of equity to total assets is a measure of a bank’s __________ risk.
A) credit
B) leverage
C) interest rate
D) liquidity
The money market rate observed most closely by the Open Market Account Manager is
the
A) Treasury bill rate.
B) commercial paper rate.
C) discount rate.
D) federal funds rate.
A fall in interest rates will cause long-term bond prices to
A) fall less than short-term bond prices.
B) fall more than short-term bond prices.
C) rise less than short-term bond prices.
D) rise more than short-term bond prices.
“Financial distress” is more easily handled in a __________-oriented financial system,
in which ownership of the firm tends to be spread among __________ shareholders
than in the other type of system.
A) markets; more
B) markets; fewer
C) banking; more
D) banking; fewer
The primary role of financial institutions is to
A) regulate the money supply.
B) transfer funds from investors to borrowers.
C) package savings for transfer to borrowers.
D) lend money to consumers.
If wages and prices are flexible, then an anticipated change in the money supply will
cause wages and prices to __________ the actual inflation rate.
A) increase at the same rate as
B) increase at a higher rate than
C) increase at a slower rate than
D) cannot be exactly predicted
The Purchasing Managers’ Index is __________ indicator.
A) a leading
B) a coincident
C) a lagging
D) an inconsistent
A Phillips Curve that has a negative slope is consistent with
A) a constant price level.
B) constant velocity.
C) an upward sloping aggregate supply curve.
D) a vertical aggregate supply curve.
A venture capital fund buys the __________ of a new company and hopes to profit
from __________.
A) debt; repayment of the debt at maturity
B) debt; interest payments on that debt
C) equity; dividends from the equity
D) equity; eventual sale of that equity
That segment of the market for securities which have original maturities of less than
one year is called the
A) stock market.
B) derivative securities market.
C) money market.
D) capital market.