An unexpected rise in Housing Starts should send bond prices __________ and stock
prices __________.
A) up; up
B) up; down
C) down; up
D) down; down
The distinction between a ‘secured” lender and an “unsecured” lender is that in the event
of the bankruptcy of the borrower
A) the unsecured lender has first claim on collateral.
B) the secured lender has first claim on collateral.
C) the secured lender has a first claim on all of the assets of the bankrupt borrower.
D) the unsecured lender has a first claim on all of the assets of the bankrupt borrower.
Assume a consumption function of C = 90 + .75Y. The saving function for this
economy is equal to
A) 90 + .25Y.
B) -90 + .75Y.
C) -90 + .25Y.
D) 90 + .75Y.
Federal law required that no two Federal Reserve Board Governors come from the same
A) state.
B) political party.
C) industry.
D) Federal Reserve district.
In most cases, higher interest rates cause the velocity of M1 to
A) turn negative.
B) move erratically.
C) increase.
D) decline.
In a simple Keynesian model, a decrease in income leads to a decrease in
A) consumption.
B) investment.
C) the price level.
D) the money supply.
Margin requirements on stocks are set by
A) the New York Stock Exchange.
B) the National Association of Securities Dealers.
C) the Federal Reserve System.
D) the Securities Exchange Commission.
If the federal government collects $10 billion in taxes and then spends it on the public,
the money supply
A) rises by $20 billion.
B) rises by $10 billion.
C) falls by $10 billion.
D) is unaffected.
The price level is 3, total output is 500, and the money supply is 200. The velocity of
money is
A) 7.5.
B) 2.5.
C) 2.0.
D) None of the above.
What is the “underwriting spread?”
A) the average percentage of the total bond issue handled by a member of an
underwriting syndicate
B) the difference between the price the underwriters receive and the price they pay the
borrower
C) the length of time the underwriter agrees to withhold the bonds from the primary
market
D) the number of financial institutions in the underwriting syndicate
Monetarists contend that an expansionary monetary policy will lead to a rise in the
interest rate because __________ and the __________ effect will raise interest rates by
more than the initial __________ effect lowers it.
A) inflationary expectations; income; liquidity
B) inflationary expectations; liquidity; income
C) deflationary expectations; income; liquidity
D) deflationary expectations; liquidity; income
A major difference between stocks and bonds is that
A) bonds pay their owners dividends while stocks pay interest.
B) bonds pay their owners interest while stocks pay dividends.
C) the interest on a bond depends on the earnings of the corporation and is not
guaranteed while dividends on stock are legally required.
D) bonds represent ownership while stock represent debt.
If a security held by a bank falls in market value, that loss
A) must be recorded by the bank, no matter what.
B) will be recorded by the bank only if the security is of the type they hold to maturity.
C) will be recorded by the bank only if the security is of the type they often sell before
maturity.
D) will be recorded by the bank only if it sells the security.
Investment banks operate in the
A) secondary market.
B) primary market.
C) syndicated market.
D) money market.
__________ are concentrated on the East Coast and have a relatively long history of
making nonmortgage consumer loans.
A) Savings and loan associations (S&Ls)
B) Commercial banks
C) Credit unions
D) Savings banks
The federal funds rate is always __________ the repo rate.
A) above
B) below
C) the same as
D) None of the above.
An Oldsmobile dealer may turn to a __________ like GMAC for loans in purchasing
vehicles for his inventory.
A) investment bank
B) broker-dealer
C) bootstrap financing company
D) captive finance company
Money increases economic growth by facilitating transfers from
A) savers to borrowers.
B) the government to investors.
C) investors to savers.
D) investors to borrowers.
When you get a car loan, the lending institution usually sends a check directly to the car
dealer. Such a practice
A) helps forestall moral hazard.
B) helps forestall adverse selection.
C) gives rise to moral hazard.
D) gives rise to adverse selection.