Assume that there are no excess reserves, no savings accounts, and no currency held by
the public. If the demand deposit expansion multiplier is 4, the required reserve ratio
must be
A) also 4.
B) .2.
C) .25.
D) .5.
The demand for loanable funds is equivalent to the
A) supply of loanable funds.
B) supply of securities.
C) demand for securities.
D) supply of bonds.
Pension plans in which employer contributions are set by the plan and benefits depend
on the performance of the assets in the plan is called a
A) defined benefit plan.
B) defined contribution plan.
C) a fully vested plan.
D) an unfunded plan.
An increase in the money supply will immediately __________ the __________
interest rate, according to the “liquidity effect.”
A) raise; natural
B) raise; nominal
C) lower; natural
D) lower; nominal
A call option has a strike price of $48. If the underlying stock is selling for $45 on the
expiration date, the intrinsic value of the call option is __________ per share.
A) $93
B) $45
C) $3
D) $0
Credit unions made it through the 1980s in relatively good shape because
A) most of their depositors were individuals.
B) most of their depositors were businesses.
C) they held many mortgages among their assets.
D) they held no mortgages among their assets.
South Africa is a major wine producer. As Americans become more familiar with those
wines and show an increased preference for them, an increased __________ the South
African rand will cause the dollar to __________ relative to the rand.
A) demand for; depreciate
B) demand for; appreciate
C) supply of; depreciate
D) supply of; appreciate
As Regulation Q was repealed, most of the assets of savings-and-loans were in the form
of
A) business loans.
B) consumer loans.
C) mortgages.
D) savings deposits.
News about __________ sends stock and bond prices in the same direction.
A) some expenditure indicators
B) GDP
C) inflation
D) capacity utilization
Moral hazard is, in general, the asymmetric information problem that occurs
A) after a transaction is consummated.
B) due to a size difference in the parties to a transaction.
C) with equity financing.
D) before a transaction is consummated.
Which of the following is classified as a liability for a commercial bank?
A) Reserves
B) Commercial loans
C) Demand deposits
D) Deposits with the Federal Reserve
__________ are never borrower-spenders.
A) Governmental bodies
B) Business firms
C) Households
D) All of the above can be borrower-spenders.
Suppose a new employee is promised a pension payment of $8000 in the twenty-fourth
year after joining the firm. The current pension contribution is $1200 a year. Assuming
a six percent rate of return, their pension plan is said to be
A) fully funded.
B) partly funded.
C) unfunded.
D) fully vested.
In the standard consumption function of C = a + bY, a change in corporate stock prices
would be reflected by a change in
A) Y.
B) b.
C) a.
D) both A and B.
If total Fed assets __________, then reserves have to __________, everything else
being equal.
A) fall; rise
B) rise; fall
C) fall; fall
D) None of the above.