The efficient markets hypothesis
A) assumes that market participants form their expectations adaptively.
B) applies rational expectations to the pricing of assets.
C) applies to the stock market, but not to the bond market.
D) indicates that the stock market is efficient, but not rational.
Answer:
The Fed and Treasury took action to restore the flow of funds from savers to borrowers
in order to encourage all of the following EXCEPT:
A) increase the return to savers
B) enable households to purchase durable goods
C) increase the likelihood of purchases of houses
D) allow firms to finance purchases of structures and equipment
Answer:
Which of the following activities is NOT a primary concern of investment banks?
A) taking in deposits and making loans
B) providing advice and financing for mergers and acquisitions
C) underwriting new security issues
D) providing advice on new security issues
Answer:
The fee charged by the seller of an option is referred to as the
A) market price.
B) option premium.
C) futures fee.
D) call price.
Answer:
If the Fed sterilizes the purchase of foreign assets,
A) its assets and liabilities rise by the same amount.
B) its assets and liabilities fall by the same amount.
C) the composition of its assets changes, but its liabilities are unaffected.
D) the composition of its liabilities changes, but its assets are unaffected.
Answer:
According to the new classical view, aggregate output will differ from full-employment
output
A) whenever saving does not equal investment.
B) only if the actual price level does not equal the expected price level.
C) only if the federal government’s expenditures are greater than its tax receipts.
D) whenever imports exceed exports.
Answer:
A reduction in the money supply will result in:
A) a lower interest rate and more negative output gap
B) a higher interest rate and more positive output gap
C) a lower interest rate and more positive output gap
D) a higher interest rates and more negative output gap
Answer:
The velocity of money can best be described as
A) how quickly prices are increasing.
B) how quickly output is increasing.
C) the number of times each dollar in the money supply is used to buy goods and
services included in GDP.
D) the growth rate of the money supply.
Answer:
Suppose First National Bank makes a one-year simple loan of $1,000 at 7% interest to
Harry’s Restaurant. At the end of one year Harry’s Restaurant will pay First National
A) $934.58.
B) $1007.
C) $1700.
D) $1070.
Answer:
Capital inflow restrictions
A) receive less support from economists than full capital controls.
B) may lessen domestic lending booms and risk-taking by domestic banks.
C) were imposed in the United States during the late 1990s.
D) were imposed in Europe in May 2000.
Answer:
All of the following are characteristics of debit cards EXCEPT:
A) payments are deferred until a later date
B) they can be used like checks
C) they eliminate the problem of trust since the bank’s computer authorizes the
transaction
D) when used at a store, his bank instantly credits the store’s account with the amount
and
deducts it from his account.
Answer:
A swap is
A) another name for a put option.
B) another name for a call option.
C) an agreement between two or more persons to exchange sets of cash flows over
some future period.
D) the name for the replacement of a futures contract by an options contract.
Answer:
Hedgers are primarily interested in
A) betting on anticipated changes in prices.
B) reducing their exposure to the risk of price fluctuations.
C) increasing market liquidity.
D) reducing the spread between bid and ask prices on bonds.
Answer:
Which of the following financial assets has both the highest risk and highest return for
the period of 1926-2011?
A) small company stocks
B) large company stocks
C) corporate bonds
D) Treasury bills
Answer:
The principal-agent view of Fed motivation predicts that the Fed acts
A) to promote the interests of the general public.
B) to promote the interests of the Fed’s principalthe President of the United States.
C) in order to increase its power, influence, and prestige.
D) in order to make sure its agentscommercial bankscarry out its wishes.
Answer:
The percentage of deposits that banks must hold as reserves is called the
A) percentage rate.
B) required reserve ratio.
C) Fed rate.
D) discount rate.
Answer:
When banks hold excess reserves, the size of the money multiplier
A) is less than the simple deposit multiplier would suggest.
B) is greater than the simple deposit multiplier would suggest.
C) is equal to the size of the simple deposit multiplier.
D) becomes infinite.
Answer:
Which of the following is NOT a financial intermediary?
A) mutual fund
B) bank
C) stock exchange
D) insurance company
Answer:
What is the primary reason for the differences between the U.S. banking system and
those in other major industrial countries?
A) Economies of scale are greater in banking in the United States than in banking in
other countries.
B) legislation that led to the development of state and national banks
C) the Federal Reserve System
D) the National Bank
Answer:
Who sets the inflation target for the Bank of England?
A) Prime Minister
B) Chancellor of the Exchequor
C) head of the monetary policy committee
D) majority vote of the monetary policy committee
Answer:
NOW accounts were developed in order to
A) circumvent Regulation Q.
B) provide banks with a checkable deposit on which they did not have to pay interest.
C) provide banks with a liquid, interest-earning asset.
D) provide banks with a means of earning interest on the funds in their reserve accounts
with the Fed.
Answer:
Which function of money allows for specialization to take place?
A) medium of exchange
B) unit of account
C) store of value
D) standard of deferred payment
Answer:
About what percentage of bank assets is made up of cash items in 2012?
A) 8%
B) 20%
C) 37%
D) 50%
Answer:
According to the quantity theory of money, the growth rate of which of the following is
zero?
A) money supply
B) velocity
C) real GDP
D) price level
Answer:
If in the short run prices did not respond at all to changes in aggregate demand, the
short-run aggregate supply curve would
A) be vertical.
B) be horizontal.
C) slope up.
D) slope down.
Answer:
By how much did real GDP decline between 1929 and 1933?
A) 18%
B) 20%
C) 27%
D) 81%
Answer:
Which of the following is the most likely result of financial intermediaries?
A) increased funds available to borrowers
B) higher transaction costs
C) higher information costs
D) lower information cost but higher transaction costs
Answer:
Deliberate actions by a central bank to influence the exchange rate are known as
A) current account actions.
B) foreign-exchange market interventions.
C) dollar-value operations.
D) foreign-commerce maneuvers.
Answer:
The daily turnover in the foreign exchange market is:
A) millions of dollars.
B) billions of dollars.
C) trillions of dollars.
D) declining in the last decade.
Answer:
Suppose that a bank with no excess reserves receives a deposit into a checking account
of $10,000 in currency. If the required reserve ratio is 0.20, what is the maximum
amount that the bank can lend out?
A) $2,000
B) $8,000
C) $10,000
D) $50,000
Answer:
As of October 2012, which of the following was true?
A) deposits of foreign governments and international organizations > bank reserves >
currency in circulation
B) currency in circulation > bank reserves > deposits of foreign governments and
international organizations
C) bank reserves > currency in circulation > deposits of foreign government and
international organizations
D) currency in circulation > deposits of foreign governments and international
organizations > bank reserves
Answer:
In comparing money to shares of Apple stock, we can say that
A) money is a store of value, but shares of Apple stock are not.
B) shares of Apple stock are a store of value, but money is not.
C) both money and shares of Apple stock are stores of value.
D) neither money nor shares of Apple stock are stores of value.
Answer: