A repurchase agreement of government securities by the Fed
A) permanently increases bank reserves.
B) temporarily increases bank reserves.
C) permanently reduces bank reserves.
D) temporarily reduces bank reserves.
“Institutionalization” refers to the fact that a(n) __________ percentage of funds in the
United States are flowing __________ the financial markets through financial
intermediaries
A) increasing; indirectly into
B) decreasing; indirectly into
C) increasing; indirectly out of
D) decreasing; directly out of
If the required reserve ratio is .10, the demand deposit expansion multiplier is
A) .1.
B) 4.
C) 5.
D) 10.
Over 90 percent of life insurance companies are structured as __________ companies.
Over 50 percent of industry assets are controlled by companies structured as
__________ companies.
A) mutual, mutual
B) mutual, stock
C) stock, mutual
D) stock, stock
Risk aversion implies that
A) individuals will not take on risk.
B) investors must be compensated for about half of the risk they take on.
C) investors must be compensated for the risk they take on.
D) None of the above.
A difference between M2 and M3 measures of the money supply is that M3 includes
A) bank repurchase agreements.
B) retail money market mutual fund shares.
C) demand deposits at banks.
D) NOW accounts.
Depository institutions are the most important source of credit to
A) mutual funds.
B) large businesses.
C) small businesses.
D) state governments.
A forward looking measure of a bank’s credit risk is
A) the ratio of loan charge-offs as a percent of total loans.
B) the ratio of non-performing loans to total loans.
C) ratio of non-performing loans to total assets.
D) the ratio of equity to total loans.
The economy tends to be more stable with a __________ LM curve causing interest
rates to be rather __________ to shifts in the IS curve.
A) steeper; sensitive
B) steeper; insensitive
C) flatter; sensitive
D) flatter; insensitive
The function of the interest rate in the Classical model was to keep the economy at full
employment equilibrium by assuring that
A) actual saving equaled actual investment.
B) actual saving equaled desired investment.
C) desired saving equaled desired investment.
D) desired saving equaled actual investment.
The Glass-Steagall Act became law in the
A) 1890s.
B) 1910s.
C) 1930s.
D) 1950s.
If interest rates have been increasing, adaptive expectations would predict
A) that interest rates will increase.
B) that interest rates will decrease.
C) that inflation rates will increase.
D) that inflation rates will decrease.
A reverse repurchase agreement of government securities by the Fed
A) permanently increases bank reserves.
B) temporarily increases bank reserves.
C) permanently reduces bank reserves.
D) temporarily reduces bank reserves.
Changes in the money supply have an immediate effect on an economy’s
A) liquidity.
B) GDP.
C) price level.
D) employment.
An indication to the Open Market Account Manager that commercial banks are
experiencing a liquidity surplus would be a
A) falling federal funds rate.
B) rising federal funds rate.
C) falling discount rate.
D) rising discount rate.
A rise in interest rates will cause short-term bond prices to
A) fall less than long-term bond prices.
B) fall more than long-term bond prices.
C) rise more than long-term bond prices.
D) rise less than long-term bond prices.
The present value of $900 to be received in three years, with an annual interest rate of
10 percent, compounded annually, is equal to $__________.
A) 772
B) 676
C) 816
D) 810