Clauses in life insurance policies that eliminate death benefits if the insured person
commits suicide is an example of a
A) restrictive provision.
B) restrictive covenant.
C) anti-fraud exclusion.
D) risk-based deductible.
Early Keynesians concluded that changes in monetary policy had no impact on
aggregate output because early empirical studies found no linkage between movements
in ________ and ________.
A) nominal interest rates; investment spending
B) real interest rates; investment spending
C) money supply; aggregate output
D) investment spending; aggregate output
On ________, October 19, 1987, the stock market experienced its worst one-day drop
in its entire history with the DJIA falling by 22%.
A) “Terrible Tuesday”
B) “Woeful Wednesday”
C) “Freaky Friday”
D) “Black Monday”
The steeply upward sloping yield curve in the figure above indicates that
A) short-term interest rates are expected to rise in the future.
B) short-term interest rates are expected to fall moderately in the future.
C) short-term interest rates are expected to fall sharply in the future.
D) short-term interest rates are expected to remain unchanged in the future.
If Toyota sells a $1000 bond in the United States, the bond is a
A) foreign bond.
B) Eurobond.
C) Tokyo bond.
D) currency bond.
If you sell a $100,000 interest-rate futures contract for 110, and the price of the
Treasury securities on the expiration date is 106, your ________ is ________.
A) profit; $4000
B) loss; $4000
C) profit; $6000
D) loss; $6000
Which of the following insurance practices attempts to minimize the adverse selection
problem insurance companies face?
A) prevention of fraud
B) risk-based premiums
C) restrictive provisions
D) deductibles
If prices in the diamond market become less volatile, all else equal, then the demand for
diamonds ________ and the demand for gold ________.
A) increases; decreases
B) increases; increases
C) decreases; decreases
D) decreases; increases
Which of the following policy measures forced credit-rating agencies to provide reports
to the SEC when their employees go to work for a company that has been rated by them
in the last twelve months?
A) the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
B) Sarbanes-Oxley Act of 2002
C) Global Legal Settlement of 2002
D) Gramm-Leach-Bliley Act of 1999
E) Riegle-Neal Act of 1994
If the required reserve ratio is 10 percent, currency in circulation is $1,200 billion,
checkable deposits are $1,600 billion, and excess reserves total $2,500 billion, then the
M1 money multiplier is
A) 2.5.
B) 1.7.
C) 7.3.
D) 0.73.
The mound-shaped yield curve in the figure above indicates that short-term interest
rates are expected to
A) rise in the near-term and fall later on.
B) fall moderately in the near-term and rise later on.
C) fall sharply in the near-term and rise later on.
D) remain unchanged in the near-term and fall later on.
Differences in ________ explain why interest rates on Treasury securities are not all the
same.
A) risk
B) liquidity
C) time to maturity
D) tax characteristics
If you buy a put option on treasury futures at 110, and at expiration the market price is
115, the ________ will ________ exercised.
A) call; be
B) put; be
C) call; not be
D) put; not be
The primary reason for the recent reduction in the number of banks is
A) bank failures.
B) re-regulation of banking.
C) restrictions on interstate branching.
D) bank consolidation.
The spectacular growth in international banking can be explained by
A) the rapid growth in international trade.
B) the 1988 Basel Agreement.
C) the collapse of the Bretton Woods system.
D) the creation of the World Trade Organization.
According to the expectations theory of the term structure
A) the interest rate on long-term bonds will exceed the average of short-term interest
rates that people expect to occur over the life of the long-term bonds, because of their
preference for short-term securities.
B) interest rates on bonds of different maturities move together over time.
C) buyers of bonds prefer short-term to long-term bonds.
D) buyers require an additional incentive to hold long-term bonds.