The largest component of the money supply (M is
A) time deposits.
B) large CDs.
C) demand deposits.
D) coin and currency.
Which of these financial institutions is the most likely to have a portfolio very similar to
those of life insurance companies?
A) Money market mutual funds
B) Mutual savings banks
C) Private noninsured pension funds
D) Property and casualty insurance companies
Assume that a no-load open-end mutual fund holds securities with a total market value
of $20 million, has no liability, and has 250,000 shares outstanding. The net asset value
par share of this fund is
A) $5 million.
B) $80 million.
C) $5.
D) $8.
During the delivery period,
A) the futures price exceeds the price in the cash market.
B) the price in the cash market exceeds the futures price.
C) the futures price and the price in the cash market are equal.
D) there is no discernible relationship between the futures price and the price in the
cash market.
Banks can lower their liquidity risk by having more __________ on their balance sheet.
A) government securities
B) transactions deposits
C) loans
D) savings deposits
A stand-by letter of credit issued by a bank is __________ of that bank.
A) an asset
B) a liability
C) technically both an asset and a liability
D) neither an asset nor a liability
A mezzanine fund
A) will never buy equity in a company.
B) may buy only equity in a company.
C) may buy a combination of equity and convertible debt in a company.
D) may buy a combination of equity and straight debt in a company.
The Federal Reserve satisfies the public’s demand for currency by
A) printing paper bills.
B) setting commercial bank profit margins.
C) maintaining constant fractions of various forms of money.
D) wholesaling coins and paper currency to local banks.
The Treasury runs the greatest risk of inflation when expenditures are financed by
borrowing from
A) foreign nations.
B) the Federal Reserve.
C) the banking system.
D) the non-bank public.
Which of the following is a key assumption leading to the Monetarist view that
government deficits crowd out private investment?
A) Money demand is sensitive to the interest rate.
B) The aggregate supply curve is horizontal.
C) Technology is fixed.
D) Investment is sensitive to the interest rate.
Which of the following is an administered interest rate set by the Federal Reserve?
A) The discount rate
B) The federal funds rate
C) The prime rate
D) The commercial paper rate
State chartered banks were supposed to be driven out of business by the National
Currency Act of 1863 and the National Banking Act of 1864 by
A) imposing a tax on their issuance of state bank notes.
B) prohibiting them from having interstate branches.
C) prohibiting them from paying interest on demand deposits.
D) regulating the amount of interest they could pay on savings accounts.
From the Monetarist perspective, the aggregate supply curve is
A) vertical.
B) horizontal.
C) sensitive to changes in the money supply.
D) sensitive to changes in consumption.
An unexpected fall in Housing Starts should send bond prices __________ and stock
prices __________.
A) up; up
B) up; down
C) down; up
D) down; down
The Federal Reserve econometric model estimates that a 1 percent increase in
government spending, with the money supply increased to hold the interest rate
constant, will
A) increase real GDP by 3 percent in 3 years.
B) increase real GDP by 3 percent in 4 years.
C) increase real GDP by 1 percent 2 years.
D) have no effect on real GDP after 3 years.