In regard to crowd funding, it was expected that the SEC would limit the amount that
small investors can invest in any one company to no more than:
A) $1000
B) $10,000
C) $100,000
D) $1,000,000
Answer:
How did the global savings glut in the 2000s affect the U.S. current account balance?
A) It caused it to decline by increasing the value of the dollar.
B) It caused it to decline by reducing the value of the dollar.
C) It caused it to increase by increasing the value of the dollar.
D) It caused it to increase by reducing the value of the dollar.
Answer:
Intermediate targets are
A) interim goals set on the way to fully achieving policy goals.
B) targets for policy goals that are of secondary importance.
C) targets the Fed hopes to achieve by June of each year.
D) financial variables, such as interest rates or monetary aggregates, the Fed believes
will help it to achieve policy goals.
Answer:
If the prices of financial assets follow a random walk, then
A) they should be easy to forecast, provided market participants have rational
expectations.
B) they should be easy to forecast, provided market participants have adaptive
expectations.
C) the change in price from one trading period to the next is not predictable.
D) major traders in the market must not be making use of all available information
about the assets.
Answer:
Which of the following is most likely to lead to an increase in the value of the dollar?
A) decline in U.S. interest rates
B) increase in imports to the United States
C) decrease in exports from the United States
D) increase in U.S. interest rates compared to foreign interest rates
Answer:
Under the theory of purchasing power parity, an increase in the U.S. price level of 10%
relative to the Japanese price level will result in
A) a 10% appreciation of the yen.
B) a 10% appreciation of the dollar.
C) an appreciation of the yen by an amount that depends upon what happens to the real
exchange rate.
D) an appreciation of the dollar by an amount that depends upon what happens to the
real exchange rate.
Answer:
When a country’s real exchange rate appreciates,
A) its nominal exchange rate must also have appreciated.
B) its nominal exchange rate must have depreciated.
C) it can trade its goods for fewer units of foreign goods.
D) it can trade its goods for more units of foreign goods.
Answer:
Dividends are
A) payments made to stock holders.
B) payments made to bond holders.
C) the total profit earned by a corporation.
D) payments to holders of common stock, not preferred stock.
Answer:
The largest institutional participants in capital markets are
A) pension funds.
B) insurance companies.
C) consumer finance companies.
D) business finance companies.
Answer:
The margin requirement set by the Federal Reserve is the
A) proportion of the purchase price of a security that an investor must pay in cash.
B) difference between the interest rate banks may charge on loans and the interest rate
they receive from deposits.
C) same thing as the required reserve ratio on deposits.
D) difference banks must maintain between the value of their assets and the value of
their liabilities.
Answer:
Speculators 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:
The impact lag facing the Fed is
A) the delay before open market operations are able to affect the monetary base.
B) the delay before the Fed’s announcement of a new policy has an impact on the
decisions of the public.
C) the time required for monetary policy changes to affect output, employment, and
prices.
D) the delay before the impact of a recession on output and prices becomes clear to the
Fed.
Answer:
The mathematicians and economists who have been hired by Wall Street firms to build
mathematical models to aid the pricing of derivatives are generally referred to as
A) speculators.
B) hedgers.
C) rocket scientists.
D) market makers.
Answer:
Which of the following is an investment institution?
A) The New York Stock Exchange
B) Greater Illinois Savings and Loan
C) Prudential Insurance Company
D) Fidelity Magellan Mutual Fund
Answer:
When it takes more euros to purchase a dollar, the dollars is said to have:
A) depreciated
B) appreciated
C) it depends on whether one is using direct or indirect quotations
D) it depends on whether one is considering cross rates or exchange rates
Answer:
Which of the following is NOT a reason that interest rates remained low despite high
budget deficits following the financial crisis?
A) increased demand for U.S. government bonds
B) the perceived riskiness of alternative investments such as stocks
C) low interest rates on CDs and similar short-term assets
D) increases in expected inflation
Answer:
A decrease in the price level will lead to
A) a decrease in the real interest rate and an increase in net exports.
B) an increase in the real interest rate and an increase in net exports.
C) a decrease in the real interest rate and a decrease in net exports.
D) an increase in the real interest rate and a decrease in net exports.
Answer:
On a bank’s balance sheet, assets are
A) the uses of acquired funds.
B) the sources of acquired funds.
C) those items owed by the bank to depositors and others.
D) by definition equal to the bank’s liabilities.
Answer:
In late 2012, President Obama proposed raising the top income tax rate. All of the
following are likely impacts of higher income tax rates on bonds EXCEPT:
A) higher interest rates on Treasury bonds
B) lower interest rates on Municipal bonds
C) increased demand for Municipal bonds
D) lower prices for Municipal bonds
Answer:
Forward contracts are often illiquid because
A) any capital gains on them are heavily taxed, making investors reluctant to sell them.
B) government regulation has not provided for a secondary market in them.
C) they generally contain terms specific to the particular buyer and seller.
D) the brokerage fees involved in buying and selling them are very high.
Answer:
The Fed’s goal of interest rate stability
A) was formally abandoned in 1998.
B) is motivated by political pressure as well as by a desire for a stable saving and
investment environment.
C) is undermined by actions the Fed takes to further its goal of stability in financial
markets and institutions.
D) is undermined by actions the Fed takes to further its goal of price stability.
Answer:
Which central bank gained the power to set interest rates independent of the
government in the late 1990s?
A) Bank of England
B) Bank of Canada
C) Bank of China
D) Federal Reserve Board
Answer:
Which of the following statements regarding member banks is true?
A) A majority of banks are part of the Federal Reserve System as well as a majority of
bank deposits.
B) A minority of banks are part of the Federal Reserve System, but they have a majority
of deposits.
C) A majority of banks are part of the Federal Reserve System, but they have a minority
of deposits.
D) A minority of banks are part of the Federal Reserve System as well as a minority of
deposits
Answer:
Which of the following is NOT an advantage of a futures contract over a forward
contract?
A) reduced counterparty risk
B) increased flexibility
C) lower information cost
D) increased liquidity
Answer:
According to the equation of exchange, how can national income grow even though the
amount of money does not?
A) price level increases
B) real GDP decrease
C) velocity increases
D) velocity decreases
Answer:
Borrowers who stated but did not document their incomes are referred to as:
A) subprime
B) alt A
C) adjustable
D) securitized
Answer:
All of the following are names for bonds receiving low ratings EXCEPT:
A) junk
B) garbage
C) high yield
D) speculative
Answer:
Which of the following makes up the largest share of M2?
A) M1
B) savings deposits
C) small time deposits
D) money market mutual fund shares
Answer:
As wealth decreases, which of the following is likely to account for a smaller fraction
of a saver’s portfolio?
A) stocks
B) corporate bonds
C) cash
D) U.S. government securities
Answer:
Compared to CDs and money market funds, crowd funding
A) provides higher expected returns with increased safety
B) provides lower expected returns in exchange for increased safety
C) is likely to result in lower returns due to higher volatility
D) provides opportunities for higher returns but also significant losses
Answer:
Which of the following referred to derivatives as “financial weapons of mass
destruction?”
A) Ben Bernanke
B) Barack Obama
C) Warren Buffett
D) Michael Lewis
Answer:
All of the following are types of finance companies EXCEPT
A) government finance.
B) consumer finance.
C) sales finance.
D) business finance.
Answer: