A decrease in the liquidity of corporate bonds will ________ the yield of corporate
bonds and ________ the yield of Treasury bonds, everything else held constant.
A) increase; increase
B) decrease; decrease
C) increase; decrease
D) decrease; increase
A Supreme Court ruling in March 1996 held that
A) state laws to prevent banks from selling insurance can be superseded by federal
rulings from banking regulators that allow banks to sell insurance.
B) state laws to prevent banks from selling insurance cannot be superseded by federal
rulings from banking regulators that allow banks to sell insurance.
C) state laws to prevent banks from selling insurance can be superseded only if
Congress enacts legislation that allow banks to sell insurance.
D) state laws to prevent banks from selling insurance cannot be superseded by federal
legislation.
Monetarists directly study the link between money and economic activity using
A) structural models.
B) reduced-form models.
C) scientific models.
D) experimental models.
Corporate bonds are not as liquid as government bonds because
A) fewer corporate bonds for any one corporation are traded, making them more costly
to sell.
B) the corporate bond rating must be calculated each time they are traded.
C) corporate bonds are not callable.
D) corporate bonds cannot be resold.
Which of the following are TRUE concerning the distinction between interest rates and
returns?
A) The rate of return on a bond will not necessarily equal the interest rate on that bond.
B) The return can be expressed as the difference between the current yield and the rate
of capital gains.
C) The rate of return will be greater than the interest rate when the price of the bond
falls during the holding period.
D) The return can be expressed as the sum of the discount yield and the rate of capital
gains.
A person who agrees to buy an asset at a future date is going
A) long.
B) short.
C) back.
D) ahead.
If the expected path of 1-year interest rates over the next five years is 2 percent, 4
percent, 1 percent, 4 percent, and 3 percent, the expectations theory predicts that the
bond with the lowest interest rate today is the one with a maturity of
A) one year.
B) two years.
C) three years.
D) four years.
If the required reserve ratio is 10 percent, currency in circulation is $400 billion,
checkable deposits are $800 billion, and excess reserves total $0.8 billion, then the
excess reserves-checkable deposit ratio is
A) 0.001.
B) 0.10.
C) 0.01.
D) 0.05.
Which of the following is NOT part of the shadow banking system?
A) the transformer
B) the servicer
C) the bundler
D) the distributor
If reserves in the banking system increase by $100, then checkable deposits will
increase by $1000 in the simple model of deposit creation when the required reserve
ratio is
A) 0.01.
B) 0.10.
C) 0.05.
D) 0.20.
To lower long-term interest rates, in 2010 the Fed started its new open market operation
program to purchase
A) mortgage-backed securities.
B) commercial papers.
C) long-term Treasuries.
D) Treasury bills and Treasury notes.
The risk premium on corporate bonds reflects the fact that corporate bonds have a
higher default risk and are ________ U.S. Treasury bonds.
A) less liquid than
B) less speculative than
C) tax-exempt unlike
D) lower-yielding than
The monetarist statistical evidence examines the correlations between both ________
and ________ with ________.
A) money; aggregate spending; the unemployment rate
B) money; autonomous expenditures; the unemployment rate
C) money; consumption spending; aggregate spending
D) money; autonomous expenditures; aggregate spending
An option that gives the owner the right to sell a financial instrument at the exercise
price within a specified period of time is a
A) call option.
B) put option.
C) American option.
D) European option.
When Keynesians argue that “correlation does not necessarily imply causation,” they
are probably criticizing
A) structural-model evidence.
B) reduced-form evidence.
C) indirect-model evidence.
D) black-box evidence.
A temporary negative supply shock ________ real interest rates and ________ output in
the short run, thereby its effect on stock prices is ________.
A) raises; lowers; negative
B) raises; raises; ambiguous
C) lowers; raises; negative
D) lowers; raises; positive