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Which interest rates is most relevant in determining aggregate expenditures?
A) federal funds rate
B) short-term real interest rate
C) long-term nominal interest rate
D) long-term real interest rate
Answer:
The second stage in the regulatory process is
A) a crisis.
B) regulation.
C) response by the financial system.
D) regulatory response.
Answer:
If a one-year bond currently yields 5% and is expected to yield 7% next year, the
liquidity premium theory predicts that the yield today on a two-year bond should be
A) 5%.
B) less than 6%, but more than 5%.
C) 6%.
D) more than 6%.
Answer:
Financial instruments with high information costs
A) will usually be more liquid than similar instruments with low information costs.
B) will have lower yields than U.S. Treasury securities.
C) may not be offered for sale in some states.
D) will have lower prices than similar instruments with low information costs.
Answer:
The members of Federal Reserve district bank boards of directors who are leaders in
industry, commerce, and agriculture are known as
A) Class A directors.
B) Class B directors.
C) Class C directors.
D) Class D directors.
Answer:
In Moscow in 1989, what were taxi drivers using as a medium of exchange?
A) Russian rubles
B) Marlboro cigarettes
C) gold coins
D) caviar
Answer:
Transactions costs are
A) zero in financial markets.
B) zero in financial intermediaries.
C) the costs of direct financial transactions.
D) equal to the taxes imposed on financial transactions.
Answer:
Losses in which holding resulted in BNP Paribas not allowing investors to redeem
shares from three of its investment funds?
A) mortgage-backed securities
B) Lehman Brothers
C) Bear Stearns
D) Real Estate Investment Trusts
Answer:
Money can BEST be described as:
A) anything that is generally accepted as payment for goods and services or in the
settlement of debts.
B) paper that can be used to purchase goods and services
C) commodities that have intrinsic value
D) any form of wealth possessed by consumers
Answer:
Which of the following was NOT a result of the passage of the Gramm-Leach-Bliley
Act?
A) It repealed the Glass-Steagall Act.
B) It allowed commercial banks to participate in securities, insurance, and real estate
activities.
C) It authorized new financial holding companies which permitted securities and
investment firms to own commercial banks.
D) It increased the capital requirements for commercial banks.
Answer:
In the early post-war years, the Fed was reluctant to continue its wartime agreement
with the Treasury because it believed the result would be
A) recession.
B) inflation.
C) higher taxes.
D) lower taxes.
Answer:
A chief criticism of adaptive expectations is that
A) it assumes people ignore information that would be useful in making forecasts
B) people have a hard time adapting
C) it doesn't rely on technical analysis
D) it violates the efficient markets hypothesis
Answer:
When market participants have rational expectations, the deviation of the expected
price from the actual future price is
A) zero.
B) predictable, provided all relevant information is made use of.
C) not predictable.
D) predictable under certain circumstances, but not under others.
Answer:
Expectations of asset values by participants in financial markets
A) are not possible to model, given the current state of economic knowledge.
B) determine market prices, but are not related to changes in market prices.
C) generally do not change.
D) determine current market prices and changes in market prices.
Answer:
An ATS account
A) converts a corporation's checking account balance at the end of the day into an
overnight repurchase agreement.
B) is the name given to NOW accounts outside of New England.
C) are negotiable certificates of deposit of less than $100,000.
D) were used during the Great Depression by depositors who had lost faith in
conventional checking accounts.
Answer:
How does an increase in the price level result in higher interest rates?
A) It increases the real money supply.
B) It decreases the real money supply.
C) It increases the real money demand.
D) It decreases the real money demand.
Answer:
Which of the following has led to reduced use of ATMs?
A) some banks closing branches in low-income neighborhoods
B) some banks charging fees for transactions performed by tellers that could be done by
ATMs
C) increased use of debit card transactions
D) reductions in fees for overdrafts
Answer:
In forward transactions,
A) the exchange takes place at the same exchange rate as in the spot market.
B) currencies are exchanged at a set date in the future.
C) currencies may only be exchanged at rates set by governments well in advance.
D) currency is bought and sold for delivery later that same day.
Answer:
Which of the following statements is correct?
A) The discount rate is generally above the federal funds rate.
B) The discount rate is generally below the federal funds rate.
C) The discount rate is generally equal to the federal funds rate.
D) There is no general pattern to the relation between the discount rate and the federal
funds rate.
Answer:
The current yield is equal to
A) the coupon divided by the market price of the bond.
B) the yield to maturity, if the bond is a coupon bond.
C) the coupon divided by the par value of the bond.
D) the market price of the bond divided by its par value.
Answer:
The rate of return of a stock held for one year equals
A) the change in the price of the stock.
B) the dividend yield plus the rate of capital gain.
C) the rate of capital gain minus the dividend yield.
D) the dividend yield minus the rate of capital gain.
Answer:
What made the recession of 2007-2009 different than any other recession since the
Great Depression?
A) the government did not implement a fiscal stimulus
B) the Fed failed to reduce interest rates
C) it was accompanied by a financial crisis
D) the impact was primarily limited to the financial sector
Answer:
The size of the money multiplier depends upon all of the following EXCEPT
A) the required reserve ratio.
B) the currency-deposit ratio.
C) excess reserves relative to deposits.
D) the discount rate.
Answer:
If market participants have rational expectations,
A) they can assume the stock prices they observe represent the fundamental values of
those stocks
B) they know to purchase stocks that are priced below their fundamental value
C) they will achieve higher returns than those with adaptive expectations
D) they can earn above-average returns on their investments
Answer:
The person on the other side of a transaction is referred to as the:
A) derivator
B) counterparty
C) hedger
D) speculator
Answer:
Suppose Matt's New Cars issues a bond in which they'll need to pay $10,000 in one
year, which includes 4% interest. How much will they receive for the bond?
A) $9,600
B) $9,615
C) $10,000
D) $10,400
Answer:
In recent decades,
A) trading in financial futures declined in importance relative to trading in agricultural
and mineral commodities futures.
B) trading in financial futures increased in importance relative to trading in agricultural
and mineral commodities futures.
C) trading in agricultural and commodities futures was discontinued.
D) trading in financial futures was discontinued.
Answer:
Which country experiencing hyperinflation in excess of 15 billion percent in 2008?
A) Argentina
B) Canada
C) Iceland
D) Zimbabwe
Answer:
Which of the following has the largest impact on short-run movements in exchange
rates?
A) growth rate of exports
B) growth rate of imports
C) investment opportunities
D) changes in the trade deficit
Answer:
Which type of stock should result in the best return according to the Efficient Markets
Hypothesis?
A) a firm that is expected to be highly profitable in the future
B) a firm that is considered to be undervalued
C) a firm expected to earn little profit in the future
D) none of the above
Answer:
A primary criticism of preferential tax treatment of dividends and capital gains is:
A) there is not a double taxation of dividends
B) it adversely affects the distribution of after-tax income
C) there is no locked-in effect resulting from taxation of capital gains
D) it does not have any impact on efficiency
Answer:
When market participants have rational expectations,
A) they use all information available to them.
B) they only slowly adjust their expectations to news which could affect prices or
returns.
C) they are less likely to make accurate forecasts than if they have adaptive
expectations.
D) they are able to forecast interest rates more accurately than inflation rates.
Answer:
As of 2012, carried interest was taxed as:
A) capital gains
B) dividends
C) interest income
D) ordinary income
Answer:
