1) If a bank has $10 million of checkable deposits, a required reserve ratio of 10
percent, and it holds $2 million in reserves, then it will not have enough reserves to
support a deposit outflow of
A) $12 million
B) $11 million
C) $1 million
D) $900,000
2) Everything else held constant, a depreciation of the domestic currency will cause the
IS curve to shift to the ________ and aggregate demand will ________
A) right; increase
B) right; decrease
C) left; increase
D) left; decrease
3) According to the interest parity condition, if the domestic interest rate is 10 percent
and the foreign interest rate is 12 percent, then the expected ________ of the foreign
currency must be ________ percent
A) appreciation; 4
B) appreciation; 2
C) depreciation; 2
D) depreciation; 4
4) In September 1992, the Bundesbank attempted to keep the mark from appreciating
relative to the British pound, but it failed because participants in the foreign exchange
market came to expect the
A) appreciation of the mark
B) depreciation of the mark
C) revaluation of the dollar
D) end of the Exchange Rate Mechanism
5) When the federal funds rate equals the interest rate paid on excess reserves
A) the supply curve of reserves is vertical
B) the supply curve of reserves is horizontal
C) the demand curve for reserves is vertical
D) the demand curve for reserves is horizontal
6) According to Edward Kane, because the banking industry is one of the most
________ industries in America, it is an industry in which ________ is especially likely
to occur
A) competitive; loophole mining
B) competitive; innovation
C) regulated; loophole mining
D) regulated; innovation
7) If, in retaliation for “unfair” trade practices, Congress imposes a 30 percent tariff on
Japanese DVD recorders, but at the same time, US demand for Japanese goods
increases, then, in the long run, ________, everything else held constant
A) the Japanese yen should appreciate relative to the US dollar
B) the Japanese yen should depreciate relative to the US dollar
C) there is no effect on the Japanese yen relative to the US dollar
D) the Japanese yen could appreciate, depreciate or remain constant relative to the US
dollar
8) Both ________ and ________ are Federal Reserve assets
A) currency in circulation; reserves
B) currency in circulation; securities
C) securities; loans to financial institutions
D) securities; reserves
9) The riskiness of an asset is measured by
A) the magnitude of its return
B) the absolute value of any change in the asset’s price
C) the standard deviation of its return
D) risk is impossible to measure
10) For a 3-year simple loan of $10,000 at 10 percent, the amount to be repaid is
A) $10,030
B) $10,300
C) $13,000
D) $13,310
11) The business term for economies of scope is
A) economies of scale
B) diversification
C) cooperation
D) synergies