The development of money market mutual funds contributed to the growth of ________
since the money market mutual funds need to hold liquid, high-quality, short-terms
assets.
A) the commercial paper market
B) the municipal bond market
C) the corporate bond market
D) the junk bond market
Answer:
The process of transforming otherwise illiquid financial assets into marketable capital
market instruments is known as
A) securitization.
B) internationalization.
C) arbitrage.
D) program trading.
Answer:
Because banks engage in regulatory arbitrage, the Basel Accord on risk-based capital
requirements may result in
A) reduced risk taking by banks.
B) reduced supervision of banks by regulators.
C) increased fraudulent behavior by banks.
D) increased risk taking by banks.
Answer:
Today the United States has a dual banking system in which banks supervised by the
________ and by the ________ operate side by side.
A) federal government; municipalities
B) state governments; municipalities
C) federal government; states
D) municipalities; states
Answer:
Which of the following monetary policy tools is more effective when the economy
faces the interest rate zero-lower-bound problem?
A) Open market operation
B) Discount policy
C) Required reserve ratio
D) The Fed’s liquidity provision
Answer:
Everything else held constant, an increase in expected inflation, lowers the expected
return on ________ compared to ________ assets.
A) bonds; financial
B) bonds; real
C) physical; financial
D) physical; real
Answer:
A financial crisis is
A) not possible in the modern financial environment.
B) a major disruption in the financial markets.
C) a feature of developing economies only.
D) typically followed by an economic boom.
Answer:
Of the sources of external funds for nonfinancial businesses in the United States, stocks
account for approximately ________ of the total.
A) 2%
B) 11%
C) 20%
D) 40%
Answer:
Everything else held constant, a decrease in government spending ________ aggregate
________.
A) increases; demand
B) decreases; demand
C) decreases; supply
D) increases; supply
Answer:
The short-run aggregate supply curve shifts to the right when
A) output gap is higher.
B) output gap is lower.
C) expected inflation is higher.
D) expected inflation is lower.
Answer:
The formula for the M1 money multiplier is
A) m = (1 + c)/(rr + e + c).
B) M = 1/(rr + e + c).
C) M = (1 + c)/(rr + e + c).
D) m = [1/(rr + e + c)] × MB.
Answer:
In response to the overvalued dollar in the early 1970s, the German Bundesbank bought
________ and sold ________ to keep the exchange rate fixed, gaining international
reserves.
A) marks; dollars
B) marks; pounds
C) dollars; marks
D) dollars; pounds
Answer:
Rising interest-rate risk
A) increased the cost of financial innovation.
B) increased the demand for financial innovation.
C) reduced the cost of financial innovation.
D) reduced the demand for financial innovation.
Answer: