Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
1) Which of the following are primary concerns of the bank manager?
A) Maintaining sufficient reserves to minimize the cost to the bank of deposit outflows
B) Extending loans to borrowers who will pay low interest rates, but who are poor
credit risks
C) Acquiring funds at a relatively high cost, so that profitable lending opportunities can
be realized
D) Maintaining high levels of capital and thus maximizing the returns to the owners
2) Paper currency that has been declared legal tender but is not convertible into coins or
precious metals is called ________ money
A) commodity
B) fiat
C) electronic
D) funny
3) Both ________ and ________ were financial innovations that occurred because of
interest rate volatility
A) adjustable-rate mortgages; commercial paper
B) adjustable-rate mortgages; financial derivatives
C) sweep accounts; financial derivatives
D) sweep accounts; commercial paper
4) The agreement to provide a standardized commodity to a buyer on a specific date at a
specific future price is
A) a put option
B) a call option
C) a futures contract
D) a mortgage-backed security
5) Bonds issued by state and local governments are called ________ bonds
A) corporate
B) Treasury
C) municipal
D) commercial
6) ________ in the domestic interest rate causes the demand for domestic assets to
________ and the domestic currency to appreciate, everything else held constant
A) An increase; increase
B) An increase; decrease
C) A decrease; increase
D) A decrease; decrease
7) A phenomenon closely related to market overreaction is
A) the random walk
B) the small-firm effect
C) the January effect
D) excessive volatility
8) A nominal anchor promotes price stability by
A) outlawing inflation
B) stabilizing interest rates
C) keeping inflation expectations low
D) keeping economic growth low
9) A shift in tastes toward foreign goods ________ net exports in the US and causes the
IS curve to shift to the ________ in the US, everything else held constant
A) decreases; right
B) decreases; left
C) increases; right
D) increases; left
10) As in the United States, an important factor in the banking crises in Latin America
was the
A) financial liberalization that occurred in the 1980s
B) decline in real interest rates that occurred in the 1980s
C) high inflation that occurred in the 1980s
D) sluggish economic growth that occurred in the 1980s
11) Using the Gordon growth formula, if D1 is $200, ke is 12% or 012, and g is 10% or
010, then the current stock price is
A) $20
B) $50
C) $100
D) $150
12) ________ is used to make purchases while ________ is the total collection of
pieces of property that serve to store value
A) Money; income
B) Wealth; income
C) Income; money
D) Money; wealth
13) If the dollar depreciates relative to the Swiss franc
A) Swiss chocolate will become cheaper in the United States
B) American computers will become more expensive in Switzerland
C) Swiss chocolate will become more expensive in the United States
D) Swiss computers will become cheaper in the United States
14) The Glass-Steagall Act, before its repeal in 1999, prohibited commercial banks
from
A) issuing equity to finance bank expansion
B) engaging in underwriting and dealing of corporate securities
C) selling new issues of government securities
D) purchasing any debt securities
15) A bank has excess reserves of $1,000 and demand deposit liabilities of $80,000
when the reserve requirement is 20 percent If the reserve requirement is lowered to 10
percent, the bank's excess reserves will be
A) $1,000
B) $8,000
C) $9,000
D) $17,000
16) Suppose the Federal Reserve releases a policy statement today which leads people
to believe that the Fed will be enacting expansionary monetary policy in the near future
Everything else held constant, the release of this statement would immediately cause
the demand for US assets to ________ and the US dollar to ________
A) increase; appreciate
B) decrease; appreciate
C) increase; depreciate
D) decrease; depreciate
17) Everything else held constant, an increase in autonomous planned investment
spending 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
