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1) Which of the following items are not counted in US GDP?
A) your purchase of a new Ford Mustang
B) your purchase of new tires for your old car
C) GM's purchase of tires for new cars
D) a foreign consumer's purchase of a new Ford Mustang
2) In the market for reserves, if the federal funds rate is between the discount rate and
the interest rate paid on excess reserves, a ________ in the reserve requirement
decreases the demand for reserves, ________ the federal funds interest rate, everything
else held constant
A) rise; lowering
B) decline; raising
C) decline; lowering
D) rise; raising
3) A contractionary monetary policy decreases net exports by ________ interest rates
and ________ the value of the dollar
A) lowering real; decreasing
B) lowering real; increasing
C) raising nominal; increasing
D) raising real; increasing
4) Holding all else constant, when a bank receives the funds for a deposited check,
A) cash items in the process of collection fall by the amount of the check
B) bank assets increase by the amount of the check
C) bank liabilities decrease by the amount of the check
D) bank reserves increase by the amount of required reserves
5) On January 25, 2009, one US dollar traded on the foreign exchange market for about
075 euros Therefore, one euro would have purchased about ________ US dollars
A) 075
B) 100
C) 133
D) 175
6) Suppose that from a new checkable deposit, First National Bank holds two million
dollars in vault cash, one million dollars in required reserves, and faces a required
reserve ratio of ten percent Given this information, we can say First National Bank has
________ million dollars in excess reserves
A) one
B) two
C) nine
D) ten
7) If the required reserve ratio is 5 percent, currency in circulation is $400 billion,
checkable deposits are $800 billion, and excess reserves total $08 billion, then the M1
money multiplier is
A) 25
B) 272
C) 23
D) 0551
8) In contrast to the CAPM, the APT assumes that there can be several sources of
________ that cannot be eliminated through diversification
A) nonsystematic risk
B) systematic risk
C) credit risk
D) arbitrary risk
9) One factor contributing to the decline in cost advantages that banks once had is the
A) decline in the importance of checkable deposits from over 60 percent of banks'
liabilities to 2 percent today
B) decline in the importance of savings deposits from over 60 percent of banks'
liabilities to under 15 percent today
C) decline in the importance of checkable deposits from over 40 percent of banks'
liabilities to 15 percent today
D) decline in the importance of savings deposits from over 40 percent of banks'
liabilities to under 20 percent today
10) Suppose that the latest Consumer Price Index (CPI) release shows a higher inflation
rate in the US than was expected Everything else held constant, the release of the CPI
report would immediately cause the demand for US assets to ________ and the US
dollar would ________
A) increase; appreciate
B) increase; depreciate
C) decrease; appreciate
D) decrease; depreciate
11) If the price of gold becomes less volatile, then, other things equal, the demand for
stocks will ________ and the demand for antiques will ________
A) increase; increase
B) increase; decrease
C) decrease; decrease
D) decrease; increase
12) Ranking assets from most liquid to least liquid, the correct order is
A) savings bonds; house; currency
B) currency; savings bonds; house
C) currency; house; savings bonds
D) house; savings bonds; currency
13) In the simple deposit expansion model, if the required reserve ratio is 10 percent
and the Fed increases reserves by $100, checkable deposits can potentially expand by
A) $100
B) $250
C) $500
D) $1,000
14) The Fed-Treasury Accord of March 1951 provided the Fed greater freedom to
A) let interest rates increase
B) let unemployment increase
C) let inflation accelerate
D) let exchange rates increase
15) An investment bank purchases securities from a corporation at a predetermined
price and then resells them in the market This process is called
A) underwriting
B) underhanded
C) understanding
D) undertaking
16) Using the Gordon growth model, a stock's current price decreases when
A) the dividend growth rate increases
B) the required return on equity decreases
C) the expected dividend payment increases
D) the growth rate of dividends decreases
