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1) One reason financial systems in developing and transition countries are
underdeveloped is
A) they have weak links to their governments
B) they make loans only to nonprofit entities
C) the legal system may be poor making it difficult to enforce restrictive covenants
D) the accounting standards are too stringent for the banks to meet
2) Collateralized debt is also know as
A) unsecured debt
B) secured debt
C) unrestricted debt
D) promissory debt
3) Everything else held constant, aggregate demand increases when
A) taxes are cut
B) government spending is reduced
C) animal spirits decrease
D) the money supply is reduced
4) The yield to maturity for a one-year discount bond equals the increase in price over
the year, divided by the
A) initial price
B) face value
C) interest rate
D) coupon rate
5) Keynes assumed that money has ________ rate of return
A) a positive
B) a negative
C) a zero
D) an increasing
6) In the one-period valuation model, an increase in the required return on investments
in equity
A) increases the expected sales price of a stock
B) increases the current price of a stock
C) reduces the expected sales price of a stock
D) reduces the current price of a stock
7) In the simple Keynesian framework, declines in planned investment spending that
produce high unemployment can be offset by raising
A) taxes
B) government spending
C) consumer confidence
D) business confidence
8) If during the past decade the average rate of monetary growth has been 5% and the
average inflation rate has been 5%, everything else held constant, when the Federal
Reserve announces that the new rate of monetary growth will be 10%, the adaptive
expectation forecast of the inflation rate is
A) 5%
B) between 5 and 10%
C) 10%
D) more than 10%
9) The largest percentage of banks' holdings of securities consist of
A) Treasury and government agency securities
B) tax-exempt municipal securities
C) state and local government securities
D) corporate securities
10) All of the following are examples of off-balance sheet activities that generate fee
income for banks except
A) foreign exchange trades
B) guaranteeing debt securities
C) back-up lines of credit
D) selling negotiable CDs
11) When I purchase ________, I own a portion of a firm and have the right to vote on
issues important to the firm and to elect its directors
A) bonds
B) bills
C) notes
D) stock
12) The theory of purchasing power parity cannot fully explain exchange rate
movements because
A) all goods are identical even if produced in different countries
B) monetary policy differs across countries
C) some goods are not traded between countries
D) fiscal policy differs across countries
13) The measure of the aggregate price level that is most frequently reported in the
media is the
A) GDP deflator
B) producer price index
C) consumer price index
D) household price index
