1) A debt instrument sold by a bank to its depositors that pays annual interest of a given
amount and at maturity pays back the original purchase price is called
A) commercial paper
B) a negotiable certificate of deposit
C) a municipal bond
D) federal funds
2) Member commercial banks have purchased stock in their district Fed banks; the
dividend paid by that stock is limited by law to ________ percent annually
A) four
B) five
C) six
D) eight
3) Everything else held constant, if consumption expenditure increases by 65 for a 100
increase in disposable income, the mpc is
A) 0
B) 05
C) 065
D) 1
4) In the Keynesian framework, as long as output is ________ the equilibrium level,
unplanned inventory investment will remain ________, firms will continue to raise
production, and output will continue to rise
A) below; negative
B) above; negative
C) below; positive
D) above; positive
5) Everything else held constant, if aggregate output is to the ________ of the IS curve,
then there is an excess ________ of goods which will cause aggregate output to rise
A) right; supply
B) right; demand
C) left; supply
D) left; demand
6) The fixed exchange rate regime established at a meeting in New Hampshire in 1944
has been known as the
A) General Agreement on Tariffs and Trade
B) Bretton Woods system
C) International Settlement Fund
D) Balance of Payments Compliance Accord
7) When the European System of Central Banks uses main refinancing operations, it is
similar to the Federal Reserve using
A) dynamic open market operations
B) defensive open market operations
C) discount policy
D) reserve requirements
8) During the bank panics of the Great Depression the excess reserve ratio
A) increased sharply
B) decreased sharply
C) increased slightly
D) decreased slightly
9) In the market for reserves, if the federal funds rate is between the discount rate and
the interest rate paid on excess reserves, a decline in the reserve requirement ________
the ________ curve of reserves and causes the federal funds interest rate to fall,
everything else held constant
A) decreases; demand
B) increases; demand
C) increases; supply
D) decreases; supply
10) According to the Taylor Principle, when the inflation rate rises, the nominal interest
rate should be ________ by ________ than the inflation rate increase
A) increased; more
B) increased; less
C) decreased; more
D) decreased; less
11) In the United States, loans from ________ are far ________ important for corporate
finance than are securities markets
A) government agencies; more
B) government agencies; less
C) financial intermediaries; more
D) financial intermediaries; less
12) Severe fiscal imbalances can directly trigger a currency crisis since
A) investors fear that the government may not be able to pay back the debt and so begin
to sell domestic currency
B) the government may stop printing money
C) the government may have to cut back on spending
D) the currency must surely increase in value
13) Through correspondent banking, large banks provide services to small banks,
including
A) loan guarantees
B) foreign exchange transactions
C) issuing stock
D) debt reduction
14) According to aggregate demand and supply analysis, America’s involvement in the
Vietnam War had the effect of
A) increasing aggregate output, lowering unemployment, and raising the inflation
B) decreasing aggregate output, lowering unemployment, and lowering the inflation
C) increasing aggregate output, raising unemployment, and raising the inflation
D) decreasing aggregate output, raising unemployment, and lowering the inflation
15) Which of the following types of information most likely allows the exploitation of a
profit opportunity?
A) Financial analysts’ published recommendations
B) Technical analysis
C) Hot tips from a stockbroker
D) Insider information
16) If a bank has ________ rate-sensitive assets than liabilities, then ________ in
interest rates will increase bank profits
A) more; a decline
B) more; an increase
C) fewer; an increase
D) fewer; a surge