1) When banks calculate the losses the institution would incur if an unusual
combination of bad events happened, the bank is using the ________ approach
A) stress-test
B) value-at-risk
C) trading-loss
D) maximum value
2) In the generalized dividend model, the current stock price is the sum of
A) the actual value of the future dividend stream
B) the present value of the future dividend stream
C) the present value of the future dividend stream plus the actual future sales price
D) the present value of the future sales price
3) The three largest Federal Reserve banks (New York, Chicago, and San Francisco)
combined hold more than ________ percent of the assets of the Federal Reserve System
A) 25
B) 33
C) 50
D) 67
4) When gold prices become more volatile, the ________ curve for gold shifts to the
________; ________ the price of gold
A) supply; right; increasing
B) supply; left; increasing
C) demand; right; decreasing
D) demand; left; decreasing
5) The view that velocity is constant in the short run transforms the equation of
exchange into the quantity theory of money According to the quantity theory of money,
when the money supply doubles
A) velocity falls by 50 percent
B) velocity doubles
C) nominal incomes falls by 50 percent
D) nominal income doubles
6) Everything else held constant, increased demand for a country’s ________ causes its
currency to appreciate in the long run, while increased demand for ________ causes its
currency to depreciate
A) imports; imports
B) imports; exports
C) exports; imports
D) exports; exports
7) When the value of the British pound changes from $150 to $125, then the pound has
________ and the US dollar has ________
A) appreciated; appreciated
B) depreciated; appreciated
C) appreciated; depreciated
D) depreciated; depreciated
8) All of the following are common to banking crises in different countries except
A) financial liberalization or innovation
B) weak bank regulatory systems
C) a government safety net
D) a dual banking system
9) A short-term debt instrument issued by well-known corporations is called
A) commercial paper
B) corporate bonds
C) municipal bonds
D) commercial mortgages
10) Everything else held constant, a decrease in the currency ratio causes the M1 money
multiplier to ________ and the money supply to ________
A) decrease; increase
B) increase; increase
C) decrease; decrease
D) increase; decrease
11) If brokerage commissions on stocks fall, everything else held constant, the demand
for bonds ________, the price of bonds ________, and the interest rate ________
A) decreases; decreases; increases
B) decreases; decreases; decreases
C) increases; decreases; increases
D) increases; increases; increases
12) As interest rates rise, the opportunity cost of holding money ________ and the
demand for money ________
A) rises; rises
B) rises; falls
C) falls; rises
D) falls; falls
13) ________ is the process of researching and developing profitable new products and
services by financial institutions
A) Financial engineering
B) Financial manipulation
C) Customer manipulation
D) Customer engineering
14) Which of the following is an entity of the Federal Reserve System?
A) The US Treasury Secretary
B) The FOMC
C) The Comptroller of the Currency
D) The FDIC
15) An important function of secondary markets is to
A) make it easier to sell financial instruments to raise funds
B) raise funds for corporations through the sale of securities
C) make it easier for governments to raise taxes
D) create a market for newly constructed houses