1. In general, the more liquid an asset the ______.+ n* r7 l3 E1 ?" y% T! f
A. less it is likely to yield
6 G# m2 I- d' x% y, U& F5 IB. greater its risk of default4 Y- L" b. L! V& |8 C8 H9 X r0 k- X
C. lower its market price will be% q9 }/ b( o0 j
D. more it will add to bank profits8 Q/ @# s+ ]$ A) X
2. The interest rate printed on the face of a bond is called the ______.
3 T7 l* L% P7 J5 EA. coupon rate
2 \0 w6 l$ Z4 S/ e y& KB. prime rate
9 j. T1 f8 B& |, t& jC. printed rate6 C# S2 Q9 P$ H+ o( M1 |3 i
D. nominal rate9 ~; h( c+ r# d8 ^$ k6 D3 ]) H
3. A rise in interest rates leads to ______.3 J2 i4 J8 D" d# I$ S. w1 Q
A. capital gains for bondholders6 n+ N: A: E. {) r$ Q6 q" K
B. capital losses for bondholders
. C7 C' Z! x: Z7 y7 u9 V+ z1 KC. income gains for bondholders# ^4 k8 C' g9 m# R; i
D. income losses for bondholders
) G0 d! x; y6 q4. If the reserve requirement ratio were equal to zero, then ______.
4 x7 {: \+ m6 J' B. NA. the deposit multiplier would be infinitely large
4 \7 K: g9 b! AB. required reserves would be equal to zero
( ?7 a0 Z3 }0 E; WC. the banking system would theoretically be able to create an infinitely large amount of demand deposits7 D& z% W# c; w R8 m" l
D. all of the above
6 q ]" C x' H0 d5. Financial intermediaries’ primary function in financial markets is to serve as ______.
( V. n: O% ~2 A4 N: ]& _A. ultimate borrowers. k+ M: w4 _& e$ W; J; S: {. {
B. ultimate lenders- E& `6 r* ~2 R T3 `, k
C. ultimate savers
: q/ g8 }% B; x& ~6 x2 A- oD. middlemen5 r9 r- t9 y6 V8 I/ }" J. ?
6. Suppose the Fed buys $10 million in government securities from a commercial bank. If the required reserve ratio is 0.25, what is the maximum amount by which checkable deposits in the banking system can change? ______.
4 E* u, }6 J. r$ O6 b2 s6 BA. +$100000009 ] @- m: d& c; J* G0 H ~
B. +$250000008 G: e: F) ?+ e! {/ C
C. +$40000000
' Z; B# Z, h+ `9 G0 P) eD. -$40000000/ d; ^' U6 X$ O1 K
7. Suppose the annualized yield on a 91-day Treasury bill is 1.25%. If you invested $10 000 in this bill, how much would you have to pay for this security? ______.) Y4 `6 N ^ H8 n" ?9 g& p' Q
A. $11.250' Z, v5 I* g, [& G
B. $10012.50
' @7 Q& `0 [" u; ZC. $9998.753 m9 h( _$ v! O u
D. $9968.93- G! F# b2 I' a2 Q' S+ N6 G! a3 v
8. Who are the first to bear financial losses incurred by the bank? ______.
0 Z* R, c: u( q: L. iA. The depositors0 K1 R0 F9 {# C6 v' e5 J
B. The debtors/ `6 D, Z. [1 N- G2 J5 \
C. The bank capital shareholders
' c6 x+ ^4 W* H3 I1 sD. The bank employees( y6 l) ?+ p; F9 f9 E' m
9. A government is faced with a balance of payments deficit. It may take action to deal with this by doing all of the following except ______.
' N! I1 b7 u3 LA. devalue the currency
5 ~6 z6 Y3 g! d0 O( E: \B. reduce interest rates* h6 n7 `5 a) C& @8 n4 i
C. restrict consumer spending& b; X; o D& ]% Z2 e
D. restrict imports
, S: g* e, @1 t$ Q/ _. r2 ?4 p7 [9 `
10. According to the principle of comparative advantage, countries ______.
9 N( f) W2 |1 ~& R2 F' CA. should specialize in producing goods they have lower opportunity cost for4 r/ u, n8 n9 g6 [, t
B. should export goods they can produce at lower input costs
( y( G3 `( U1 w: N& s( m" w) OC. will specialize in producing goods which they can produce at lower input costs; d6 \9 e; W" R8 Y, V/ ?
D. should specialize in producing goods they have lower absolute costs for |