1. In general, the more liquid an asset the ______.
1 B( l1 g' x! f. A3 FA. less it is likely to yield b' C5 R8 {/ T O9 ]) p
B. greater its risk of default3 X. @' x3 _& c6 w' e1 Q
C. lower its market price will be- E) k) r9 {! J6 C" L D3 i X$ r# \
D. more it will add to bank profits' \/ U* d$ D: Y8 K$ |
2. The interest rate printed on the face of a bond is called the ______.
) ~- Y+ O* S! T8 lA. coupon rate
4 T& D6 k/ t. F2 F+ ^B. prime rate" F2 q ^" F5 i$ H
C. printed rate" r5 F. e2 Q+ I3 @: ~
D. nominal rate
4 k- L7 G$ i7 o. x$ D3. A rise in interest rates leads to ______.
/ t5 c1 |: r! r$ OA. capital gains for bondholders
5 Q# r; P, W. ZB. capital losses for bondholders
: l k. i7 j* K' dC. income gains for bondholders
6 T, _+ ?: W" s# ~2 nD. income losses for bondholders- }4 |+ o% S/ H
4. If the reserve requirement ratio were equal to zero, then ______.' q3 c) }9 X: n' d4 p
A. the deposit multiplier would be infinitely large
5 J( p$ H: U) `! Z! }B. required reserves would be equal to zero
; n: E% L/ O3 a4 x1 ZC. the banking system would theoretically be able to create an infinitely large amount of demand deposits
, F* A$ C9 O; J# \+ {" cD. all of the above
9 j1 u$ @7 }* a- h8 P l5. Financial intermediaries’ primary function in financial markets is to serve as ______.
2 X" V- g6 L! f' b; aA. ultimate borrowers9 R* Y% y0 [7 p8 [5 x+ C0 W$ g# C
B. ultimate lenders! q; b& Y. v' C" N3 h
C. ultimate savers
6 t/ }( {) k" Y3 @( p/ l( yD. middlemen5 b# v- }3 V' ^+ ?! k* c# i
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? ______.
2 T( B; K! g* K! `- ZA. +$10000000
6 [5 c% [6 u) j; ]B. +$25000000- B% l( _0 C6 z8 K% W4 t; J
C. +$400000004 s) W8 j8 H. k# S! H
D. -$400000000 {6 K5 Y( X) R# x, s
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? ______.
6 i5 a" @/ P. l* ^A. $11.250
/ z% l0 B# q" v8 E! Q2 ?B. $10012.50
3 r# ~- z' C# v. K, ]2 QC. $9998.75
% O, l5 d1 P3 w- zD. $9968.93
* u* p5 A8 _3 C) H! ~+ S& ]8. Who are the first to bear financial losses incurred by the bank? ______.* q" d2 ?$ Q1 ?& M! \
A. The depositors
1 k: P9 o' v5 c9 f x0 ~& u: [B. The debtors6 v$ j8 t3 } Z; r$ Y5 z2 M: s" c
C. The bank capital shareholders
/ |4 H4 z, @, d9 AD. The bank employees
1 [( T0 o: Z( M- j9. 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 ______.
& o9 }* C6 E" Q, w9 H r- \A. devalue the currency
; s5 L! b( B, t- \) _B. reduce interest rates
) R' ]0 Y2 L& w! B+ M+ ]C. restrict consumer spending U: W, m5 F2 u+ W& e* `8 u
D. restrict imports 2 S [9 b) S- b2 M% s4 w+ _
1 B* W& Y7 p4 `" Y$ }" B! e6 g W10. According to the principle of comparative advantage, countries ______.
7 P! T( `7 y, {+ {' EA. should specialize in producing goods they have lower opportunity cost for$ W* c2 t( v$ W- {
B. should export goods they can produce at lower input costs& n# k+ p ~2 l/ O
C. will specialize in producing goods which they can produce at lower input costs
. D4 Q! y5 D% u* j7 o" HD. should specialize in producing goods they have lower absolute costs for) |2 f# E+ h/ I) c: s- n6 d
11. A currency depreciation on the foreign exchange market will ______.* U) }. s/ F& e$ P' P9 V
A. encourage imports to the country whose currency has depreciated
9 h8 z" v1 u* S+ \. `/ SB. discourage imports to the country whose currency has depreciated0 t- f! U1 [) q# e3 p- f4 V
C. discourage exports to the country whose currency has depreciated4 ]0 t' W3 R3 O+ H4 A
D. encourage foreign travel by the citizens of the country whose currency has depreciated
+ w+ q( ^8 A1 k/ S9 i12. The difference between fiscal policy and monetary policy is that ______.! _' |6 T: v# l+ S6 W
A. fiscal policy is macroeconomic policy and monetary policy is microeconomic policy
+ f2 w1 B2 E, c; I; R# Q, Z6 A: K. nB. monetary policy is macroeconomic policy and fiscal policy is microeconomic policy
8 ~- e/ [6 `- G: p" o; ?; zC. fiscal policy involves regulation of natural monopolies and monetary policy involves the provision of public goods
, U) C. [+ b' @8 H2 Z3 m. T; l8 BD. monetary policy involves regulation of the money supply and fiscal policy involves government spending and taxing
: f0 V4 g& ]% ?, l9 s* m13. When economists speak of the utility of a certain good, they are referring to ______.6 m4 m, l S& n2 L( W; b
A. the demand for the good
, @! t+ N4 u; I- m7 O7 q3 kB. the usefulness of the good in consumption0 y3 L6 l" g8 e$ ~ C
C. the satisfaction gained from consuming the good9 _- ^( ^# f( G$ |6 F8 R5 ~! ^/ h
D. the rate at which consumers are willing to exchange one good for another* h$ N$ l( @- J
14. How are financial ratios used in decision making? ______.
( m+ T5 O5 N9 i& r! mA. They remove the uncertainty of the business environment& D* D% f4 S- l" c) R7 p8 D' a
B. They give clear signals about the appropriate action to take4 v, ~+ B7 M1 z3 C5 F5 {# T
C. They can help identify the reasons for success and failure in business, but decision making requires information beyond the ratios
$ {! L, R! o' `D. They aren’t useful because decision making is too complex.
( @0 E- }/ ]) Y$ `* L0 j* n15. A good is called an inferior good if sales ______.4 w+ Z0 t1 h0 J0 k" W+ ?
A. are unaffected by income5 f+ D0 c& H5 q$ j
B. rise as price increases
3 J3 b* X) @. BC. decline as price increases" \4 G& ^! Z9 w0 J7 |
D. decline as income increases% y& t' v. K+ n: D6 ? H7 C5 s
% ?! w" \: N& I0 T8 d4 @: g* F2 R16. Interest rates are made up of ______.9 ^9 B* [9 `! D' K4 C( d3 l
A. the real rate and the inflation premium
8 C1 ^) {& t5 n# zB. the risk-free rate and the period rate
) q0 X/ u6 g1 m! }! s# w" Z8 yC. the risk premium |