1. In general, the more liquid an asset the ______.
- q0 l' w0 f/ R; OA. less it is likely to yield
! ~4 U- D' T$ O3 Z4 m% ^B. greater its risk of default- X- W, [# U/ u! s5 W& `0 M! t
C. lower its market price will be/ O. y- E% z! g& v: `
D. more it will add to bank profits0 @6 P' g* l$ q' l; v$ |( |! u0 U8 i& L
2. The interest rate printed on the face of a bond is called the ______.
3 y! x; i. I' J0 f5 e! s/ B) JA. coupon rate
8 O. S+ k6 u- I2 g4 UB. prime rate
2 A" w3 a" j2 }C. printed rate
( z# K' p0 i( z7 {D. nominal rate
l& L1 f7 I6 ]" G3. A rise in interest rates leads to ______.
8 d! P5 P! h9 _8 m" vA. capital gains for bondholders
6 s7 d' c& ~( H- F2 }% F( OB. capital losses for bondholders
" N& b; D' W5 T" M- jC. income gains for bondholders! o! j1 X& ]4 z0 U" `$ y
D. income losses for bondholders
, o: D3 |' ^% ~4. If the reserve requirement ratio were equal to zero, then ______.
" C' P8 |0 w VA. the deposit multiplier would be infinitely large
. h% p7 y5 s0 m- C7 JB. required reserves would be equal to zero0 J8 B) x6 S# B* u* M0 Y
C. the banking system would theoretically be able to create an infinitely large amount of demand deposits
: { Q) _6 \: w$ iD. all of the above
/ H) _% U N) t8 n5. Financial intermediaries’ primary function in financial markets is to serve as ______.
) b% b7 b9 W# g' S3 g3 `A. ultimate borrowers
D- b& c" a; m/ s; ~% rB. ultimate lenders2 M2 U' c7 n6 |3 f/ _( H9 V7 {; O
C. ultimate savers! y6 p& k, T7 G5 r/ h
D. middlemen
5 a8 H- q% f' j- z6. Suppose the Fed buys $10 million in government securities from a commercial bank. If the required reserve ratio is 0.25, what is the maximum amount by which checkable deposits in the banking system can change? ______.$ l' J( D8 a! S0 k' ^6 U
A. +$10000000
% l: L' k" P: o0 UB. +$25000000
2 Q6 f9 I- }0 j7 c5 K- ~C. +$40000000
9 ]- v8 y6 M; kD. -$40000000+ Q0 v( r* j1 U& x7 U4 ]
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? ______.7 F' z y- _+ ]5 t& b9 R2 X* r
A. $11.250
+ r, p& U( ?5 v. q s) mB. $10012.50
2 N, V5 @5 \: x) ^# v$ pC. $9998.75( r& n3 E5 | w
D. $9968.93; Y+ n. _4 Y. [2 U
8. Who are the first to bear financial losses incurred by the bank? ______. G; I6 E6 N. L( B: n
A. The depositors7 {( h+ ~/ d0 y. W. O3 V, |
B. The debtors# n0 {, P- Q0 \: x, L
C. The bank capital shareholders
% k7 M# J6 \: s9 j& I Q( `D. The bank employees% k O% b( g+ o7 p: l' |1 {
9. A government is faced with a balance of payments deficit. It may take action to deal with this by doing all of the following except ______.
! g5 L' ?. B4 c/ Q' `5 ^" E( |A. devalue the currency
( j; r3 W# E" X$ RB. reduce interest rates
+ J* `! S# ~2 VC. restrict consumer spending/ R, c8 G$ D6 S, w a' Q% M
D. restrict imports & f& E, y3 J" p$ J
# h8 w8 \" A% p
10. According to the principle of comparative advantage, countries ______.* v* q8 v4 f3 o4 ?
A. should specialize in producing goods they have lower opportunity cost for
" x) n! `, [/ ~6 V3 j$ VB. should export goods they can produce at lower input costs$ {4 i7 q! e0 o/ R/ R, r
C. will specialize in producing goods which they can produce at lower input costs5 A" j$ b+ Q+ `5 b
D. should specialize in producing goods they have lower absolute costs for" ?8 E/ E5 {: e% ?* Y! x4 n4 s0 o
11. A currency depreciation on the foreign exchange market will ______.
: P0 U0 O0 t6 T5 x1 Z- x- r9 w9 NA. encourage imports to the country whose currency has depreciated
% K( `% b6 ]/ M/ bB. discourage imports to the country whose currency has depreciated
5 e2 V4 @, u+ I: g+ LC. discourage exports to the country whose currency has depreciated
, x( P; q% r% M/ @* c1 LD. encourage foreign travel by the citizens of the country whose currency has depreciated/ I+ |3 R7 y1 T1 K# u
12. The difference between fiscal policy and monetary policy is that ______.
: h9 \5 t( I3 h8 [A. fiscal policy is macroeconomic policy and monetary policy is microeconomic policy' z1 _# ]2 B/ w9 @
B. monetary policy is macroeconomic policy and fiscal policy is microeconomic policy! v, Z4 ?5 P5 v% A# S
C. fiscal policy involves regulation of natural monopolies and monetary policy involves the provision of public goods
1 b c8 t' e: G# o( dD. monetary policy involves regulation of the money supply and fiscal policy involves government spending and taxing+ A2 O$ n' i2 ?- {+ z- U3 v. A5 L
13. When economists speak of the utility of a certain good, they are referring to ______.* }% E* g) e4 I9 W, E% z
A. the demand for the good
4 T+ L* g4 h; j/ k; o, sB. the usefulness of the good in consumption; h+ @% X5 C2 p" |* J4 @% \1 D
C. the satisfaction gained from consuming the good4 |- q6 u9 ^4 A& g5 P5 s/ v( a& Z
D. the rate at which consumers are willing to exchange one good for another9 d7 Z8 d9 C& Q7 q# f- v
14. How are financial ratios used in decision making? ______. Y2 {, S* [# y/ W. R8 R2 S
A. They remove the uncertainty of the business environment& J- c7 A* X0 g! J: H
B. They give clear signals about the appropriate action to take
k8 |5 t. s* e/ ]C. They can help identify the reasons for success and failure in business, but decision making requires information beyond the ratios
, a2 H1 E9 W; b4 o1 c, R8 |D. They aren’t useful because decision making is too complex.7 [! ~2 i, E' Q3 X0 O
15. A good is called an inferior good if sales ______.
7 l# i# X% E% V- X$ @A. are unaffected by income
( i4 O0 e A# z3 m4 G" pB. rise as price increases4 i) R5 p# [9 m5 C! }, g
C. decline as price increases
* J7 z/ H% h2 P9 W4 _) {D. decline as income increases- Z7 v: V1 Y- \2 s. s' n, h
% I6 x. h. h: K. N
16. Interest rates are made up of ______.9 N- ^% e, j, [
A. the real rate and the inflation premium
5 z. S0 J2 J& }B. the risk-free rate and the period rate
( W% B% K) d/ C: O' ?C. the risk premium |