1. In general, the more liquid an asset the ______.3 ], ]+ {" X1 a+ m4 s
A. less it is likely to yield
4 {8 y" G( {3 m/ O& V5 t. ~6 vB. greater its risk of default) @% C% }& U3 b1 z4 e% l$ d
C. lower its market price will be
- D! p# ^9 p2 B) _: \D. more it will add to bank profits
* N- C4 g9 s! d/ D9 w1 L ^& j' X% J2. The interest rate printed on the face of a bond is called the ______.* R `7 ?; s. v( W# L$ v! S
A. coupon rate4 w2 K* ~ o$ U) v/ L6 S; T
B. prime rate D' z' X) `5 k o" B; g
C. printed rate6 b$ |7 R, e X* G" P
D. nominal rate n# _8 q# t3 O4 X$ P+ R# Z
3. A rise in interest rates leads to ______.
) P% k+ v( g* o3 S- b; `; mA. capital gains for bondholders* x4 W7 X9 V& V7 \) O- B" ?
B. capital losses for bondholders( ]& I0 q2 Y* V9 b$ K
C. income gains for bondholders
$ X/ B/ J$ D' I8 pD. income losses for bondholders: L; y& K2 p, s7 n1 _- Q
4. If the reserve requirement ratio were equal to zero, then ______.
! V0 h9 ]. E, u S/ a% iA. the deposit multiplier would be infinitely large
# g* U' b/ w) \; d5 ?" K5 U" J5 J5 ^B. required reserves would be equal to zero
2 ~7 Z+ c0 K, O, c x( N) r4 l+ @9 VC. the banking system would theoretically be able to create an infinitely large amount of demand deposits
( d; m i6 D7 M3 L% C5 xD. all of the above' y' v' t+ m, x, I s
5. Financial intermediaries’ primary function in financial markets is to serve as ______.3 y( Z" Y0 L! _4 _& E4 G
A. ultimate borrowers, l* O' ~* K- _2 @0 d
B. ultimate lenders
7 H* Y$ R' P. V/ GC. ultimate savers
1 [5 A% U* o) G: C) w3 KD. middlemen
; u4 \ \" v h) }$ P2 _+ x6. 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? ______.9 F! o1 l, X3 a ]: D
A. +$100000000 S1 W& b6 d) D: b5 _6 M! |
B. +$25000000$ @$ |+ G [; v* u( d0 k
C. +$40000000
- l4 k5 O1 g" P" V. a( aD. -$40000000% o" J) I, ^# d
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? ______.+ l x. z6 z! M& _6 E
A. $11.2500 t. o3 v( V' d0 V: F/ L
B. $10012.508 w7 m) q& ]3 J
C. $9998.75
. a; W' H# r: U. d" N8 P* w3 R8 C4 LD. $9968.93/ O* d- k3 Z7 R! f/ }
8. Who are the first to bear financial losses incurred by the bank? ______., x# {+ s6 x+ |( G6 o+ I6 N: r( `
A. The depositors
; P& E: x2 l% MB. The debtors
6 G S1 \9 C' z; CC. The bank capital shareholders
5 A i) }8 Q2 p( }D. The bank employees
5 [* t9 X1 W, d+ p9. A government is faced with a balance of payments deficit. It may take action to deal with this by doing all of the following except ______.
( J! |* Q% L! J1 m" Q- j a! G$ FA. devalue the currency
5 n, u/ O1 C+ k$ uB. reduce interest rates
1 G. M: X# f" T6 d, Z1 t) dC. restrict consumer spending
9 x" ?- c! g- B u4 qD. restrict imports 1 `) w8 o6 f; z: I+ Q0 L, [
& Z9 _# E" i2 X; S$ J8 l& [+ `4 n* B
10. According to the principle of comparative advantage, countries ______.
. u! \% [1 V# i8 _5 q8 D; KA. should specialize in producing goods they have lower opportunity cost for
( v+ a% D1 w& \3 w& L; v6 n) J- gB. should export goods they can produce at lower input costs
) y9 u) k9 A" m6 uC. will specialize in producing goods which they can produce at lower input costs- b& y" r; X/ Y1 c; |9 F6 z
D. should specialize in producing goods they have lower absolute costs for
* A0 |* I7 f/ j0 N% Y11. A currency depreciation on the foreign exchange market will ______.
5 E" [! J2 O. E# q. x8 lA. encourage imports to the country whose currency has depreciated e6 r: R) I0 O
B. discourage imports to the country whose currency has depreciated$ K4 \( E0 d. O' t1 C2 c
C. discourage exports to the country whose currency has depreciated
( `% U6 y1 t* p4 C( n/ A+ U+ qD. encourage foreign travel by the citizens of the country whose currency has depreciated9 b7 `8 l( [* W2 G5 s& ?; p- l( g
12. The difference between fiscal policy and monetary policy is that ______.
/ L- V! P! X2 c$ v6 C$ ]7 eA. fiscal policy is macroeconomic policy and monetary policy is microeconomic policy
( q2 M0 q, ~6 }: {% }B. monetary policy is macroeconomic policy and fiscal policy is microeconomic policy
, `7 s4 _' z! p: ?* Z; ], d2 O cC. fiscal policy involves regulation of natural monopolies and monetary policy involves the provision of public goods3 q9 [9 I1 j, U
D. monetary policy involves regulation of the money supply and fiscal policy involves government spending and taxing
' r. k- C% D/ L, x" s4 R13. When economists speak of the utility of a certain good, they are referring to ______.
1 @5 N7 w! s& W; wA. the demand for the good- |! P- k- q! P! ~
B. the usefulness of the good in consumption) [! @8 R F5 c+ z$ r( ?& V, M
C. the satisfaction gained from consuming the good3 O0 p. }3 P& P4 Y0 y9 M9 b
D. the rate at which consumers are willing to exchange one good for another
# Y* @. K% e; }. n14. How are financial ratios used in decision making? ______.
7 G1 U! z9 [% T/ l, G$ C6 nA. They remove the uncertainty of the business environment
U+ M) S) f2 p- M9 R: ^B. They give clear signals about the appropriate action to take- T. D, ~! g& H) N' [+ T
C. They can help identify the reasons for success and failure in business, but decision making requires information beyond the ratios [- b! M3 i7 C# C7 ]' q
D. They aren’t useful because decision making is too complex.
, b' ?" x) s e! g15. A good is called an inferior good if sales ______.
" y& J9 j4 ]! Y( |A. are unaffected by income7 C4 a6 i% g, `9 J0 u% `+ m
B. rise as price increases$ _; l; B: S- O o
C. decline as price increases
8 g/ u- C- A7 S7 xD. decline as income increases. N. W/ D- Y8 C, t
# R1 V1 _) ?6 ?0 P! a0 J+ O
16. Interest rates are made up of ______.5 a0 I- |' g. D) j
A. the real rate and the inflation premium" u7 {# ?+ H7 u5 K w% J% p
B. the risk-free rate and the period rate+ ~9 `4 c; M% p/ {3 P4 o% F* I8 X
C. the risk premium |