1. In general, the more liquid an asset the ______.( a5 ^: S* {. W* E
A. less it is likely to yield K x. R* X9 q" ^$ ^# i9 t$ c/ t
B. greater its risk of default( l- w" _) e2 O4 G! @
C. lower its market price will be
7 A) T) r; A6 k- e1 pD. more it will add to bank profits
9 t# }7 `, u0 F/ a: P2. The interest rate printed on the face of a bond is called the ______.
7 S2 K$ v9 e" Z% _A. coupon rate
+ v+ @. J3 D( dB. prime rate+ C) ]2 v. n U5 R/ e" J3 Z9 p% m
C. printed rate
- Y7 r6 n" Q1 e% _: _6 aD. nominal rate
7 e7 v4 R4 M1 a4 G$ O: ~5 o3. A rise in interest rates leads to ______.& w9 p1 ~! C2 d* p# |* i4 f8 n
A. capital gains for bondholders
$ g3 F# o' d g* r7 m" AB. capital losses for bondholders; k( h1 ^9 [$ `3 s+ w% _% I/ x
C. income gains for bondholders
$ k) J5 U* _ M/ H9 o4 F9 N* XD. income losses for bondholders* c( i- ]& a! C2 _2 V
4. If the reserve requirement ratio were equal to zero, then ______.
0 b# l( F j$ r, Z) t: K* }2 mA. the deposit multiplier would be infinitely large
: N! Y, B1 L4 l) N4 ~B. required reserves would be equal to zero
3 j% X5 U/ G: _4 y. NC. the banking system would theoretically be able to create an infinitely large amount of demand deposits
3 d# n8 E* E }3 [$ S1 J: s3 OD. all of the above5 M* A1 T. s- t V+ |; `0 f
5. Financial intermediaries’ primary function in financial markets is to serve as ______.# v2 \% z# v8 {6 `) F( @2 H+ |
A. ultimate borrowers' S7 z- Y5 E% N9 r, P' Z
B. ultimate lenders
' N$ L4 W1 y. h" d+ {3 PC. ultimate savers
' H6 J- W# Z6 j; W* U# VD. middlemen- Z# ]& c+ m( f( v1 [$ f! [; }
6. Suppose the Fed buys $10 million in government securities from a commercial bank. If the required reserve ratio is 0.25, what is the maximum amount by which checkable deposits in the banking system can change? ______.3 b$ Y+ G( {& i% f' w$ h/ [
A. +$10000000
2 H% L- i7 M6 n( w( DB. +$25000000! K0 S* x8 j! f, j% U0 Y
C. +$400000005 h! [) G& s8 G. P |
D. -$40000000/ U* M( U$ v3 v$ l9 V' {
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? ______.; C3 \2 _0 U- A; l S
A. $11.250
# c* B2 d$ G9 l7 c: W: Q& F }B. $10012.50
. D3 A( w" n" }) t, ~2 cC. $9998.75* L* u6 E3 n6 u0 B1 z$ c
D. $9968.93
4 @' \1 S* A3 i6 ?- G6 \8. Who are the first to bear financial losses incurred by the bank? ______.' e5 [# E6 i6 O
A. The depositors) M9 m9 p0 w5 b, ] x* X3 y
B. The debtors
% F: W' R* J: xC. The bank capital shareholders
( g8 O0 B) S; ~1 vD. The bank employees7 ^1 d: E& \. v# {- f8 s7 z
9. A government is faced with a balance of payments deficit. It may take action to deal with this by doing all of the following except ______.
# E' a0 C9 Q, K# r5 O. r+ m! ?A. devalue the currency
5 o7 _8 l+ {0 T9 HB. reduce interest rates8 a5 k" v& e5 L! ]) s
C. restrict consumer spending/ e. I' D n* i. |' d
D. restrict imports , h' a' y7 i1 `8 G* ?2 Z/ }
( K2 ]' @: H# H0 O10. According to the principle of comparative advantage, countries ______.9 Z! ]3 b9 f4 L% a5 U
A. should specialize in producing goods they have lower opportunity cost for
- i. A7 H/ j F7 S! V# n, e) n3 QB. should export goods they can produce at lower input costs
+ C) H4 O; S: ZC. will specialize in producing goods which they can produce at lower input costs! ~! B0 l; H$ x4 X9 g
D. should specialize in producing goods they have lower absolute costs for |