. In general, the more liquid an asset the ______.
* t; k, _9 Y4 [5 h3 W/ P A. less it is likely to yield
; h( q& D9 x* w' z, ? B. greater its risk of default5 T) j+ q% W9 \* r# U0 L: G
C. lower its market price will be+ ]% |% v) F M2 Q
D. more it will add to bank profits( `: y9 U" l. t# s& ^1 J
2. The interest rate printed on the face of a bond is called the ______.( U( ?2 _7 Q2 r8 Y
A. coupon rate5 b& |5 b" T, O- z; }
B. prime rate: k @. Z+ y/ {! K- x5 m
C. printed rate
& _5 H- M2 ^: f$ d- I- Q D. nominal rate
- d; N: b" J0 \2 A" z3 `0 i 3. A rise in interest rates leads to ______.
- k% H& R- J6 M* d W$ g A. capital gains for bondholders
5 Y) }3 S! D- P B. capital losses for bondholders
# T5 B: W1 f6 v( h, L9 v( n C. income gains for bondholders2 d# l/ l V1 i9 O
D. income losses for bondholders* x v# v8 S. q6 C3 [
4. If the reserve requirement ratio were equal to zero, then ______.
8 U4 ^, D% p* N3 v$ N A. the deposit multiplier would be infinitely large
% r7 F H) b: q- Y; ~7 z* N1 V B. required reserves would be equal to zero9 H" c* N2 E& ~- \
C. the banking system would theoretically be able to create an infinitely large amount of demand deposits {6 @/ j/ q; ?% H- V5 O1 m
D. all of the above9 f7 a' s5 f" Z: U
5. Financial intermediaries' primary function in financial markets is to serve as ______.
9 L8 \3 V5 p/ B. e: }$ o* h6 v- P A. ultimate borrowers& B/ _, [6 v0 w) f6 Z, w" X
B. ultimate lenders
! T2 ]" t4 p9 P2 V, E4 ^0 `6 M( K. N, V C. ultimate savers
+ M. L+ I2 H' l4 ~- p. _9 b) X D. middlemen! X5 a+ O8 Y+ d
6. Suppose the Fed buys $10 million in government securities from a commercial bank. If the required reserve ratio is 0.25, what is the maximum amount by which checkable deposits in the banking system can change______.$ y. V* |' T9 v. ?9 I
A. +$100000001 U( N3 o3 ^' Z" B
B. +$25000000
0 @2 V1 b5 }1 F1 u* i4 Q, _5 W C. +$400000002 Z! q q' }. }* q7 w% U
D. -$40000000
# y& q1 X* j6 p# G: e# j 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______.
, \' n+ x3 N% \ A. $11 250! P% l! t- A* S4 X7 N
B. $10012.504 G) P: f( w G" C! f
C. $9998.75! S& s+ u- d+ p. D+ T
D. $9968.93+ f% S- M* C! h: ~
8. Who are the first to bear financial losses incurred by the bank______.% ]3 ^1 U2 Y2 m. c o1 W) U
A. The depositors. o. c0 o! h9 D7 l
B. The debtors. d2 S9 E! h; H! b2 X
C. The bank capital shareholders5 m0 x( L) D: G% m
D. The bank employees% f( q8 H6 Q5 t1 b4 N
9. A government is faced with a balance of payments deficit. It may take action to deal with this by doing all of the following except ______.# y1 o* h0 A* e1 P, R/ E
A. devalue the currency
' F1 B2 ?4 d+ c B. reduce interest rates" T1 B' z9 I0 }7 O5 E
C. restrict consumer spending
6 {) E8 X6 d9 Z8 p- }" T D. restrict imports0 c3 F" j! d5 I" ^
10. According to the principle of comparative advantage, countries ______.
0 t6 f$ c, K( N A. should specialize in producing goods they have lower opportunity cost for4 P* B7 k7 q- m |9 {$ z
B. should export goods they can produce at lower input costs
( {* Z4 I' P% D( Z, q# J- V/ m C. will specialize in producing goods which they can produce at lower input costs
0 d% h" |9 V5 v5 ^+ t# L& G! p7 c% x" s D. should specialize in producing goods they have lower absolute costs for
6 p3 T! f/ j' P; v7 m% O5 j7 E 11. A currency depreciation on the foreign exchange market will ______.
+ v5 O2 l; ^/ \ A. encourage imports to the country whose currency has depreciated' d$ P2 T# K; X+ G" S( Y% O- O! s) s
B. discourage imports to the country whose currency has depreciated$ s8 d8 A* i, Y+ F9 } X
C. discourage exports to the country whose currency has depreciated$ ]! C1 C- E) ?( o
D. encourage foreign travel by the citizens of the country whose currency has depreciated
9 z- P; l9 U- s6 f* p! @( |- | 12. The difference between fiscal policy and monetary policy is that ______.
3 r# O/ h5 a' \/ N' ^" i A. fiscal policy is macroeconomic policy and monetary policy is microeconomic policy' C! q4 y- v6 Y/ |3 U4 P
B. monetary policy is macroeconomic policy and fiscal policy is microeconomic policy
, q& ?, S) L9 V- s9 N C. fiscal policy involves regulation of natural monopolies and monetary policy involves the provision of public goods v5 {+ _6 \: P( i* a% U
D. monetary policy involves regulation of the money supply and fiscal policy involves government spending and taxing
$ y0 L: |% J; i" j 13. When economists speak of the utility of a certain good, they are referring to ______.- }( \- R0 b8 w' D4 S; ]! y9 e
A. the demand for the good
9 B4 G+ S" x, V' w7 P7 I- v, a B. the usefulness of the good in consumption* t2 z1 L5 E; K
C. the satisfaction gained from consuming the good1 L* p6 t0 W( `
D. the rate at which consumers are willing to exchange one good for another
2 a e0 a% N" q8 M5 e& W3 U 14. How are financial ratios used in decision making______.8 ?2 |, X7 b- o* l7 I
A. They remove the uncertainty of the business environment. {; e( x( W0 S. k- u
B. They give clear signals about the appropriate action to take
. m" ^7 L# a& e5 X* Y/ P( l C. They can help identify the reasons for success and failure in business, but decision making requires information beyond the ratios
" Q' W3 I4 ]( P& P D. They aren't useful because decision making is too complex.
5 |0 L# h5 H) W8 r% ^; J 15. A good is called an inferior good if sales ______.& F5 ~. K" A( f7 P0 ^+ s
A. are unaffected by income: B, w& U$ {) i3 L% h. o) S
B. rise as price increases+ h6 H* x( b3 I. |& l
C. decline as price increases |