1. In general, the more liquid an asset the ______.5 |$ j2 f& P1 f4 ]8 T, k; Z
A. less it is likely to yield/ l2 }3 C. s, E4 a
B. greater its risk of default
2 ~$ \# n/ U$ n3 E! ~2 CC. lower its market price will be! i% M, ^4 n9 |% I; f
D. more it will add to bank profits
* t. u4 m6 H2 M, x6 L2. The interest rate printed on the face of a bond is called the ______.+ R. z1 v; T& T6 {
A. coupon rate
8 r7 W8 G$ H6 a( ^5 MB. prime rate+ Z+ f! E1 ?$ h( F7 v: ^
C. printed rate- \3 B3 }: |6 y( x" B5 v$ n- s0 V
D. nominal rate
3 | ?8 O* W. h' D. T1 P3. A rise in interest rates leads to ______.% c# v3 i* I' f B6 t2 X. d
A. capital gains for bondholders
N7 v, @3 h" ]$ \4 g8 L$ EB. capital losses for bondholders; r @+ _- `% W( C, D) \3 G9 _; h
C. income gains for bondholders
* I" h/ l4 p& q0 oD. income losses for bondholders
7 o# d$ }, @3 T7 H4. If the reserve requirement ratio were equal to zero, then ______.
3 ]$ e! h3 ^3 w+ H: A* fA. the deposit multiplier would be infinitely large
) W6 _4 P S9 QB. required reserves would be equal to zero/ e! O# w: H# X: J9 K6 O2 v- H
C. the banking system would theoretically be able to create an infinitely large amount of demand deposits
, M O% C; U/ u w! fD. all of the above X* H' w" `/ R; U% C* w
5. Financial intermediaries’ primary function in financial markets is to serve as ______.
/ s: {+ l+ S' h3 s/ @A. ultimate borrowers0 p. l( W/ F8 E# j( P- Y. B
B. ultimate lenders+ E1 ~! Q- O( M k, T0 a
C. ultimate savers
& ~! E3 u6 y' |8 [" QD. middlemen
. C3 V( o1 U$ f! a; a- h) R6. 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? ______., V* b D; }3 _0 x. G: N' r
A. +$10000000* f! ]8 [- @7 r- v, a" t
B. +$25000000; v& Y6 o" ~9 T) f& v. C8 n1 q
C. +$40000000
, }. M. g- G% xD. -$40000000; V( V6 m4 V+ a) b1 P
7. Suppose the annualized yield on a 91-day Treasury bill is 1.25%. If you invested $10 000 in this bill, how much would you have to pay for this security? ______.
. U( j% `3 b4 Z5 ~$ l/ r5 uA. $11.250
3 d) P6 M" r. FB. $10012.50! }* C4 a9 u( C
C. $9998.75
. j( ?* n5 T5 o: n1 v0 h7 ]D. $9968.93- o6 i" M; b L1 B. @* j; q
8. Who are the first to bear financial losses incurred by the bank? ______. y: P0 e. E3 V+ v+ V+ x$ }1 b7 r, e
A. The depositors
/ O$ c2 q0 o5 b, MB. The debtors- h, G$ m; p& C) J: j6 v( @8 A- \
C. The bank capital shareholders3 a" ?6 x& u5 Y6 H" M7 s3 c
D. The bank employees
" Z- y. r8 F+ v3 {# a9 i 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 ______.7 U/ y9 K" m: \& R8 k+ _5 ~
A. devalue the currency% d# K9 r+ W" b* |/ n @0 G$ j
B. reduce interest rates
- f/ p6 Q; P- l6 w7 q# p5 W NC. restrict consumer spending
, b' e. k* C, Y- Y2 d- T1 Y0 G, ID. restrict imports : v/ S6 `- @" `1 c' M# y
N& I+ c+ F/ _! {0 c. X# {0 w+ @10. According to the principle of comparative advantage, countries ______.
4 p) c% X1 e& j& j" d3 LA. should specialize in producing goods they have lower opportunity cost for; j( ^2 [" X- W. J
B. should export goods they can produce at lower input costs$ }6 d/ l, O1 j2 e& @; f# P
C. will specialize in producing goods which they can produce at lower input costs
4 v R# b) H! j) R8 ^D. should specialize in producing goods they have lower absolute costs for
0 j3 C8 Q$ V! A( W {11. A currency depreciation on the foreign exchange market will ______." u+ C7 W+ h8 @1 N. G
A. encourage imports to the country whose currency has depreciated
# ?% C1 U7 G! ^$ K# JB. discourage imports to the country whose currency has depreciated
; X" s* P0 R9 w: @: i% m# Y9 V/ OC. discourage exports to the country whose currency has depreciated
6 l4 X, P+ V7 l: XD. encourage foreign travel by the citizens of the country whose currency has depreciated
5 c" m$ j; q; Q5 `1 z# r* \% {12. The difference between fiscal policy and monetary policy is that ______.) y, e# x5 g$ Z6 `" Q4 d
A. fiscal policy is macroeconomic policy and monetary policy is microeconomic policy, ?) d3 B0 w- Q
B. monetary policy is macroeconomic policy and fiscal policy is microeconomic policy' Z; K& f& J: w1 I
C. fiscal policy involves regulation of natural monopolies and monetary policy involves the provision of public goods' z+ k. D+ b" k$ D- o& I( f
D. monetary policy involves regulation of the money supply and fiscal policy involves government spending and taxing. w" s" O) ] S! F+ N) \( M
13. When economists speak of the utility of a certain good, they are referring to ______.; s. z; E1 d, c5 G
A. the demand for the good
2 B% ^! u& J8 lB. the usefulness of the good in consumption$ r# g9 P* s% [ U9 W7 H& F" [
C. the satisfaction gained from consuming the good
& q" I; Z( {2 r2 B( ~/ rD. the rate at which consumers are willing to exchange one good for another" F6 H6 V5 A/ P! L% a
14. How are financial ratios used in decision making? ______.$ {5 r# T% o' o# R
A. They remove the uncertainty of the business environment& Z+ ~- F9 r, ^* X+ q) y! T l
B. They give clear signals about the appropriate action to take
& Q# g) E& J A# `C. They can help identify the reasons for success and failure in business, but decision making requires information beyond the ratios0 Z3 v) q( y& \; F; |
D. They aren’t useful because decision making is too complex.
; [ t- y" @9 I: i4 C15. A good is called an inferior good if sales ______.
. x7 W0 M7 ]+ Y5 ]$ u; z0 `A. are unaffected by income
: u" [0 A3 F8 M. M. wB. rise as price increases. y" Y# V0 f8 G: E, w
C. decline as price increases
& P: S& N* M- A3 p* n9 pD. decline as income increases
" }3 ]+ c7 X. a, |
# a/ ~4 E5 x; b, y, n. }16. Interest rates are made up of ______. p% T9 A8 Y6 J$ s! ]4 C( a% i3 e
A. the real rate and the inflation premium
3 `$ g/ l4 ^! j' sB. the risk-free rate and the period rate' C7 o' i" u# J
C. the risk premium |