1. In general, the more liquid an asset the ______.
% r3 f9 ~ g2 O" s5 QA. less it is likely to yield
1 n2 h2 \5 n: C/ G- U" L/ NB. greater its risk of default8 z/ O9 `3 }1 k Y+ ?/ w; Q
C. lower its market price will be2 R t- U0 u3 S b- M; r$ S2 H4 p5 V# c
D. more it will add to bank profits- ]0 w ]0 X9 g- P; o* K5 ]
2. The interest rate printed on the face of a bond is called the ______.
z4 g" h( d& P+ s2 pA. coupon rate
. n# ^5 j; y; v( dB. prime rate. m" c- C4 r( ]- l! m' Q; _
C. printed rate
: | l" L% g* i2 yD. nominal rate- _& K* P- K0 C5 Q# M
3. A rise in interest rates leads to ______.0 D' e) @5 L. S2 D
A. capital gains for bondholders
% e/ V: y2 w: _7 ]B. capital losses for bondholders7 o9 D3 V; k1 n- P
C. income gains for bondholders. z1 X% N+ U: h
D. income losses for bondholders
. F/ r/ J. L: p& m, s6 b- f4. If the reserve requirement ratio were equal to zero, then ______.
; A! Y. E- f% @( _" `) g* P: [A. the deposit multiplier would be infinitely large
; z# w) l+ I4 t5 K, e: R! }B. required reserves would be equal to zero
2 G; d/ S% n" a# E" q+ hC. the banking system would theoretically be able to create an infinitely large amount of demand deposits
: R( y/ a* ^9 uD. all of the above0 ?1 i1 F' a$ y8 @4 J
5. Financial intermediaries’ primary function in financial markets is to serve as ______.
" d7 o4 N# R# i# _0 |/ z1 gA. ultimate borrowers4 d: @$ R4 n6 V) j( Z: j
B. ultimate lenders0 y# e- ^$ i( [$ Q+ O
C. ultimate savers+ e" `, o% _; y, w V' k
D. middlemen0 U$ B s" V2 w
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? ______.0 Y% \: {* m0 ~ ^1 |' ~
A. +$10000000
~0 ?- K& y1 Q: aB. +$25000000
6 n- N" A) c! J# a( aC. +$40000000& h( z" T/ P! O8 \( z: l
D. -$40000000
* c: ^) b- s4 A7. 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? ______.
; T' G3 ^1 F9 h: w9 G; gA. $11.250: S5 n7 J1 c ^% E
B. $10012.50
7 B R9 s' M1 p; f: E2 }/ ~C. $9998.752 ^# z8 \9 m! j) }) `5 M _+ j
D. $9968.93
8 h y. n7 q6 f9 z& O' @8. Who are the first to bear financial losses incurred by the bank? ______., O1 I+ k2 g8 g% Z
A. The depositors
2 [, s! r! x- r* r: FB. The debtors- ~; u, \. a3 K, D1 R; Q
C. The bank capital shareholders
( O" d, K- L& oD. The bank employees
7 O6 ]5 t2 D+ A3 }1 o/ @% C4 v9 Y9. A government is faced with a balance of payments deficit. It may take action to deal with this by doing all of the following except ______.
4 O7 u" w% i s" f3 j' d9 TA. devalue the currency- }1 W' b& b; z: f8 B8 m+ [
B. reduce interest rates
' N; p# ^" R+ N2 ]; ?. VC. restrict consumer spending
& l7 u% \2 F" \D. restrict imports
5 m. y& u1 f9 A0 R
* a8 Z2 t' O! V+ x3 [, \10. According to the principle of comparative advantage, countries ______.
6 x! q: ` j& W# VA. should specialize in producing goods they have lower opportunity cost for
& c- O$ J( _& G2 oB. should export goods they can produce at lower input costs: v" [; U+ p1 {! y* F9 D
C. will specialize in producing goods which they can produce at lower input costs
6 B8 I# ?1 O, h' e8 {1 n! HD. should specialize in producing goods they have lower absolute costs for
0 J5 i H. E. q3 ^8 \ B5 ^11. A currency depreciation on the foreign exchange market will ______.
4 j/ n. ^. ?: i2 i9 f8 v( pA. encourage imports to the country whose currency has depreciated- M1 i. P0 T0 T4 E' g% ]4 o
B. discourage imports to the country whose currency has depreciated) {) b7 V; `, W% V
C. discourage exports to the country whose currency has depreciated
! `/ n# ^1 s1 JD. encourage foreign travel by the citizens of the country whose currency has depreciated) W# I) @- g. B* l# v: `1 f% G; m
12. The difference between fiscal policy and monetary policy is that ______. E7 \6 ]% H$ @0 G- `) k) I4 `9 I9 I1 o
A. fiscal policy is macroeconomic policy and monetary policy is microeconomic policy. F3 o9 O' Y4 _- d5 R; B; u$ X
B. monetary policy is macroeconomic policy and fiscal policy is microeconomic policy
- E# x# l( Y# G% hC. fiscal policy involves regulation of natural monopolies and monetary policy involves the provision of public goods
5 p8 F8 s4 D: P: ^0 L5 XD. monetary policy involves regulation of the money supply and fiscal policy involves government spending and taxing
; F# p& E8 A: R! k% I' U R13. When economists speak of the utility of a certain good, they are referring to ______.
) j& I4 N N- \ u$ |A. the demand for the good
4 ?+ H" c* P* N, \. GB. the usefulness of the good in consumption
6 W. b3 X: g$ n. KC. the satisfaction gained from consuming the good
* l% s- M" k" k. L# ED. the rate at which consumers are willing to exchange one good for another v' ?& Y& ]5 i' w) f1 R3 t
14. How are financial ratios used in decision making? ______.
, d8 p0 R5 Z; PA. They remove the uncertainty of the business environment3 U$ |6 T; M9 U" Y5 w' S7 |7 v0 s- b
B. They give clear signals about the appropriate action to take) b, x6 K) i# n! _, _/ B% T! b
C. They can help identify the reasons for success and failure in business, but decision making requires information beyond the ratios
( C0 H+ Z2 a% z& FD. They aren’t useful because decision making is too complex.
! j6 [4 ?. ?- w# y/ `3 T- h15. A good is called an inferior good if sales ______.; D/ b1 E5 k s* d& z
A. are unaffected by income
$ ~8 R) A2 W/ r$ a4 |B. rise as price increases
+ Q( w) ]1 v) O" ]2 H- F; z! iC. decline as price increases
$ H, ^" n1 S$ C- ?D. decline as income increases8 g) |8 T* J' m Z- `# L
3 ]0 D0 A) K! I9 ?6 G4 b) a& R; g
16. Interest rates are made up of ______.% {! U: y6 j) t2 m0 k% E/ c
A. the real rate and the inflation premium
0 F; A, u$ y% JB. the risk-free rate and the period rate" Q: t) X" A6 q5 Q1 U
C. the risk premium |