Exams

Risk premium on corporate bonds tends to _______ during business-cycle expansions and ______ during recessions. Select one: A. Decrease, Increase B. Decrease, Decrease C. Increase, Decrease D. Increase, Increase

Decrease, Increase

Within the Federal Reserve System, members of the ______ take part in formal voting to set the target for ______, which is then determined through domestic policy directive. Select one: A. Board of Directors, real GDP B. FOMC, federal funds rate C. Board of Directors, federal funds rate D. FOMC, real GDP

FOMC, federal funds rate

According to the quantity theory of money, if Japan and China experience the same percent change in real GDP but the money supply grows faster in Japan than in China during a given period, the purchasing power of money must have increased faster in Japan than in China during this period. Select one: A. True. B. False.

False

An increase in interest rates reduces the adverse selection problem in the bond market. Select one: A. True B. False

False

An investment grade bond is more likely to have a higher interest rate than a junk bond of the same maturity. Select one: A. True B. False

False

The interest rate parity condition holds that if the interest rate on a German one-year bond is 3% and the interest rate on a U.S. one-year bond is 1%, the dollar is expected to depreciate by 2% against the euro. Select one: A. False. B. True.

False.

Which of the following assets is the LEAST liquid? Select one: A. U.S. Treasury bond B. House C. Stock D. Money market mutual fund shares

House

Which of the following strategies can a bank use to mitigate its exposure to liquidity risk? Select one: A. Increasing share of fixed-rate loans they make. B. Requiring collaterals on all of the loans it makes. C. Diversifying the portfolio of their assets over loans in all industries. D. Increasing share of the reverse repurchase agreements in their portfolio of assets.

Increasing share of the reverse repurchase agreements in their portfolio of assets.

All of the following is a reason that can result in a violation of PPP theory except ____ Select one: A. Government barriers on trades B. product differentiation C. Law of one price D. Impossibility of exporting/importing certain baskets of goods and services

Law of one price

If a person moves $1,000 from a demand deposit account to a money market deposit account, Select one: A. M1 increases and M2 decreases. B. M1 decreases and M2 stays the same. C. M1 increases and M2 stays the same. D. M1 stays the same and M2 increases.

M1 decreases and M2 stays the same.

During 1989, taxi drivers in Moscow quoted a bewildering array of fares in terms of foreign currencies to tourists. However, tourists could pay the fares with Marlboro cigarettes instead of currency. Taxi drivers could easily convert all major currencies to Marlboro equivalents. Used in this way, Marlboro cigarettes serve as ...? Select one: A. Standard of deferred payment B. Medium of exchange C. Fiat Money D. Electronic funds transfer

Medium of exchange

Which of the following statements is TRUE? Select one: A. Money and wealth are both flow variables. B. Money is a stock variable and wealth is a flow variable. C. Money and wealth are both stock variables. D. Money is a flow variable and wealth is a stock variable.

Money and wealth are both stock variables.

Which of the following is NOT a financial intermediary? Select one: A. Statefarm Insurance Company B. Vanguard Total Stock Market Index Fund C. NASDAQ D. Bank of America

NASDAQ

_______ is an example of an over-the-counter stock market Select one: A. NASDAQ B. Japan Stock Exchange C. Shanghai Stock Exchange D. NYSE

NASDAQ

Which of the following can explain a faster growth in M2 than M1 during a period? Select one: A. A larger share of the income being stored as paper currency instead of saving in certificates of deposit. B. People investing a larger share of their income in certificates of deposit rather than depositing it in their demand deposit accounts. C. Increasing usage of debit cards instead of checks. D. People holding more of the money in checking accounts than as paper currency.

People investing a larger share of their income in certificates of deposit rather than depositing it in their demand deposit accounts.

Consider the following investment options .1) A bond with an equal probability of the rate of return of 5% and 15%.2) A bond with an equal probability of the rate of return of 8% and 12%.3) A bond with an equal probability of the rate of return of 9% and 13%.Which of the following statements is CORRECT? Select one: A. A risk-loving investor would choose option 2 over option 1. B. A risk-averse investor would choose option 1 over option 2. C. Regardless of risk preference, all investors would choose option 3.

Regardless of risk preference, all investors would choose option 3.

Which of the following statements is TRUE? Select one: A. If you purchase a corporate bond, the bond is an asset to the corporation and a liability to you. B. Liquidity is the chance that the price of a financial asset will change as a result of a change in market interest rate. C. Funds flow indirectly from lenders to borrowers through financial markets. D. Stock is a financial security that represents a partial ownership of the corporation that issues it.

Stock is a financial security that represents a partial ownership of the corporation that issues it.

All of the following are factors that determine whether a country's economy can provide a high standard of living for its residents and whether that standard of living can increase over time EXCEPT Select one: A. The ability of the country's businesses to accumulate capital. B. The country's government's ability to provide a legal framework that protects property rights and enforces contracts. C. The ability of the country's government to print money in response to high levels of inflation. D. The ability of the country's businesses to adopt the latest technology.

The ability of the country's government to print money in response to high levels of inflation.

Suppose that the current yields on municipal bonds are equal to Treasury bonds with the same maturity. Municipal bonds also have a higher default-risk than Treasury bonds. What is the explanation for this? Select one: A. There is no tax exemption on municipal bonds at this moment. B. The benefit from the tax-exempt status of the municipal bonds is less than the default risk. C. The benefit from the tax-exempt status of the municipal bonds exceeds the default risk. D. The benefit from the tax-exempt status of the municipal bonds equals the default risk.

The benefit from the tax-exempt status of the municipal bonds equals the default risk.

Which of the following statements is TRUE? Select one: A. When market interest rate increases, the longer the maturity of the existing bond is, the higher the rate of return on that bond during a given holding period is. B. Nominal interest rates cannot be lower than real interest rates. C. The lower the interest rate used to discount the future payments is, the higher the present value of the future payments is. D. Lenders won't charge any interest rate when there are no inflation and no default risk.

The lower the interest rate used to discount the future payments is, the higher the present value of the future payments is.

In which of the following situations would it be LEAST advantageous to be taking out a mortgage? Select one: A. The nominal interest rate is 1 percent and the expected inflation rate is 2 percent. B. The nominal interest rate is 25 percent and the expected inflation rate is 28 percent. C. The nominal interest rate is 15 percent and the expected inflation rate is 11 percent. D. The nominal interest rate is 6 percent and the expected inflation rate is 8 percent. E. The nominal interest rate is 40 percent and the expected inflation rate is 40 percent.

The nominal interest rate is 15 percent and the expected inflation rate is 11 percent.

The Expectation theory of term structure holds that investors will be indifferent in buying a long-term bond over a sequence of short-term bonds if it offers the same yield as the sequence of short-term bonds. Select one: A. True B. False

True

The fact that the shadow banking system relies on wholesale funding instead of retail funding increases the chance of systematic risk. Select one: A. False B. True

True

The term structure of interest rate refers to the difference between interest rates on bonds with the same characteristics but different maturities. Select one: A. True B. False

True

Adaptive Expectation assumes that people forecast future values of a variable using only past values of the variable. Select one: A. True. B. False.

True.

If the current price of a bond is greater than its face value, then the yield to maturity must be lower than the coupon rate. Select one: A. True. B. False.

True.

Which of the following can be described as indirect finance? Select one: A. You buy a U.S. Treasury bill from the U.S. Treasury. B. You buy a share of stock in the primary market. C. You borrow $100 from your neighbor. D. You take out a mortgage from a bank.

You take out a mortgage from a bank.

According to the money market model, a decrease in real GDP will have the same effect on short-term nominal interest rates as ________ in price level or ________ in the money supply. Select one: A. a decrease; an increase B. an increase; an increase C. an increase; a decrease D. a decrease; a decrease

a decrease; an increase

A decrease in interest rates causes _______ in the required return on equity, thereby ______ the value of a stock, everything else held constant. Select one: A. a decrease; reducing B. a decrease; increasing C. an increase; reducing D. an increase; increasing

a decrease; increasing

Managers (________) may act in their own interest rather than in the interest of the stockholder-owners (_______) because managers have less incentive to maximize profits than the stockholder-owners do. Select one: A. agents; principals B. principals; agents C. agents; agents D. principals; principals

agents; principals

The monetary base is equal to Select one: A. checkable deposits in depository institutions plus reserves held by banks. B. all currency in circulation plus all deposits in financial institutions C. all currency in circulation plus reserves held by banks D. all currency in circulation plus checkable deposits in financial institutions

all currency in circulation plus reserves held by banks

Stocks of small firms have a higher annual average return than stocks in general. Some economists attribute this to Select one: A. compensation for the higher risk of small firms. B. lower liquidity of stocks of small firms. C. higher information costs of stocks of small firms. D. all of the above.

all of the above.

Last year, in an article about the yields on 10-year U.S. Treasury bonds, Heather Long of Washington Post wrote: "The U.S. bond market flashed an unprecedented sign of worry that has never been seen before. The yield on 10-year U.S Treasury bond fell below 1 percent, meaning investors in America and around the world are willing to hand the U.S. Treasury their money for a decade in exchange for anemic return. The article then added " If a lot of Americans stay home, restaurants, stores, theaters, conference venues and more will suffer. Tuesday's 10-year Treasury bond milestone is a signal that there's a lot of fear that situation will get worse. "The rationale in the article characterizes _____ in the demand for 10-year Treasury bonds, resulting in _____ in the the price of 10-year Treasury bonds . Select one: A. an increase, a decrease B. an increase, an increase C. a decrease, an increase D. a decrease, a decrease

an increase, an increase

Suppose the Board of Governors decides to purchase a painting to grace the walls of its conference room at the Federal Reserve Branch Bank in New York and pays for the painting with currency. Everything else held constant, this purchase, immediately, will cause_________ in the Fed's liabilities and _______ in checkable deposit account balances. Select one: A. an increase; no change B. a decrease; an increase C. no change; an increase D. a decrease; no change

an increase; no change

Suppose the Board of Governors increases the required reserve ratio while, at the same time, the non-bank public increases their currency-to-deposit ratio. Everything else held constant, these changes would ______ the M1 money supply. Select one: A. have an ambiguous effect on B. have no effect on C. increase D. decrease

decrease

Suppose the Federal Reserve reduces interest rates while interest rates in Europe do not change. Everything else held constant, this will ________ demand for dollars, causing the dollar to _____ against the euro. Select one: A. decrease; depreciate B. decrease; appreciate C. increase; appreciate D. increase; depreciate

decrease; depreciate

Suppose that the U.S. government enacts an across-the-board decrease in income tax rates. Everything else held constant, this would cause the yields on U.S Treasury bonds to________ and the yields on municipal bonds to________. Select one: A. increase; increase B. increase; decrease C. decrease; increase D. decrease; decrease

decrease; increase

Suppose the federal government imposes a tax of $20 per bond on bond sales . Everything else held constant, the supply of bonds ________ as the cost of issuing bonds _______. Select one: A. increases; decreases B. decreases; decreases C. increases; increases D. decreases; increases

decreases; increases

When the exchange rate for the euro changes from $1.23 per euro to $1.14 per euro, everything else held constant, the euro has ______ and _______ expensive. Select one: A. appreciated; European cars sold in the U.S. become less B. depreciated; American computers sold in Europe become less C. appreciated; European cars sold in the U.S. become more D. depreciated; American computers sold in Europe become more

depreciated; American computers sold in Europe become more

Discounting is the process of Select one: A. monetizing a government's debts. B. reducing risk by splitting wealth among different financial assets. C. reducing the money supply in the economy. D. determining the present value of funds to be received in future.

determining the present value of funds to be received in future.

According to the _____, if the nominal GDP is $12 trillion and the money supply is $3 trillion during a time period, then the velocity of money should be _____ during that time period. Select one: A. equation of exchange, 36 B. quantity theory of money, 36 C. equation of exchange, 4 D. quantity theory of money, 4

equation of exchange, 4

Suppose all assets and liabilities can be split into two categories: fixed-rate and variable-rate (No Bank Capital in Balance Sheet). Bank profits will decline following a decrease in interest rates if the value of its Select one: A. fixed-rate liabilities is greater than the value of its variable-rate liabilities. B. fixed-rate assets is greater than the value of its fixed-rate liabilities. C. fixed-rate assets is less than the value of its fixed-rate liabilities. D. fixed-rate assets is greater than the value of its variable-rate assets.

fixed-rate assets is less than the value of its fixed-rate liabilities.

Which of the following is NOT an example of transactions costs? Select one: A. lawyers' fees B. minimum investment requirements C. high interest rates D. brokerage commissions

high interest rates

When nominal interest rates on financial assets are high, the opportunity cost of holding money is ________, so the quantity of money demanded by households and firms will be ________. Select one: A. high; high B. low; low C. low; high D. high; low

high; low

Everything else held constant, the higher the real GDP for a given period is, the ____ the short-term cost of credit is. Select one: A. higher. B. lower.

higher.

Suppose the Fed conducts an open market purchase of $10 million worth of assets with it's primary dealers. In that case, the monetary base will _____ by _______ $10 million. Select one: A. increase, more than B. decrease, exactly C. decrease, more than D. increase, exactly

increase, exactly

If a bank has positive duration, a/an ________ in market interest rates would decrease its _______ . Select one: A. increase, shareholders' equity B. decrease, shareholders' equity C. decrease, profit D. increase, profit

increase, shareholders' equity

Suppose the stock market has become less liquid. Everything else held constant, this change will cause the demand for bonds to _______ and their yields to ______. Select one: A. decrease; increase B. decrease; decrease C. increase; decrease D. increase; increase

increase; decrease

According to the Gordon growth model, which of the following can cause the value of a stock to decline? Select one: A. decreased required return on equity B. higher expected growth rate of dividends C. lower risk-free interest rate D. increased idiosyncratic risk

increased idiosyncratic risk

A decrease in expected inflation ________ the equilibrium price of bonds and ________ the yields for bonds, everything else held constant. Select one: A. decreases; increases B. increases; decreases C. decreases; decreases D. increases; increases

increases; decreases

An investor who buys a fifty-year corporate bond Select one: A. must be expecting to still be alive in fifty years. B. is probably expecting market interest rates to decrease in the future. C. is probably expecting market interest rates to increase in the future. D. is subject to substantial reinvestment risk.

is probably expecting market interest rates to decrease in the future.

The yield on a thirty-year Treasury bond is 8% at the same time as the yield on two-year Treasury note is 5%. This occurrence Select one: A. indicates that the bond market is anticipating that inflation will fall. B. is well explained by the segmented markets theory. C. indicates that the yield curve is downward sloping. D. is largely explained by the favorable tax treatment of Treasury notes.

is well explained by the segmented markets theory.

The efficiency of a payments system is important because Select one: A. it ensures smooth transfers of funds in transactions. B. better security increases participants' confidence that funds will not be stolen. C. fast settlement facilitates transactions. D. it allows the system to function using fewer resources, which benefits the whole economy.

it allows the system to function using fewer resources, which benefits the whole economy.

The Glass-Steagall Act was designed to Select one: A. impose high capital ratios on investment banks. B. promote the interests of community banks. C. legally separate investment banking from commercial banking. D. promote mergers in the banking industry.

legally separate investment banking from commercial banking.

A flight to quality refers to a shift by savers from Select one: A. bonds and into real assets, such as real estate. B. bonds and into stocks. C. stocks and into gold or other precious metals. D. low-quality bonds and into high-quality bonds.

low-quality bonds and into high-quality bonds.

Suppose TJ Maxx Co. announces that its earnings for the fourth quarter of 2020 fall to $10.94 billion. As a result of this announcement, the price of TJ Maxx Co.'s stock does not change. The best explanation of this is: Select one: A. market participants have adaptive expectations. B. market participants expected TJ Maxx Co.'s earnings to be greater than $10.94 billion. C. market participants expected TJ Maxx Co.'s earnings to be less than $10.94 billion. D. market participants expected TJ Maxx Co.'s earnings to be $10.94 billion.

market participants expected TJ Maxx Co.'s earnings to be $10.94 billion.

Each member of the Board of Governors can serve Select one: A. only full nonrenewable 8-year term plus part of another term another member.. B. only one nonrenewable 8-year term. C. only one nonrenewable 14-year term. D. one full nonrenewable 14-year term plus part of another term of another member.

one full nonrenewable 14-year term plus part of another term of another member.

The Federal Reserve can reduce the money supply by conducting an open market ________ or by________ the required reserve ratio, everything else held constant. Select one: A. sale; increasing B. purchase; decreasing C. purchase; increasing D. sale; decreasing

sale; increasing

The financial system provides risk sharing by allowing Select one: A. borrowers to convert liabilities into assets. B. savers to earn interest tax-free. C. borrowers to obtain funds either directly or indirectly. D. savers to hold many assets.

savers to hold many assets.

All of the following are new rules affecting the shadow banking system as a result of the Dodd-Frank Act EXCEPT Select one: A. large hedge funds are required to register with the SEC. B. securitized loans must now be insured. C. some trading of derivatives are required to take place on exchanges. D. firms selling mortgage-backed securities and similar assets are required to hold 5% of the credit risk.

securitized loans must now be insured.

The ______ theory of term structure can explain why the yield curve is typically upward sloping, but it cannot explain why interest rates on bonds of different maturities tend to move together. On the other hand, the ______ theory of term structure can explain why interest rates on bonds of different maturities tend to move together, but it cannot explain why the yield curve is typically upward sloping. Select one: A. segmented markets; expectation B. liquidity premium; segmented markets C. expectation; liquidity premium D. expectation; segmented markets

segmented markets; expectation

Federal Reserve district banks perform all of the following roles EXCEPT Select one: A. managing check clearing in the payments system. B. setting the federal funds rate. C. managing currency in circulation by issuing new Federal Reserve notes. D. performing regulatory functions.

setting the federal funds rate.

According to the liquidity premium theory of the term structure, a downward-sloping yield curve indicates that Select one: A. short-term interest rates are expected to decline sharply in the future. B. short-term interest rates are expected to decline moderately in the future. C. short-term interest rates are expected to rise in the future. D. short-term interest rates are expected to remain unchanged in the future.

short-term interest rates are expected to decline sharply in the future.

When a government declares a money to be "legal tender for all debts, private", it is guaranteeing that the money will function as a Select one: A. store of value B. means of unilateral payment C. standard of deferred payment D. unit of account

standard of deferred payment

If the price level in the United States increases more slowly than the price level in Canada, we would expect Select one: A. U.S. productivity to have increased more slowly than Canadian productivity. B. interest rates in the United States to be higher than interest rates in Canada. C. the U.S. dollar to depreciate against the Canadian dollar. D. the Canadian dollar to depreciate against the U.S. dollar.

the Canadian dollar to depreciate against the U.S. dollar.

All of the following help make the Fed independent of the political process EXCEPT Select one: A. financial independence. B. board members receive a long, nonrenewable appointment. C. the chair of the Fed receives a lifetime appointment. D. budgetary independence.

the chair of the Fed receives a lifetime appointment.

If the prices of financial assets follow a random walk, then Select one: A. major traders in the market must not be making use of all available information about the assets. B. they should be easy to forecast, provided market participants have rational expectations. C. they should be easy to forecast, provided market participants have adaptive expectations. D. the change in price from one trading period to the next is not predictable.

the change in price from one trading period to the next is not predictable.

The demand for U.S. dollars represents Select one: A. the demand for U.S. goods and financial assets by households and firms within the United States. B. the willingness of households and firms that own dollars to exchange them for foreign currency. C. the demand for foreign goods and financial assets by households and firms within the United States. D. the demand for U.S. goods and financial assets by households and firms outside the United States.

the demand for U.S. goods and financial assets by households and firms outside the United States.

The rate of return of a stock held for one-year equals Select one: A. the dividend yield plus the rate of capital gain. B. the change in the price of the stock. C. The rate of capital gain minus the dividend yield. D. the dividend yield minus the rate of capital gain.

the dividend yield plus the rate of capital gain.

If, while you are holding a coupon bond, its market price falls, you can be sure that Select one: A. the coupon payment you are receiving must have been reduced. B. the interest rate on other similar bonds must have fallen. C. the par value of the bond must have declined. D. the interest rate on other similar bonds must have risen.

the interest rate on other similar bonds must have risen.

On a bank's balance sheet, assets are Select one: A. by definition, equal to the bank's liabilities B. the sources of acquired funds C. those items owed by the bank to the depositors D. the uses of acquired funds

the uses of acquired funds

An implication of the efficient markets hypothesis is that Select one: A. above-normal profits will be eliminated in the trading process B. only sophisticated investors will be able to earn above-normal profits from financial investments C. unless he or she acts recklessly, the average investor should be able to make above-normal profits D. above-normal profits are available only to elite traders

above-normal profits will be eliminated in the trading process

Reserve deposits are Select one: A. assets for depository institutions, but liabilities for the Fed. B. assets for both depository institutions and the Fed. C. liabilities for depository institutions, but assets for the Fed. D. liabilities for both depository institutions and the Fed.

assets for depository institutions, but liabilities for the Fed.

Falling stock prices ________ household wealth, which ________ consumption spending. Select one: A. increases; decreases B. decreases; decreases C. decreases; increases D. increases; increases

decreases; decreases

An increase of discount loans in the Fed's balance sheet results in a ______ in the monetary base. Select one: A. temporary reduction B. temporary increase C. permanent reduction D. permanent increase

temporary increase

Suppose that the required reserve ratio is 0.20. Furthermore, suppose that the banks in the banking system do not hold any excess reserve, and that the non-bank public only deposits their income into checking accounts (they do not hold cash). Under these assumptions, a $2 billion increase in bank reserves as a result in a ______ increase in total money supply. Select one: A. $4 billion. B. $5 billion. C. $10 billion. D. $1 billion.

$10 billion.

Suppose that a bank's leverage ratio is 0.20, and its return on assets is 3%. What is the return on equity for this bank? Select one: A. 6% B. 5% C. 24% D. 15%

15%

Suppose a tube of Colgate costs 200 Yen in Tokyo and $5 in San Francisco. If the real exchange rate is one tube of Colgate in the U.S. for five tube of Colgate in Tokyo, how many yen should you receive in exchange for $1? Select one: A. 100 B. 40 C. 200 D. 12.5

200

Suppose a bank finances every $6 of its assets with $4 of debt. What is this bank's leverage? Select one: A. 6 B. 3 C. 1.5 D. 1/3

3

Suppose that the average price of a fixed basket of goods and services is $50 in the U.S and 150 pesos in Mexico. The the theory of PPP predicts that in the absence of inflation the exchange rate in the long run is ____ Mexican pesos per one U.S dollar. If the current exchange rate is five Mexican pesos per one U.S. dollar, in the long run, the U.S. dollar will _____ against the Mexican peso so that PPP holds. Select one: A. 1/3, appreciate B. 1/3, depreciate C. 3, depreciate D. 3, appreciate

3, depreciate

Suppose you purchase a 5-year bond with a coupon payment of $40 for $800. One year later, you sell it for $1,000. The rate of return on your bond for a holding period of one year is _____. Select one: A. 30% B. 15% C. 25% D. 20%

30%

_____ members of the Federal Open Market Committee are the members of the Board of Governors, who are appointed by the _______. Select one: A. 5, Board of Directors B. 7, President of the United States. C. 5, President of the United States. D. 7, Board of Directors.

7, President of the United States.

Which of the following $1,000 face-value securities has the LOWEST yield to maturity? Select one: A. A 5 percent coupon bond selling for $1,200. B. A 10 percent coupon bond selling for $1,000. C. A 5 percent coupon bond selling for $1,000. D. A 6 percent coupon bond selling for $1,000.

A 5 percent coupon bond selling for $1,200.

Everything else held constant, which of the following changes would shift the demand curve for the U.S dollars to the left? Select one: A. A decrease in the information costs of U.S. financial assets. B. The value of the dollar is expected to increase relative to the value of foreign currency in the future. C. A decrease in the foreign demand for U.S. goods. D. An increase in the liquidity of U.S financial assets. Everything else held constant, which of the following changes would shift the demand curve for the U.S dollars to the left? Select one: A. A decrease in the information costs of U.S. financial assets. B. The value of the dollar is expected to increase relative to the value of foreign currency in the future. C. A decrease in the foreign demand for U.S. goods. D. An increase in the liquidity of U.S financial assets.

A decrease in the foreign demand for U.S. goods.

Which of the following is an example of adverse selection? Select one: A. A homeowner with a large fire insurance policy allows the wiring in her house to deteriorate. B. A woman with a large life insurance policy takes up sky diving. C. A man with a bad heart condition buys a large life insurance policy. D. Your brother-in-law borrows $20,000 from you to open a pizza parlor, but spends it gambling at the racetrack instead.

A man with a bad heart condition buys a large life insurance policy.

Which of the following is not an example of off-balance-sheet lending? Select one: A. A loan sale B. A standby letter of credit C. A swap D. A loan commitment

A swap

A tariff refers to Select one: A. a limit on the size of a trade deficit B. A tax on imported goods. C. the range within which an exchange rate is allowed to fluctuate D. A limit on the amount of goods that can be imported

A tax on imported goods.

Which of the following statements is TRUE? Select one: A. The quantity theory of money assumes that the growth rate of money supply is zero. B. According to the quantity theory of money, during a hyperinflation, both the money supply and velocity increase rapidly. C. According to the quantity theory of money, if the money supply grows faster than the real GDP, there is a decrease in inflation. D. The velocity money can be described as how quickly prices are increasing.

According to the quantity theory of money, during a hyperinflation, both the money supply and velocity increase rapidly.

In a Wall Street Journal's article, Telis Demos reported that one of Capital One's strategies to get past the credit infringement of the pandemic era is "paring down on marketing credit cards, and effectively putting fewer card offers out into the world." This is because the people at risk of sharp economic reversals would be willing to apply for new cards and transfer their debts to a new card with first-year 0% APR benefits. The author in the article is referring to an increase in _______ as the reason for Capital One's decision to reduce marketing credit cards. Select one: A. Adverse Selection B. Moral Hazard

Adverse Selection

Which of the following statements is CORRECT? Select one: A. On a commercial bank's balance sheet, assets are the sources of acquired funds. B. A duration gap is the difference between the value of a bank's variable-rate assets and the value of a bank's variable-rate liabilities. C. Commercial banks are not allowed to use checkable deposits to invest in corporate bonds that were graded as junk bonds at the time of issuance. D. A decrease in the market interest rate will decrease the present value of a bank's assets and liabilities.

Commercial banks are not allowed to use checkable deposits to invest in corporate bonds that were graded as junk bonds at the time of issuance.