384
11. The money market is an important financial market because a. the money market is the world's liquidity market. b. it is the market in which the Fed conducts monetary policy. c. the federal government finances most of its credit needs in the money market. d. all of the above
D
12. Most financial intermediaries: a. issue direct claims and purchase direct financial assets. b. issue indirect claims and purchase indirect financial assets. c. purchase large amounts of real, tangible assets. d. purchase direct financial claims and issue indirect securities.
D
13. The money market security represented by the largest dollar amount outstanding is a. commercial paper. b. federal agency issues. c. negotiable CDs. d. Treasury bills.
D
15. Money market securities have very little a. default risk. b. price risk. c. marketability risk. d. all of the above.
D
16. An important economic function of the U.S. government security dealer is to a. underwrite Treasury securities. b. "make a market" for Treasury securities. c. support open market operations of the Federal Reserve. d. all of the above
D
17. All but one of the following is a standard characteristic of financial claims: a. They are recognized on two balance sheets. b. They are intangible assets. c. They are IOU's traded for funds. d. They represent ownership of real assets.
D
17. Large industrial U.S. corporations are involved in the money market by a. investing excess cash balances. b. buying and selling goods on credit in international trade. c. issuing commercial paper. d. all of the above
D
18. Banks invest in government securities for a variety of reasons except a. income. b. safety. c. acceptable for collateral. d. high relative yield.
D
19. All of the following are terms for or examples of financial claims except a. bonds. b. money. c. loans. d. commodities.
D
2. Small investors are likely to invest in the money market through . a. directly; commercial paper b. locally; their credit union c. indirectly; negotiable CDs d. indirectly; money market mutual funds
D
26. In direct financing the lender a. trades a financial claim for money. b. trades money for a financial claim issued by a financial institution. c. trades money with a broker who owns the financial claims of a borrower. d. trades money for the financial claim of the borrower.
D
3. Which of the following does not take deposits? a. commercial banks. b. savings and loan associations. c. credit unions. d. finance companies.
D
30. ______ merely execute buy or sell orders for their clients; _______ "make markets". a. dealers; brokers b. brokers; investment bankers c. dealers; financial institutions d. brokers; dealers
D
32. The _____ price is the highest price offered by the dealer to purchase a given security. a. market b. ask c. offering d. bid
D
34. All but one describes a dealer involved in direct financial market: a. provides liquidity to sellers b. buys and sells from inventory c. earns return from bid-ask spread d. transforms claims
D
38. A competitive bid in the Treasury securities auction market has all of the following characteristics except: a. the bidder specifying the quantity of bills desired b. the price the investor wishes to pay c. large, institutional investors d. bids for a maximum of $1,000,000
D
38. The best synonym for "financial intermediation" is a. direct finance b. investment banking c. market making d. transformation of claims
D
39. A non-competitive bid in the Treasury securities auction market is characterized by: a. the bidder specifying the quantity of bills desired b. bids less than $1,000,000 c. the bidders paying a price equal to the weighted average price of all competitive bids accepted. d. all of the above.
D
4. Which statement is not true about Treasury bills? a. They have maturities less than one year. b. Most are sold by "book-entry" method. c. They are sold at a discount. d. They are tax free.
D
40. The fed funds rate is very important to the economy because: a. it measures the return on the most liquid of all the financial assets traded b. it is closely related to the conduct of monetary policy c. it measures directly the availability of excess reserves in the banking system d. all of the above
D
42. A commercial bank provides liquidity when it a. pays the check written by a deposit customer. b. redeems a savings deposit upon demand. c. makes a loan fulfilling a loan commitment. d. All of the above.
D
47. Which of the following is not a debt security? a. corporate bonds. b. U.S. Government securities. c. federal agency securities. d. common stock
D
50. Potential effects of yield fluctuations on security prices and reinvestment income represent a. credit risk. b. liquidity risk. c. foreign exchange risk. d. interest rate risk.
D
52. Secondary capital markets have promoted economic growth in the U.S. because a. they have increased marketability of stocks and bonds. b. they have increased the public's access to investment. c. they have helped investors diversify. d. all of the above
D
56. The household sector is the largest surplus sector and invests in the capital market a. directly by purchasing stocks and bonds. b. indirectly through mutual funds. c. indirectly through pension funds d. all of the above
D
6. Federal Funds are typically a. Treasury deposits. b. Federal Reserve assets. c. commercial bank deposits at the Federal Reserve. d. overnight loans settled in immediately available funds.
D
61. The DSU receives the funds in the primary market; the SSU sells the claim in the a. intermediation market. b. direct financial market. c. federal funds market. d. secondary market.
D
63. Small investors are likely to invest in the money market ______ through __ ___ . a. directly; commercial paper b. locally; their credit union c. indirectly; negotiable CDs d. indirectly; money market mutual funds
D
66. Federal Funds are typically a. Treasury deposits. b. Federal Reserve assets. c. commercial bank deposits at the Federal Reserve. d. overnight loans settled in immediately available funds
D
67. The money market is important because a. it is the world's liquidity market. b. it is the market in which the Fed conducts monetary policy. c. the federal government finances most of its credit needs in the money market. d. all of the above
D
68. The money market security represented by the largest dollar amount outstanding is a. commercial paper. b. federal agency issues. c. negotiable CDs. d. Treasury bills.
D
7. Financial institutions facilitate the flow of investment funds a. from savers to borrowers b. from SSUs to DSUs c. from the household sector to the business sector d. any of the above
D
70. Money market securities have very little a. default risk. b. price risk. c. marketability risk. d. all of the above.
D
71. Large industrial U.S. corporations are involved in the money market by a. investing excess cash balances. b. buying and selling goods on credit in international trade. c. issuing commercial paper. d. all of the above
D
72. Financial markets provide financial institutions: a. a place to securitize assets. b. a source of generating fee income from trading. c. a source of funding. d. all of the above.
D
8. Banks can satisfy their short-term borrowing needs by a. Federal Funds purchased. b. Federal Funds sold. c. issuing negotiable CDs. d. both a and c
D
8. Which sector has been most consistently in a surplus budget position? a. Business b. Government c. Foreign d. Household
D
9. Which of the following are "economic units"? a. households b. businesses c. governments d. all of the above
D
A decrease in reserve requirements will definitely cause a. expenditures to fall. b. inflation expectations to fall. c. an increase in the Fed Funds rate. d. excess reserves to increase.
D
A decrease in the monetary base is related to a. decrease in credit availability. b. increasing interest rates. c. decreased investment. d. all of the above
D
An contraction in the U.S. money supply should a. increase domestic interest rates b. cause the exchange value of the dollar to increase. c. cause U.S. exports to decrease. d. all of the above.
D
For what purposes do depository institutions keep deposits in the Federal Reserve banks? a. for clearing checks b. to satisfy reserve requirements c. to earn interest d. a and b
D
Generally, plant and equipment investment spending will decrease if a. interest rates rise while inflation remains unchanged. b. inflation decreases while interest rates remain unchanged. c. reserve requirements rise. d. any of the above
D
If Boeing splits its outstanding common stock 2-for-1, that is an example of a. "primary market" activity b. "secondary market" activity c. "money market" activity d. financial intermediation
D
Monetary policy impacts the economy a. by affecting real spending directly. b. by affecting real spending through the financial sector. c. by changing interest rates and the cost of housing. d. all of the above
D
Monetary policy probably affects all of the following except a. housing investment. b. consumer durable investment. c. inventory investment. d. federal government budget outlays.
D
Money market instruments and capital market instruments differ appreciably in a. maturity b. liquidity c. availability to ordinary individual investors d. all of the above
D
Ordinarily the money supply will decrease if: a. the Fed makes fewer loans at its discount window. b. the Fed sells securities on the open market. c. the Fed raises reserve requirements. d. all of the above.
D
Reserve requirements apply to a. National banks b. State banks c. Savings-and-loan associations d. All of the above
D
The "tools" of monetary policy, whether "viable" or not, include all the following except a. changing the discount rate. b. open market operations. c. changes in reserve requirements. d. changes in the Federal Funds rate
D
The Fed's most visible monetary tool is probably a. open market operations. b. change in reserve requirements. c. Reg Z. d. discount rate policy
D
The Fed's primary tools of monetary policy include all the following except a. changing the discount rate. b. open market operations. c. adjusting reserve requirements. d. changes in the Federal Funds rate.
D
The difference between "capital spending" and "real investment" is chiefly a difference in a. essential nature and purpose of the assets created or acquired b. relative cost of the assets created or acquired c. susceptibility of the assets created or acquired to amortization or depreciation d. semantics
D
The money supply a. is exclusively controlled by the Fed. b. is smaller than the monetary base c. excludes any interest-bearing deposits d. none of the above.
D
There are ______ members of the Federal Reserve Board of Governors, ¬¬¬¬_______ members of the Federal Open Market Committee, and ________ Federal Reserve Banks. a. 12; 7; 12 b. 7; 14; 12 c. 14; 12; 12 d. 7; 12; 12
D
Use this data answer questions 4-6: Total Reserves $80,000,000; Reserve Requirement 5%; Total Deposits $700,000,000. The data above exemplify a. an arguable underutilization of resources, at least for the moment b. an excess reserve position c. a near-term likelihood that loans and deposits will expand d. all of the above
D
Velocity of money a. varies inversely with the money supply b. varies directly with GDP c. is not under the Fed's exclusive control d. all of the above
D
When the New York Fed sells Treasury securities to a securities dealer a. depository institutions deposits in the Fed decrease. b. depository institutions deposits in the Fed increase. c. the deposit balance of the security dealer in its bank decreases. d. both a and c above.
D
Which of the following can be associated with original objectives of the Fed? a. coordinate an efficient payments mechanism. b. provide an elastic money supply. c. serve as lender of last resort. d. all of the above
D
Which of the following can be associated with the modern objectives of the Fed? a. coordinate an efficient payments mechanism. b. provide an elastic money supply. c. regulate the financial system. d. all of the above.
D
Which of the following is in the correct historical order? a. Second Bank of the United States, Federal Reserve Act, Crash of 1907 b. Crash of 1907, Federal Reserve Act, National Banking Acts c. First Bank of the United States, Crash of 1907, National Banking Acts d. Second Bank of the United States, National Banking Acts, Federal Reserve Act
D
Which of the following was a responsibility of the early Federal Reserve System? a. to control the money supply b. to safeguard the national payment system c. to establish a more rigorous bank supervisory system d. all of the above
D
11. A dealer offers to buy shares of IBM at $125 and sell to investors at $127. The "bid" is a. $125 b. $127 c. $2 d. none of the preceding
A
12. Which of the following money market securities is usually not found on a commercial bank's balance sheet? a. Ba rated corporate bonds b. Treasury bills c. certificates of deposit d. banker's acceptance
A
15. All but one of the following is comparative advantage of financial intermediaries: a. ability to finance businesses and governments. b. ability to achieve economies of scale. c. ability to reduce transaction costs. d. ability to find confidential information.
A
16. Which of the following would tend to hold corporate bonds in significant amounts? a. life insurance company b. credit union c. mutual savings bank d. commercial bank
A
18. Money market mutual funds are a strong competitor for a. depository institutions. b. contractual savings institutions. c. finance companies. d. the real estate market.
A
20. Which of the following money market rates is studied closely for indicators of changes in Federal Reserve monetary policy? a. Federal Funds b. Treasury bills c. commercial paper d. banker's acceptances
A
21. Surplus spending units (SSU) are also called a. lenders. b. borrowers. c. sellers of securities. d. balanced budget units.
A
25. Intermediation, or ____ financing, involves ___ financial claim(s) linking SSU and DSU. a. indirect; two b. direct; two c. indirect; one d. direct; one
A
27. The T-bill rate quoted by the Federal Reserve banks is the a. bank discount rate. b. the true rate. c. effective annual rate. d. bond equivalent rate.
A
3. Which of the following statements about the money market is true? a. The money market is a dealer market linked by efficient communications systems. b. Money market transactions are seldom over $1 million. c. Market transactions include more "primary market" trades for a security than secondary market trades. d. Most money market transactions are conducted by mail.
A
31. Federal Agency securities have higher yields than equivalent Treasury securities because a. there are less marketable than Treasury securities. b. they have higher exchange rate risk than Treasuries. c. they are more affected by interest rate risk. d. they are associated with mortgages that are riskier securities.
A
31. Hammond Securities holds an inventory of ABC Corp. stock, buying at $65.00 and selling at $67.50. The bid is _____; the bid-ask spread is _____. a. $65.00; $2.50 b. $67.50; $2.50 c. lower than the ask price; higher than the bid price d. higher than the ask price; $2.50
A
35. All but one of the following is associated with investment banking: a. Taking deposits. b. Marketing new issues of securities. c. Underwriting securities. d. Completing regulatory paperwork and rendering advice.
A
37. Most of the financial claims issued by U.S. financial intermediaries are purchased by a. the household sector. b. the business sector. c. the government sector. d. the foreign sector
A
45. Credit unions are _____ institutions; pension funds are _______ institutions. a. depository; contractual b. contractual; depository c. federal ; investment d. depository; depository
A
5. Which of the following may be a liability of a non-financial business corporation? a. commercial paper b. Federal Funds c. Treasury securities d. agency securities
A
55. Primary capital markets are most likely to finance a. plant and equipment b. inventory c. operating expenses d. none of the above
A
6. Pension funds tend to invest in a. higher-yielding long-term securities b. money market securities exclusively c. government securities exclusively d. none of the above
A
64. Which of the following statements about the money market is true? a. The money market is a dealer market linked by efficient communications systems. b. Money market transactions are seldom over $1 million. c. Market transactions include more primary than secondary market trades. d. Most money market transactions are conducted by mail.
A
65. Which of the following may be a liability of a nonfinancial business? a. commercial paper b. Federal Funds c. Treasury securities d. agency securities
A
A repurchase agreement calls for a. a firm to first sell securities with the agreement to buy them back in a short period at a higher price. b. a firm to first buy securities with the agreement to sell them back in a short period at a higher price. c. a firm to first sell securities with the agreement to buy them back in a short period at a lower price. d. a firm to first buy securities with the agreement to sell them back in a short period at a lower price.
A
Deposits tend to expand whenever: a. reserve requirements decrease. b. the public holds more cash. c. reserve requirements increase. d. monetary policy "tightens".
A
Even a small bank can even finance in the money market by a. investing in negotiable CDs. b. selling federal funds. c. purchasing federal funds. d. buying banker's acceptances.
A
Federal Reserve notes held in bank vaults are the liability or obligation of a. the Fed. b. the Treasury. c. the bank. d. none of the above
A
If the money supply increases too rapidly a. inflationary expectations will rise. b. government spending will decrease. c. bank lending will decrease. d. investment spending will fall.
A
Monetarists and Keynesians agree that a. monetary policy influences the real sector b. changes in the money supply drive changes in interest rates c. changes in interest rates drive changes in the money supply d. monetary policy does not influence the real sector
A
Monetarists believe that an increase in the money supply, all else equal, will cause: a. consumption expenditures to rise. b. investment spending to fall. c. national income to fall. d. government expenditures to rise.
A
Profitability of financial intermediaries derives from all of the following except a. government regulation of interest rates b. economies of scale c. ability to manage credit risk d. control of transactions costs
A
The primary responsibility of the Federal Open Market Committee (FOMC) is to a. set monetary policy b. supervise and examine member banks. c. guarantee excess reserves to National Banks. d. enforce margin requirements
A
To increase the money supply immediately but just slightly, the Fed would most likely a. Buy securities on the open market b. Lower the Discount Rate c. Lower reserve requirements d. Any of the above would be suitable for this purpose.
A
Use this data answer questions 4-6: Total Reserves $80,000,000; Reserve Requirement 5%; Total Deposits $700,000,000. The data above could exemplify a direct, immediate effect of any of the following except a. an open market sale by the Fed b. a lowering of reserve requirements by the Fed c. a new loan at the Discount Window by the Fed d. an open market purchase by the Fed
A
Which Fed action does not directly increase total reserves in the banking system? a. Lowering the Discount Rate b. Lowering reserve requirements c. Buying U.S. Government securities on the open market d. None of the above
A
Which of the following is not a channel of transmission of monetary policy? a. Reg Q interest rate ceilings b. consumer spending for durable goods and housing c. net exports d. business investment in real assets
A
Which of the following was not a responsibility of the early Federal Reserve System? a. replace the National Banking system b. improve the payments system c. establish more rigorous bank supervision d. act as "lender of last resort"
A
1. An SSU's a. income and expenditures for the period are equal. b. income for the period exceeds expenditures. c. expenditures for the period exceed receipts. d. spending is entirely financed by credit cards
B
1. Number of Federal Reserve Governors plus size of FOMC less number of Federal Reserve banks equals: a. 9. b. 7. c. 14. d. 12.
B
1. Which of the following is not a characteristic of money market instruments? a. short-term to maturity b. small denomination c. low default risk d. high marketability
B
10. Which of the following best describes the "two faces of debt" concept? a. DSUs are sometimes SSUs. b. Every financial asset is someone else's liability. c. Intermediaries may own both direct and indirect financial assets. d. The government is unable to control its federal spending.
B
10. Which of the following money market instruments would typically be used in international transactions? a. a Treasury bill b. a banker's acceptance c. commercial paper d. a negotiable CD
B
28. A sale of an entire security issue to one investor or a small group of investors is a. a dealer arrangement. b. a private placement. c. an underwriting. d. intermediation financing.
B
30. Purchasing T-bill via a computerized account without actually receiving the securities is achieved through a. a Direct Purchase Account. b. a Treasury Direct Account. c. a Fed Purchase Account. d. a Clinton Benefit Account.
B
33. A repurchase agreement is like a secured loan because a. it involves two parties. b. it involves collateral, in this case the sale of a security under agreement to repurchase. c. it is backed by a mortgage on real property. d. it is like the secured lending in that a mortgage is effected by the lender.
B
36. Hollon Securities is underwriting an issue of Llamas Unlimited, Inc. common stock. Hollon will pay LU $45.00 a share and offer the stock to the public at $48.00. The direct cost of underwriting the issue is $1.00 per share. The underwriting spread is a. $4.00 per share. b. $3.00 per share. c. $2.00 per share. d. not ascertainable from the information above.
B
39. An S&L taking short-term deposits and financing local land development is engaging in a. speculation. b. maturity intermediation. c. denomination intermediation. d. currency transformation
B
46. The financial institution that is the largest issuer of commercial paper is a. commercial banks. b. finance companies. c. property-casualty insurance companies. d. pension funds.
B
53. Security exchanges provide a valuable function in that they a. create interest in stocks. b. increase the marketability of securities. c. provide a legal way to gamble. d. supply money to deficit spending units.
B
62. Which of the following is not a characteristic of money market instruments? a. short-term to maturity b. small denomination c. low default risk d. high marketability
B
73. Corporations list their securities on exchanges in order to a. pay an annual listing fee and disclose important information. b. enhance the liquidity of their securities for investors. c. sell more securities. d. increase the size of the firm
B
A reverse repurchase agreement calls for a. a firm to first sell securities with the agreement to buy them back in a short period at a higher price. b. a firm to first buy securities with the agreement to sell them back in a short period at a higher price. c. a firm to first sell securities with the agreement to buy them back in a short period at a lower price. d. a firm to first buy securities with the agreement to sell them back in a short period at a lower price.
B
An increase in Federal Reserve float a. decreases bank reserve deposits in the Fed. b. increases bank reserve deposits in the Fed. c. has no impact upon bank reserves deposits in the Fed. d. reduces the net loan granted by the Fed to member banks.
B
An increase in the assets of Federal Reserve banks a. decreases the monetary base. b. increases the monetary base. c. has no effect on monetary base. d. always decreases another Federal Reserve Bank asset.
B
Changes in spending caused by changing security values are called the a. liquidity effect b. wealth effect c. income effect d. reactionary effect
B
Consumption spending should increase if a. financial wealth decreases. b. reserve requirements decrease. c. interest rates increase. d. credit availability decreases.
B
Federal Reserve float a. is the "lag time" required for monetary policy to take effect b. represents a net extension of credit by the Fed, which increases bank reserves. c. represents a net liability of the Fed. d. is DACI minus CIPC.
B
Increases in the Fed's assets a. decrease the monetary base b. increase the monetary base c. have no effect on the monetary base. d. none of the above
B
Influence of monetary policy on the financial sector is a. negligible b. inevitable c. limited d. insignificant
B
Monetary policies directed toward increased economic growth may have what impact upon the value of the dollar in relation to other currencies? a. increase b. decrease c. no effect d. none of the preceding
B
Reforms and regulatory changes in U.S. financial institutions are best associated with: a. international events affecting U.S. financial institutions. b. periods of severe economic and financial problems in the U.S. economy. c. voter changing the majority party in Congress. d. recommendations of presidential commissions.
B
The 12 Federal Reserve Banks are a. Important and autonomous components of a "decentralized central bank" b. Important components of the Fed, but no longer very autonomous c. Neither important nor autonomous d. All permanently voting members of the FOMC
B
The Discount Window a. is a common way for depository institutions to raise loanable funds b. relates to the Fed's "lender of last resort" function c. is a relatively recent innovation in the design of the Federal Reserve System d. is available only during emergencies
B
The asset of Federal Reserve banks associated with open market operations is a. Federal Reserve notes. b. U.S. government securities. c. loans to member banks. d. float.
B
The only "deposit-type" institutions that do not operate for profit are a. thrift institutions b. credit unions c. pension funds d. commercial banks
B
The purchase of government securities by the Fed will a. decrease the money supply. b. increase security prices. c. increase interest rates. d. decrease credit availability.
B
Unemployment should fall if a. wages increase and people expect prices to rise, too. b. wages increase and people expect prices to be stable. c. interest rates rise more than prices are expected to rise. d. the money supply decreases.
B
Use this data answer questions 4-6: Total Reserves $80,000,000; Reserve Requirement 5%; Total Deposits $700,000,000. Using the data above, the level of excess reserves is a. $ 4,000,000 b. $ 45,000,000 c. $ 70,000,000 d. not ascertainable
B
When firms issuing commercial paper use a backup line of credit, it: a. increases the credit risk for investors b. decreases the credit risk for investors c. has no impact on investors d. decreases the marketability of commercial paper
B
Who among the following does not have a permanent vote on the FOMC? a. President, Federal Reserve Bank of New York b. Chairman, Board of Governors c. President, Federal Reserve Bank of Los Angeles d. Members of the Board of Governors
B
14. Denomination intermediation is best exemplified by a. issuing insured deposits and making risky business loans. b. bringing together investors of different religions c. issuing five $3,000 CDs and making one $15,000 loan. d. promising liquidity to SSUs while investing the funds long-term
C
14. Which of the following bank money market securities is backed by specified collateral? a. negotiable CDs b. banker's acceptances c. repurchase agreements d. commercial paper
C
2. Which of the following is an example of indirect financing? a. an SSU purchasing a financial claim from a DSU b. an SSU purchasing a financial claim from a dealer c. an SSU purchasing a financial claim from a commercial bank d. an SSU purchasing a financial claim from an underwriter
C
23. The ease with which a financial claim can be resold is its a. quality. b. risk. c. marketability. d. perpetuity.
C
24. The flow of funds from saving to investment through direct financing involves a. the saver holding the lender's IOU. b. two separate contracts. c. the lender holding the borrower's IOU. d. several different financial institutions.
C
26. The following yield calculation on a Treasury bill provides the best comparison yield for competing coupon bearing securities of the same maturity? a. bank discount rate b. CD equivalent rate c. bond equivalent rate d. the true rate.
C
27. All but one is associated with direct financing: a. single financial instrument. b. a broker, dealer or investment banker. c. small denominations. d. dominance of governments and businesses as borrowers.
C
28. The Wall Street Journal publishes T-bill price (bid/ask) based on the ___________ rate; with the __________ rate provided as the quoted (ask) yield on the T-bill? a. bond equivalent; bank discount b. effective annual; bank discount c. bank discount; bond equivalent d. bank equivalent; bank discount
C
29. Which of the following will give the higher yield given the price and maturity of a T-bill? a. the true rate b. bond equivalent rate c. bank discount rate d. none of the above.
C
32. Yields on three-month T-bills are more similar to a. Two-year Treasury notes rates. b. Ninety-day commercial paper rates. c. federal funds rates. d. Aaa-rated corporate bond rates.
C
33. Acting as matchmaker and earning a commission, the ______ is an important component in direct financial markets. a. dealer b. investment banker c. broker d. seller
C
4. When the financial system has achieved a high degree of efficiency, a. Borrowers are able to finance at the highest possible cost. b. Surplus spending units are able to receive the lowest return on their savings. c. Transaction and intermediation costs are low. d. Lenders will have a limited choice of financial investments.
C
40. Credit risk diversification occurs when a. adding loans to the portfolio increases the variability of the loan portfolio. b. loans from similar borrowers are combined in a portfolio. c. adding loans to the portfolio decreases the variability of the loan portfolio. d. combining loans with similar payment patterns in a single portfolio.
C
43. Disintermediation is best exemplified by a. purchase of securities. b. sale of securities. c. writing a broker a check to pay for a purchase of IBM stock. d. depositing an insurance settlement with a credit union.
C
5. An efficient financial system a. eliminates search and transactions costs b. is a mere theoretical possibility c. promotes economic growth and social progress d. depends on high volumes of "direct" transactions
C
51. Which of the following is not an example of capital market securities? a. common stocks b. convertible bonds c. commercial paper d. mortgages
C
60. Money markets are associated with ; capital markets are associated with a. liquidity; marketability. b. spot; future. c. liquidity; economic investment. d. primary; secondary.
C
69. Which of the following bank money market securities is backed by specified collateral? a. negotiable CDs b. banker's acceptances c. repurchase agreements d. commercial paper
C
7. The most important money market instrument utilized in the Fed's open market operation is a. Federal Funds. b. commercial paper. c. Treasury bills. d. Agency securities.
C
9. Which of the following statements is not true about repurchase agreements? a. These are a form of secured borrowing by a bank. b. They are settled in federal funds. c. These are seldom used by the Federal Reserve for making temporary reserve positions adjustments. d. Treasury securities are often used in this type of transaction.
C
All of the following are locations of Federal Reserve Banks except a. San Francisco b. Dallas c. Washington, DC d. Kansas City
C
An expansion in the U.S. money supply a. will increase domestic interest rates b. will cause the exchange value of the dollar to increase. c. will cause U.S. exports to increase. d. will cause U.S. imports to increase.
C
An increase in excess reserves will cause a. the Fed Funds rate to rise. b. planned inventory investment to fall. c. depository institutions to lend more freely. d. foreign investors to buy more T-Bills.
C
Brokers and dealers work in direct financial markets to a. make commissions. b. minimize the bid-ask spread. c. bring sellers and buyers together. d. underwrite new issues of securities.
C
Currency transformation is an important service because a. most SSUs want to invest in more than one currency b. all financial institutions operate internationally c. few ordinary investors care to hold claims denominated in foreign currency d. DSUs can't export unless they borrow in the currency of the importing country
C
Direct finance is best exemplified by a. the purchase of mutual fund shares. b. depositing in a credit union. c. borrowing from a friend or relative. d. employee contributions to a pension fund
C
During 2008, Bob and Nancy Gutierrez expect total income of about $225,000 and are budgeting total expenditures of about $180,000. For this budget period, the Gutierrez family is most specifically a(n) a. DSU b. business c. SSU d. household
C
Federal agencies issue high quality securities and invest primarily in claims issued by a. businesses that are "too big to fail". b. the U.S. Treasury to finance government deficits. c. agricultural or housing-related sectors which have limited access to private credit. d. foreign governments
C
Influence of monetary policy on the real sector is a. negligible b. decisive c. significant d. insignificant
C
M3 includes a. currency in circulation b. demand deposits c. both d. neither
C
Restrictive monetary policy first impacts the market, security prices and interest rates. a. money, increasing, decreasing b. capital, increasing, decreasing c. money, decreasing, increasing d. mortgage, increasing, decreasing
C
Sustained open market buying by the Fed will cause a. the Fed Funds rate to rise. b. planned inventory investment to fall. c. depository institutions to lend more freely. d. foreign investors to buy more T-Bills.
C
The Fed's most important duty is to a. regulate national banks b. print currency c. establish the nation's monetary policy d. stimulate the economy
C
The Fed's non-monetary or regulatory powers do not include a. Margin requirements b. Interest rate disclosures on deposits c. Investigation and prosecution of counterfeiting d. Bank holding companies
C
The Federal Reserve System established a. a system for federal chartering of banks. b. a system for controlling bank note issuance. c. a source of liquidity for the banking system. d. the beginning of demand deposit accounts.
C
The Treasury draws most of its checks upon a. the Comptroller of the Currency. b. national banks. c. Federal Reserve banks. d. its own required reserves
C
The intended longer run impact of monetary policy is a. to lower interest rates. b. to raise security prices. c. to influence change consumption and investment spending. d. to reduce government spending.
C
The monetary base will decrease when: a. banks withdraw currency from the Fed. b. the Fed makes loans at the discount window. c. the Fed sells securities on the open market. d. the Fed buys securities on the open market.
C
The velocity of money measures: a. the rate of growth of the money supply. b. the relationship between the monetary base and the money supply. c. the relationship between the money supply and economic activity. d. all of the above.
C
Which of the following tools of monetary policy has the greatest impact? a. discount rate b. Regulation Q c. open market operations d. bank examination
C
Which of the following would most likely decrease the Federal Funds rate? a. decrease in the discount rate. b. sale of securities by the Fed. c. decrease in reserve requirements. d. none of the above
C
