Econ Final Exam
If the required reserve ratio is 8% and the Fed loans $1,500 to the bank, the total amount new money that will be created is ______.
$18,750
If your car's market value is $3,000 and the deductible for collision is $1,000. How much will the insurance company pay you if your car is totally damaged and cannot be repaired?
$2,000
Which of the following constitutes the Fed (=Federal Reserve System)?
-The Board of Governors -The 12 regional Federal Reserve Banks -The Federal Open Market Committee
According to Prof. Choi, which of the following contributed to the 2008 financial crisis?
-human greed -the Fed's tight monetary policy -government policy for a higher rate of home ownership
Which of the following is true about the New York Federal Reserve Bank
-stores gold for the U.S. government -can trade in the foreign exchange market -trades the U.S. Treasury securities
If a bank has an asset of $20 million, equity of $5 million, and profits of $2 million, its return on assets would be ______.
10%
If the required reserve ratio is 40%, the simple deposit multiplier is ______.
2.5
How many of the Federal Reserve Board governors can vote in the Federal Open Market Committee (FOMC)?
7
The ____ the deductibles, the ____ the insurance premium.
A) higher; higher D) lower; lower
Which member(s) of the Fed's Board of Governors are appointed by the President and confirmed by the Senate.
Chairperson
The agency that was created to protect depositors after the banking failures of 1930-1933 is the
Federal Deposit Insurance Corporation.
Which of the following is not incldued in the CAMELS rating citeria?
Liability quality, Management compensation
In a bank's balance sheet, the assets column represents the ______ of funds and generates ______ for the bank
Sources, income
Which of the following is responsible for funding the Consumer Financial Protection Bureau?
The Federal Reserve Banking System
If a bank is named "Chicago National Bank," it is chartered by _______.
The Office of the Comptroller of the Currency in the U.S. Treasury Department
A legal contract that allows the purchase or sale of a right to buy is known as _______.
The call options contract
The voting members of the Federal Open Market Committee (FOMC) include ______.
The chairperson of the Federal Reserve Board any member of the Federal Reserve Board a few president of the regional Federal Reserve Banks
Which of the following is a source of income to the Federal Reserve System (Fed)?
The interest received from the U.S. Treasury securities bought and held at the Fed The interest income from the discount loans
An adverse selection problem is also known as _____.
a moral hazard problem
Which of the following is an argument against the independence of the Federal Reserve System (Fed) from all political influences?
a) It is undemocratic to have monetary policy controlled by an elite and exclusive group b) To achieve economic goals, it makes sense to place both monetary and fiscal policies under the control of the Congress and the President.
A factoring company specializes in discounting _______.
accounts receivable
A simple deposit multiplier is defined as ______.
an inverse of the required reserve ratio
To evaluate the financial health of a bank, essential financial reports that one should examine are the _________.
balance sheet
Which of the following is not true about the Federal Reserve System (Fed)?
c) The Fed has to recieve its annual budget from the Congress.
Universal banking means a financial institution can do _______ under one company structure.
c) commercial banking and investment banking
Which of the following functions does each of the 12 regional Federal Reserve Banks play?
clear checks and destroy worn-out money
Which of the following is part of 4C's of Lending?
collateral capability
When the Federal Reserve System sells the U.S. Treasury securities to banks, this will ______ liquidity and thus, will result in ______ interest rates.
decrease; higher
Economies of scale means that as output increases, per-unit (=average) cost of production _____.:
decreases
Which of the following can a bank loan out to customers?
excess reserves
If the Federal Reserve System decides to decrease required reserves for the banks, this will cause an/a ______ in money supply and thus, will result in _____ interest rates.
increase; lower
When the deposit rate _____ and the loan rate _____, the bank can enjoy a smallest profit.
increases; decreases
If the Federal Reserve System decides to increase required reserves for the banks, this will cause ______ liquidity and thus, will result in _____ interest rates.
less; higher
The narrowest definition of money used by economists is ______
m1
According to the lecture and lecture notes, which of the following is true about ObamaCare?
no life time limit for coverage no discrimination against pre-existing medical conditions pay penalty if no health insurance
Securitization means that ______ assets are pooled and made into ______ assets.
non-marketable; marketable, illiquid; liquid
Which of the following is a defined benefit plan?
pensions
The contribution made to a 401(k) is called a/an _______ contribution whereas that made to a Roth 401(k) is called a/an __________ contribution.
pre-tax; after-tax
The Glass-Steagall Act of 1933 ________.
prohibited universal banking in the U.S.
Which of the following can reduce asymmetric information problem?
rely more on financial intermediation via banks and loan specialists
when the Federal Reserve System (Fed) makes profits, the Fed must _________.
return the profit to the U.S. Treasury Department
If you expect to pay a higher income tax rate at your retirement than now, it is more advantageous for you to contribute your money to _______ now.
roth 401k
There are ___ members of the Board of Governors whose terms are ______.
seven; non-renewable
If an insurance company treats its policyholders as customers and does not share profits directly with them, it must be organized as a ________ company
stock
Which is the least expensive form of a life insurance policy?
term
In an automobile insurance, if the comprehensive coverage is $30,000, this means that _______ will pay for the damage done to ________.
the insurance company;your car
Net Asset Value (NAV) of a stock mutual fund is ______.
the price per share of the fund
Reserves can be defined as ______.
the sum of required reserves and excess reserves
Dual banking means that _______.
there are two government agancies that can grant a bank charter
If you own a front-load mutual fund, it means that _______
you already paid a sales commission