- Which of the following benefit directly from any increase in the corporation’s profitability?
A) a bond holder B) a commercial paper holder
C) a shareholder D) a T-bill holder
- The primary assets of a pension fund are
A) money market instruments. B) corporate bonds and stock.
C) consumer and business loans. D) mortgages.
- Increasing the amount of information available to investors helps to reduce the problems of
________ and ________ in the financial markets.
A) adverse selection; moral hazard B) adverse selection; risk sharing
C) moral hazard; transactions costs D) adverse selection; economies of scale
- Which of the following statements best explains how the use of money in an economy increases
economic efficiency?
A) Money increases economic efficiency because it is costless to produce.
B) Money increases economic efficiency because it discourages specialization.
C) Money increases economic efficiency because it decreases transactions costs.
D) Money cannot have an effect on economic efficiency.
- Defining money becomes ________ difficult as the pace of financial innovation ________.
A) less; quickens B) more; quickens C) more; slows D) more; stops
- The Fed revises its estimates of the monetary aggregates, sometimes by large amounts, because
A) large depository institutions need only report their deposits infrequently.
B) weekly monetary data need to be adjusted for the “weekend effect.”
C) monthly monetary data need to be adjusted for the “payday effect.”
D) seasonal adjustments become more precise only as more data becomes available.
- Which of the following are true concerning the distinction between interest rates and returns?
A) The rate of return on a bond will not necessarily equal the interest rate on that bond.
B) The return can be expressed as the difference between the current yield and the rate of capital
gains.
C) The rate of return will be greater than the interest rate when the price of the bond falls
between time t and time t + 1.
D) The return can be expressed as the sum of the discount yield and the rate of capital gains.
- If the interest rates on all bonds rise from 5 to 6 percent over the course of the year, which bond
would you prefer to have been holding?
A) A bond with one year to maturity B) A bond with five years to maturity
C) A bond with ten years to maturity D) A bond with twenty years to maturity
- If you expect the inflation rate to be 15 percent next year and a one-year bond has a yield to
maturity of 7 percent, then the real interest rate on this bond is
A) 7 percent. B) 22 percent. C) -15 percent. D) -8 percent.
- When the economy slips into a recession, normally the demand for bonds ________, the supply of
bonds ________, and the interest rate ________, everything else held constant.
A) increases; increases; rises B) decreases; decreases; falls
C) increases; decreases; falls D) decreases; increases; rises
- If stock prices are expected to climb next year, everything else held constant, the ________ curve
for bonds shifts ________ and the interest rate ________.
A) demand; left; rises B) demand; right; rises
C) demand; left; falls D) supply; left; rises
- Rising interest-rate risk
A) increased the cost of financial innovation.
B) reduced the demand for financial innovation.
C) reduced the cost of financial innovation.
D) increased the demand for financial innovation.
- The development of money market mutual funds contributed to the growth of ________ since the
money market mutual funds need to hold liquid, high-quality, short-terms assets.
A) the municipal bond market B) the commercial paper market
C) the junk bond market D) the corporate bond market
- Since 1980
A) banks have offset the decline in profits from traditional activities with increased income from
off-balance-sheet activities.
B) bank profitability has declined.
C) bank profits have grown rapidly due to deregulation.
D) banks have offset the decline in profits from off-balance-sheet activities with increased
income from traditional activities.
- Banks responded to disintermediation by
A) opposing the elimination of interest rate regulations, as this would increase their cost of
funds.
B) supporting the elimination of interest rate regulations, enabling them to better compete for
funds.
C) supporting the elimination of interest rate regulations, as this would reduce their cost of
funds.
D) demanding that interest rate regulations be imposed on money market mutual funds.
- As the banking system in the United States evolves, it is expected that
A) the number and importance of large banks will increase.
B) the number and importance of large banks will decrease.
C) the number and importance of small banks will increase.
D) small banks will grow at the expense of large banks.
- Assume that the following are the predicted inflation rates in these countries for the year: 2% for
the United States, 3% for Canada; 4% for Mexico, and 5% for Brazil. According to the purchasing
power parity and everything else held constant, which of the following would we expect to
happen?
A) The Mexican peso will depreciate against the Brazilian real.
B) The Canadian dollar will depreciate against the Mexican peso.
C) The U.S. dollar will depreciate against the Canadian dollar.
D) The Brazilian real will depreciate against the U.S. dollar.
- The proposition that inflation is the result of a high rate of money growth is
A) not supported by evidence from the German hyperinflation.
B) held only by sociologists and is no longer believed by economists.
C) supported by evidence from inflationary episodes throughout the world.
D) largely a political fabrication designed to make the Fed a scapegoat for poor fiscal policy.
- Which of the following would provide the strongest evidence that rapid money growth is the
driving force behind inflation?
A) An endogenous increase in the money supply that preceded the onset of inflation.
B) An exogenous increase in the money supply that preceded the onset of inflation.
C) An endogenous increase in the money supply that lagged the onset of inflation.
D) An exogenous increase in the money supply that lagged the onset of inflation.
- When inflation is defined to be a condition of a continually rising price level, ________
economists agree with Milton Friedman’s proposition that inflation is a monetary phenomenon.
A) no B) very few
C) about half of practicing D) almost all
- Workers will have greater incentives to push for higher wages when government policymakers
place greater concern on ________ than ________ and are thus ________ likely to adopt
accommodative policies.
A) inflation; unemployment; less B) inflation; unemployment; more
C) unemployment; inflation; less D) unemployment; inflation; more
- A. What are agency problems?
B. Give two examples of agency problems that occurred during the recent Supprime Financial
Crisis.
C. Is the fact that homeowners during the lead up to the subprime financial crisis could refinance
their houses with larger loans when their homes appreciated in value an agency problem? State yes
or no and give clear reason why.
-
Discuss how an increase in interest rates abroad can worsen an economies financial market
-
Who are the voting members of the Federal Open Market Committee and why is this committee
important? Where does the power lie within this committee?
conditions especially in emerging markets.
- What is the theory of bureaucratic behavior and how can it be used to explain the behavior of the
Federal Reserve?
- State whether the following statement is true or false
AND explain why: "A decrease in the
discount rate will always cause a decrease in the federal reserve funds rate."
- Explain what inflation targeting is. What are the advantages and disadvantages of this type of
monetary policy strategy?
- Explain the Federal Reserve’s “just do it” approach to monetary policy. What are the advantages
and disadvantages to this type of strategy?
this was a selection of questions from my final. The class stressed how inflation comes after a rise in the interst rates not when they come down in the first place. I’m gonna lose my mind.