Reference no: EM131148138

1. Credit unions are _____ institutions.
thrift
contractual
federal
depository

2. The household sector is the largest surplus sector and invests in the capital market ______.
directly by purchasing stocks and bonds
indirectly through mutual funds
indirectly through pension funds
All of the above

3. Money markets are associated with _______ ; capital markets are associated with ______.
liquidity; marketability
spot; future
liquidity; economic investment
primary; secondary

4. Secondary capital markets have promoted economic growth in the United States because
they have increased marketability of stocks and bonds.
they have increased the public's access to investment.
they have helped investors diversify.
All of the above

5. Which of the following is not a debt security?
Corporate bonds
U.S. Government securities
Federal agency securities
Common stock

6. A conditional contract granting its holder the right to buy assets in the future is a ______.
put
forward contract
futures contract
call

7. The ease with which a financial claim can be resold is its ______.
quality
risk
marketability
perpetuity

8. Who has a permanent vote on the FOMC?
President of the Federal Reserve Bank of New York
Federal Advisory Council
President of the Federal Reserve Bank of San Francisco
Congress

9. An increase in Federal Reserve float
decreases bank reserve deposits in the Fed.
increases bank reserve deposits in the Fed.
has no impact upon bank reserves deposits in the Fed.
reduces the net loan granted by the Fed to member banks.

10. If the Fed wanted to increase the money supply immediately but just slightly, it would most likely ______.
buy securities on the open market
lower the Discount Rate
lower reserve requirements
Any of the above would be suitable for this purpose.

11. Unemployment should fall if ______.
wages increase and people expect prices to rise as well
wages increase and people expect prices to be stable
interest rates rise more than prices are expected to rise
the money supply increases

12. Monetary policies directed toward increased economic growth may have what impact upon the value of the dollar in relation to other currencies?
Increase
Decrease
No effect
None of the above

13. The "tools" of monetary policy, whether "viable" or not, include all the following except______.
changing the discount rate
open market operations
changes in reserve requirements
changes in the Federal Funds rate

14. Monetarists and Keynesians agree that______.
monetary policy influences the real sector
changes in the money supply drive changes in interest rates
changes in interest rates drive changes in the money supply
monetary policy does not influence the real sector

15. Which of the following was not a responsibility of the early Federal Reserve?
Replace the National Banking system
Improve the payments system
Establish more rigorous bank supervision
Act as "lender of last resort"

16. Which of the following statements about interest rates is incorrect?
Bond prices and interest rates change inversely with one another.
The expected rate of inflation affects current market interest rates.
Short-term interest rates are not as volatile as long-term interest rates.
Interest rates are directly related to the level of output in the economy.

17. Interest rates should increase if
the economy is in a boom.
inflationary expectations have decreased.
the Federal Reserve has decreased M1 and the supply of loanable funds.
inflationary expectations have increased.

18. Interest rates move ______ with expected inflation and _____ with economic activity.
directly; inversely
inversely; inversely
directly; directly
inversely; directly

19. If nominal interest rates are 10% and expected inflation is 5%, ______.
actual inflation exceeds 10%
the real rate of interest is 5%
market rates are expected to increase to 15%
expected interest rates are 5%

20. With the real rate at 5%, most loans were made at 10% last year. This year, interest rates have declined to 8%. What was the expected inflation rate last year?
5%
2%
10%
8%

1. List and briefly describe the main risks managed by financial intermediaries.

2. Explain why the Federal Reserve is less "independent" than it appears to be.

3. What should happen to consumption if the monetary base increases? Explain.

4. Explain why realized real rates of interest are sometimes negative but expected real rates are always positive. Give an example.