1 Which of the following are reported as assets on a bank s balance sheet A Borrowings B Reserves C Savings deposits D Bank capital E Only a and b of the above 2 When a 10 check written on the First National Bank of Chicago is deposited in an account at Citibank then A the liabilities of the First National Bank increase by 10 B the reserves of the First National Bank increase by 10 C the liabilities of Citibank increase by 10 D the assets of Citibank fall by 10 3 Which of the following help financial institutions reduce interest rate risk A interest rate swaps B financial futures C options for debt instruments D all of the above E only a and b of the above 4 A short contract requires that the investor A sell securities in the future C hedge in the future B buy securities in the future D close out his position in the future 5 If Second National Bank has more rate sensitive assets than rate sensitive liabilities it can reduce interest rate risk with a swap which requires Second National to A pay fixed rate while receiving floating rate B receive fixed rate while paying floating rate C both receive and pay fixed rate D both receive and pay floating rate 6 Each member of the seven member Board is appointed by the president and confirmed by the Senate to serve A 4 year terms B 6 year terms C 14 year terms D as long as the appointing president remains in office 7 According to the author of your textbook the Fed is A remarkably free of the political pressures that influence other government agencies B more responsive to the political pressures that influence other government agencies C severely constrained in its policy making by the congressional threat to reduce Fed independence D both a and c of the above 8 A bank has excess reserves of 1 000 and demand deposit liabilities of 80 000 when the reserve requirement is 25 percent If the reserve requirement is lowered to 20 percent the bank s excess reserves will be A 1 000 B 5 000 C 8 000 D 9 000 9 Decisions by depositors to increase their holdings of or of banks to hold excess reserves will result in a expansion of deposits than the simple model predicts A deposits smaller B deposits larger C currency smaller D currency larger 10 If the required reserve ratio is ten percent currency in circulation is 400 billion checkable deposits are 1000 billion and excess reserves total 1 billion then the monetary base is A 400 billion B 401 billion C 500 billion D 501 billion 11 Other things equal an increase in the required reserve ratio will result in a n in M1 and a n in M2 A increase increase B increase decrease C decrease increase D decrease decrease 12 If the First National Bank has a gap equal to a negative 30 million then a 5 percentage point increase in interest rates will cause profits to A increase by 15 million B increase by 1 5 million C decline by 15 million D decline by 1 5 million 13 The money multiplier is A negatively related to the currency checkable deposit ratio B positively related to the required reserve ratio C positively related to holdings of excess reserves D both a and b of the above
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