ECON 1200: EXAM 2
30 Cards in this Set
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#1 - Which of the following is a reason why banks lost their cost advantage in acquiring funds in recent years?
A.) Deposit rate ceiling and regulation Q were eliminated.
B.) The rise of commercial paper market.
C.) Lower-quality corporate borrowers have less access to junk bond mark…
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A.) Deposit rate ceiling and regulation Q were eliminated.
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#2 - Which of the following is true?
A.) since the mid-1980s, bank consolidation has decreased at a rapid rate.
B.) The large number of commercial banks in the U.S. reflects fierce competition in past years.
C.) One possible reason for having so many banks in the U,S, is because of t…
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C.) One possible reason for having so many banks in the U.S is because of the McFadden Act.
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#3 - Sarah places her savings into a local bank that has FDIC insurance. Confident her money is safe, she does not monitor the bank's activities. The bank in turn engages in riskier behavior than it otherwise would. The above situation is an example of which problem?
A.) Adverse Select…
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D.) Moral Hazard
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#4 - The "Too Big to Fail" Policy:
A.) benefits small banks by increasing their appeal to large depositors.
B.) Only uses the payoff method when handling bank failure.
C.) Is no longer practiced due to financial consolidation.
D.) Creates no incentive for large depositors to monitor t…
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D.) Creates no incentive for large depositors to monitor the bank.
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#5 - Restricting competition is one form of bank regulation used to address asymmetric information problems. Restrictions on competition result in which of the following?
A.) Decreased moral hazard incentives.
B.) Higher charges to consumers.
C.) Increased efficiency of banking insti…
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D.) Only A and B
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#6 - Members of the Board of Govemors are:
A.) Chosen by the Federal Reserve Bank presidents.
B.) Appointed by the newly elected president of the United States.
C.) Appointed by the president of the United States and confirmed by the Senate.
D.) Never allowed to serve more than a 7-…
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C.) Appointed by the president of the United States and confirmed by the Senate.
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#7 - The primary goal of the Fed is:
A.) Stable interest rates.
B.) Stable exchange rates.
C.) Low unemployment.
D.) Low and stable inflation.
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D.0 Low and stable inflation
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#8 - If currency in circulation is $600 billion, checkable deposits are $1,000 billion, required reserve ratio is 10%, and excess reserves are $2 billion, then the money multiplier is approximately:
A.) 2.10 B.) 2.28
C.) 2.55 D.) 2.8…
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B.) 2.28
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#9 - A new national bank tries to obtain a charter from the ___. Upon evaluating the proposal for for the charter, the regulator discovers the risk=taking intentions of the bank's future managers and does not rant the charter. This form of banking regulation directly prevents the ____ pro…
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C.) Office of the Comptroller of the Currency; adverse selection
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#10 - Which of the following is a way for a bank to increase reserves?
A.) Borrowing from the Fed.
B.) Borrowing from other banks.
C.) Selling securities.
D.) All of the above.
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D.) All of the above
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#11 - The ___ flexibility in liability management over the past three decades explains banks' ___ targeting for their asset growth and enhanced ability to acquire funds as they were needed.
A.) reduced; conservative
B.) reduced; aggressive
C.) greater; aggressive
D.) greater; lack o…
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C.) greater; aggressive
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#12 - An important function of the Federal Open Market Committee is:
A.) Setting reserve requirement
B.) Clearing checks
C.) Approving acquisitions and mergers
D.) Determining monetary policy.
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D.) Determining monetary policy.
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#13 - Look on Paper
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A.) You're financially fucked.
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#14 - Which of the following innovations helped banks circumvent restrictive branching laws?
A.) Sweep accounts
B.) Bank holding companies
C.) Securitization
D.) ATMs
E.) Only B and D
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E.) Only B and D
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#15 - When the exchange rate for the British pounds changes from $1.80 per lb to $1.60 per lb, then, everything constant, the pound has ___ and ___ expensive.
A.) appreciated; British cars sold in the U,S. become more.
B.) appreciated; British cars sold in U.S. become less
C.) deprecia…
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C.) depreciated American wheat sold in Britain becomes more
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#16 - The decline in tradition banking in the United States has led to:
A.) a reduction in the profitability of banking.
B.) an increase in off-balance sheet activities of banks.
C.) an increase in the number of banks.
D.) an increase in the number of savings and loans.
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B.) an increase in off-balance sheet activities of banks.
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#17 - Which of the following is true?
A.) During the Great Depression, the currency ration fell sharply.
B.) A decrease in the non-borrowed monetary base will cause the money supply to rise.
C.) The borrowed monetary base is controlled by the Fed.
D.) The money supply is positively …
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D.) The money supply is positively related to the monetary base.
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#18 - According to the law of one price, if the price of Colombian coffee is 100 pesos per pound and the price of Brazilian coffee is 4 reals per pound, then the exchange rate between the peso and real is:
A.) 40 pesos per real
B.) 400 pesos per real
C.) 25 pesos per real
D,) 0.4 pe…
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C.) 25 pesos per real.
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#19 - Which of the following will lead to an increase in money supply?
A.) decrease in required reserve ratio.
B.) increase in currency ratio.
C.) increase in total excess reserves.
D.) decrease in money multiplier.
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A.) decrease in required reserve ratio.
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#20 - Which of the following is not true?
A.) Excess reserve ratio is negatively related to market interest rate.
B.) We can split the monetary base into the non-borrowed monetary base and borrowed reserve.
C.) Over long period, the primary determinant of movements in the money su…
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C.) Over long period, the primary determinant of movement in the money supply is the money multiplier.
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#21 - The federal funds rate is important because it is:
A.) the primary indicator of the Fed's stance on monetary policy.
B.) the interest rate paid on federal debt.
C.) the interest rate charged on government loans.
D.) all of the above.
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A.) The primary indicator of the Fed's stance on monetary policy.
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#22 - A rise in the discount rate will __iff if the demand curve for reserves intersects the vertical section of the supply curve and ___iff if the demand curve for reserves intersects the horizontal section of the supply curve:
A.) lower; note affect B.) raise; not affect
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D.) not affect; raise
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#23 - In the market for reserves, a fall in the reserve requirement shifts the ___ curve to the ___ and usually causes the federal funds interest rate to fall.
A.) demand; left B.) demand; right
C.) Supply; right D.) supply; left
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A.) demand; left
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#24 - Open market operations as a monetary policy tool have the advantages that:
A.) they are flexible and precise.
B.) they can be implemented quickly without administrative delays.
C.) they are not easily reversed.
D.) all of the above.
E.) only A and B
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E.) only A and B
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#25 - If US productivity rises relative to Brazilian productivity, then, in the long run, ____, everything else held constant.
A.) Brazilian "real" will appreciate relative to the US dollar.
B.) Brazilian 'real' will depreciate relative to the US dollar.
C.) Brazilian 'real' will eith…
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B.) Brazilian 'real' will depreciate relative to the US dollar.
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#26 - The most important advantage of discount policy is that the Fed can use it to:
A.) precisely control the monetary policy.
B.) perform its role as lender of last resort.
C.) control the money supply.
D.) punish banks that have deficient reserves.
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B.) perform its role as lender of last resort.
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#27 - An independent Federal Reserve:
A.) is more likely to produce high inflation and less likely to produce a political business cycle.
B.) is more likely to produce high inflation and more likely to produce a political business cycle.
C.) is less likely to produce high inflation a…
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C.) is less likely to produce high inflation and less likely to produce a political business cycle.
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#28 - When it comes to choosing an operating policy instrument, both the ___ rate and ___ aggregates are measured accurately with almost no delay.
A.) real five year T-bond; monetary
B.) federal funds; national income
C.) federal funds; reserve
D.) real five year T-bond; reserve
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C.) federal funds; reserve
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#29 - According to Stanford's John Taylor, the Fed should raise the federal funds interest rate target when:
A.) inflation rises above the Fed's inflation target.
B.) real GDP rises above the Fed's output target.
C.) real GDP drops below the Fed's output target.
D.) both A and B occ…
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D.) both A and B occur
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#30 - A rise in demand for U.S. produced goods in Japan will cause the U.S. dollar to ___ relative to the Japanese yen.
A.) fall
B.) rise
C.) be unaffected
D.) be unpredictable
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B.) rise
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ECON 1200: EXAM 1