Question 1

Assuming all else equal,if an airline company decides to purchase new planes,it is likely to cause ________.

Accepted Answer

A)  a downward movement along its credit demand curve 
B)  an upward movement along its credit demand curve 
C)  its credit demand curve to shift to the right 
D)  its credit demand curve to shift to the left 
A)  a downward movement along its credit demand curve 
B)  an upward movement along its credit demand curve 
C)  its credit demand curve to shift to the right 
D)  its credit demand curve to shift to the left

Question 2

Which of the following is likely to shift the credit demand curve of an automobile manufacturer to the right,assuming all else equal?

Accepted Answer

A)  A decrease in the real interest rate 
B)  An increase in the real interest rate 
C)  A plan to increase production and expand to newer markets 
D)  A plan to decrease production and exit from existing markets 
A)  A decrease in the real interest rate 
B)  An increase in the real interest rate 
C)  A plan to increase production and expand to newer markets 
D)  A plan to decrease production and exit from existing markets

Question 3

Systemically important financial institutions refer to ________.

Accepted Answer

A)  all banks whose assets exceed their of liabilities 
B)  all banks whose liabilities exceed their assets 
C)  large banks that have become large market powers 
D)  banks that are owned and run by the government 
A)  all banks whose assets exceed their of liabilities 
B)  all banks whose liabilities exceed their assets 
C)  large banks that have become large market powers 
D)  banks that are owned and run by the government

Question 4

The following figure shows two credit demand curves, CD₁ and CD₂, and two credit supply curves, CS₁ and CS₂.
  
-Refer to the figure above.Which of the following statements is true when the credit demand curve is CD₂ and the credit supply curve is CS₁?

Accepted Answer

A)  At all rates of interest below 5 percent, there will be an excess demand for credit. 
B)  At all rates of interest below 6 percent, there will be an excess demand for credit. 
C)  At all rates of interest below 7 percent, there will be an excess demand for credit. 
D)  At all rates of interest below 8 percent, there will be an excess demand for credit. 
A)  At all rates of interest below 5 percent, there will be an excess demand for credit. 
B)  At all rates of interest below 6 percent, there will be an excess demand for credit. 
C)  At all rates of interest below 7 percent, there will be an excess demand for credit. 
D)  At all rates of interest below 8 percent, there will be an excess demand for credit.

Question 5

The claims that economic agents have against banks are known as the bank's ________.

Accepted Answer

A)  liabilities 
B)  assets 
C)  deposits 
D)  capital 
A)  liabilities 
B)  assets 
C)  deposits 
D)  capital

Question 6

The following figure plots real interest rate against quantity of credit.
  
-Refer to the figure above.Compared to point C,at point A,debtors are ________.

Accepted Answer

A)  more likely to invest 
B)  less likely to invest 
C)  more likely to save 
D)  less likely to save 
A)  more likely to invest 
B)  less likely to invest 
C)  more likely to save 
D)  less likely to save

Question 7

The total interest that a borrower has to pay on a loan is equal to ________.

Accepted Answer

A)  principal plus the rate of interest 
B)  principal minus the rate of interest 
C)  principal times the rate of interest 
D)  principal divided by the rate of interest 
A)  principal plus the rate of interest 
B)  principal minus the rate of interest 
C)  principal times the rate of interest 
D)  principal divided by the rate of interest

Question 8

Which of the following statements is true?

Accepted Answer

A)  Banks are the only financial institutions that lend money and do not accept deposits. 
B)  Banks are the only financial institutions that do not lend money but accept deposits. 
C)  The interest rate is positively related to the quantity of credit demanded. 
D)  The larger the principal invested, the higher will be the interest received at the end of a year. 
A)  Banks are the only financial institutions that lend money and do not accept deposits. 
B)  Banks are the only financial institutions that do not lend money but accept deposits. 
C)  The interest rate is positively related to the quantity of credit demanded. 
D)  The larger the principal invested, the higher will be the interest received at the end of a year.

Question 9

The following table lists some statistics on Boring Bank.
  
-Refer to the table above.If Boring Bank increases its loans to use all its excess reserves with the required reserve ratio being at 10 percent,what is the new stockholder's equity?

Accepted Answer

A)  $10 
B)  $50 
C)  $60 
D)  $90 
A)  $10 
B)  $50 
C)  $60 
D)  $90

Question 10

The real interest rate is equal to ________.

Accepted Answer

A)  the nominal interest rate adjusted for tax rates 
B)  the nominal interest rate adjusted for inflation 
C)  the nominal interest rate adjusted for income changes 
D)  the nominal interest rate adjusted for changes in exchange rate 
A)  the nominal interest rate adjusted for tax rates 
B)  the nominal interest rate adjusted for inflation 
C)  the nominal interest rate adjusted for income changes 
D)  the nominal interest rate adjusted for changes in exchange rate

Question 11

One of the risks of maturity transformation is that ________.

Accepted Answer

A)  it discourages savings 
B)  it can lead to bank runs 
C)  it can increase the rate of inflation 
D)  it reduces the profitability of banks 
A)  it discourages savings 
B)  it can lead to bank runs 
C)  it can increase the rate of inflation 
D)  it reduces the profitability of banks

Question 12

An asset is said to be riskless if ________.

Accepted Answer

A)  it offers a positive rate of interest 
B)  it can be easily converted into cash 
C)  its value does not change from day to day 
D)  its value is more likely to fall in future 
A)  it offers a positive rate of interest 
B)  it can be easily converted into cash 
C)  its value does not change from day to day 
D)  its value is more likely to fall in future

Question 13

The following figure shows two credit demand curves, CD₁ and CD₂, and two credit supply curves, CS₁ and CS₂.
  
-Refer to the figure above.What is the equilibrium rate of interest when the credit demand curve is CD₂ and the credit supply curve is CS₁?

Accepted Answer

A)  2 percent 
B)  3 percent 
C)  4 percent 
D)  5 percent 
A)  2 percent 
B)  3 percent 
C)  4 percent 
D)  5 percent

Question 14

Scenario: John is looking to buy a house in Bozeman. He has about $120,000 in savings, and the house he is interested in costs $300,000. When he approaches Boze Bank, the same bank at which all of his five brothers have accounts, he learns that he can borrow at a nominal interest rate of 5 percent. Inflation is 2 percent for 2 years after he buys the house and then increases to 3 percent. Assume that Boze Bank is the only bank in Bozeman and John's five brothers contribute a significant amount to the bank's total savings.
-Refer to the scenario above.If John takes a loan to cover the difference between the cost of the new house and his savings and makes annual payments of $50,000,how much will John owe after 3 years?

Accepted Answer

A)  $41,251 
B)  $40,000 
C)  $50,748 
D)  $42,146 
A)  $41,251 
B)  $40,000 
C)  $50,748 
D)  $42,146

Question 15

The following figure shows two credit demand curves, CD₁ and CD₂, and two credit supply curves, CS₁ and CS₂.
  
-Refer to the figure above.Which of the following statements is true when the credit demand curve is CD₁ and the credit supply curve is CS₁?

Accepted Answer

A)  At all rates of interest above 1 percent, there will be an excess supply of credit. 
B)  At all rates of interest above 2 percent, there will be an excess supply of credit. 
C)  At all rates of interest above 3 percent, there will be an excess supply of credit. 
D)  At all rates of interest above 4 percent, there will be an excess supply of credit. 
A)  At all rates of interest above 1 percent, there will be an excess supply of credit. 
B)  At all rates of interest above 2 percent, there will be an excess supply of credit. 
C)  At all rates of interest above 3 percent, there will be an excess supply of credit. 
D)  At all rates of interest above 4 percent, there will be an excess supply of credit.

Question 16

The following table lists various statistics for Bridger Bank.
  
-Refer to the table above.What are the total assets of Bridger Bank?

Accepted Answer

A)  $180 million 
B)  $225 million 
C)  $278 million 
D)  $331 million 
A)  $180 million 
B)  $225 million 
C)  $278 million 
D)  $331 million

Question 17

Scenario: Amateur Bank is just starting out and has had the following transactions:
• Amateur Bank takes out a $3,000 loan from Pro Bank.
• Amateur bank has $2,500 invested in building and operations.
• Suzie deposits $1,200.
• Joe deposits $750.
• Robbie takes out a loan for $900.
• Jackie takes out a business loan for $625.
• Amateur Bank invests $1,000 in GoPro.
-Refer to the scenario above.If the required reserve ratio is 10 percent,then how much must Amateur bank keep in its reserves?

Accepted Answer

A)  $75 
B)  $120 
C)  $195 
D)  $285 
A)  $75 
B)  $120 
C)  $195 
D)  $285

Question 18

Scenario: Amateur Bank is just starting out and has had the following transactions:
• Amateur Bank takes out a $3,000 loan from Pro Bank.
• Amateur bank has $2,500 invested in building and operations.
• Suzie deposits $1,200.
• Joe deposits $750.
• Robbie takes out a loan for $900.
• Jackie takes out a business loan for $625.
• Amateur Bank invests $1,000 in GoPro.
-Refer to the scenario above.How much does Amateur Bank have in stockholders' equity?

Accepted Answer

A)  $100 
B)  $300 
C)  $500 
D)  $700 
A)  $100 
B)  $300 
C)  $500 
D)  $700

Question 19

What is the loanable funds market? What happens if the real interest rate in the market is held above the equilibrium interest rate?

Accepted Answer

The loanable funds market is the market

Question 20

If the quantity of credit demanded in a market exceeds the quantity of credit supplied in the market,________.

Accepted Answer

A)  the real rate of interest tends to fall 
B)  the real rate of interest tends to rise 
C)  the rate of inflation tends to rise 
D)  the unemployment rate tends to fall 
A)  the real rate of interest tends to fall 
B)  the real rate of interest tends to rise 
C)  the rate of inflation tends to rise 
D)  the unemployment rate tends to fall

Assuming all else equal,if an airline company decides to purchase new planes,it is likely to cause ________.

Which of the following is likely to shift the credit demand curve of an automobile manufacturer to the right,assuming all else equal?

Systemically important financial institutions refer to ________.

The following figure shows two credit demand curves, CD₁ and CD₂, and two credit supply curves, CS₁ and CS₂. -Refer to the figure above.Which of the following statements is true when the credit demand curve is CD₂ and the credit supply curve is CS₁?

The claims that economic agents have against banks are known as the bank's ________.

The following figure plots real interest rate against quantity of credit. -Refer to the figure above.Compared to point C,at point A,debtors are ________.

The total interest that a borrower has to pay on a loan is equal to ________.

Which of the following statements is true?

The following table lists some statistics on Boring Bank. -Refer to the table above.If Boring Bank increases its loans to use all its excess reserves with the required reserve ratio being at 10 percent,what is the new stockholder's equity?

The real interest rate is equal to ________.

One of the risks of maturity transformation is that ________.

An asset is said to be riskless if ________.

The following figure shows two credit demand curves, CD₁ and CD₂, and two credit supply curves, CS₁ and CS₂. -Refer to the figure above.What is the equilibrium rate of interest when the credit demand curve is CD₂ and the credit supply curve is CS₁?

The following figure shows two credit demand curves, CD₁ and CD₂, and two credit supply curves, CS₁ and CS₂. -Refer to the figure above.Which of the following statements is true when the credit demand curve is CD₁ and the credit supply curve is CS₁?

The following table lists various statistics for Bridger Bank. -Refer to the table above.What are the total assets of Bridger Bank?

What is the loanable funds market? What happens if the real interest rate in the market is held above the equilibrium interest rate?

If the quantity of credit demanded in a market exceeds the quantity of credit supplied in the market,________.

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, Supply, and Equilibrium

The Wealth of Nations: Defining and Measuring Macroeconomic Aggregates

Aggregate Incomes

Economic Growth

Why Isn't the Whole World Developed?

Employment and Unemployment

The Monetary System

Short-Run Fluctuations

Countercyclical Macroeconomic Policy

Macroeconomics and International Trade

Open Economy Macroeconomics

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Exam 10: Credit Markets

Assuming all else equal,if an airline company decides to purchase new planes,it is likely to cause ________.

Which of the following is likely to shift the credit demand curve of an automobile manufacturer to the right,assuming all else equal?

Systemically important financial institutions refer to ________.

The following figure shows two credit demand curves, CD₁ and CD₂, and two credit supply curves, CS₁ and CS₂. -Refer to the figure above.Which of the following statements is true when the credit demand curve is CD₂ and the credit supply curve is CS₁?

The claims that economic agents have against banks are known as the bank's ________.

The following figure plots real interest rate against quantity of credit. -Refer to the figure above.Compared to point C,at point A,debtors are ________.

The total interest that a borrower has to pay on a loan is equal to ________.

Which of the following statements is true?

The following table lists some statistics on Boring Bank. -Refer to the table above.If Boring Bank increases its loans to use all its excess reserves with the required reserve ratio being at 10 percent,what is the new stockholder's equity?

The real interest rate is equal to ________.

One of the risks of maturity transformation is that ________.

An asset is said to be riskless if ________.

The following figure shows two credit demand curves, CD₁ and CD₂, and two credit supply curves, CS₁ and CS₂. -Refer to the figure above.What is the equilibrium rate of interest when the credit demand curve is CD₂ and the credit supply curve is CS₁?

The following figure shows two credit demand curves, CD₁ and CD₂, and two credit supply curves, CS₁ and CS₂. -Refer to the figure above.Which of the following statements is true when the credit demand curve is CD₁ and the credit supply curve is CS₁?

The following table lists various statistics for Bridger Bank. -Refer to the table above.What are the total assets of Bridger Bank?

What is the loanable funds market? What happens if the real interest rate in the market is held above the equilibrium interest rate?

If the quantity of credit demanded in a market exceeds the quantity of credit supplied in the market,________.

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, Supply, and Equilibrium

The Wealth of Nations: Defining and Measuring Macroeconomic Aggregates

Aggregate Incomes

Economic Growth

Why Isn't the Whole World Developed?

Employment and Unemployment

The Monetary System

Short-Run Fluctuations

Countercyclical Macroeconomic Policy

Macroeconomics and International Trade

Open Economy Macroeconomics

Filters