Question 1

Which of the following equations is correct?

Accepted Answer

A)  Real interest rate = Nominal interest rate + Inflation rate 
B)  Real interest rate = Nominal interest rate − Inflation rate 
C)  Real interest rate = Nominal interest rate × Inflation rate 
D)  Real interest rate = Nominal interest rate ÷ Inflation rate 
A)  Real interest rate = Nominal interest rate + Inflation rate 
B)  Real interest rate = Nominal interest rate − Inflation rate 
C)  Real interest rate = Nominal interest rate × Inflation rate 
D)  Real interest rate = Nominal interest rate ÷ Inflation rate

Question 2

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 quantity of credit when the credit demand curve is CD₁ and the credit supply curve is CS₁?

Accepted Answer

A)  $20 
B)  $30 
C)  $40 
D)  $50 
A)  $20 
B)  $30 
C)  $40 
D)  $50

Question 3

What is meant by the term "rate of interest"? If the nominal rate of interest in an economy is 6 percent and the rate of inflation in the economy is 4 percent,what is the real rate of interest in the economy?

Accepted Answer

The rate of interest is the additional p

Question 4

Consider two banks: Bank A and Bank B.Suppose the value of liabilities of both the banks is equal.However,Bank A is solvent,while Bank B is insolvent.This would imply that ________.

Accepted Answer

A)  Bank A's assets exceed Bank B's assets 
B)  Bank B's assets exceed Bank A's assets 
C)  Bank A's liabilities exceed Bank A's assets 
D)  Bank B's assets exceed Bank B's liabilities 
A)  Bank A's assets exceed Bank B's assets 
B)  Bank B's assets exceed Bank A's assets 
C)  Bank A's liabilities exceed Bank A's assets 
D)  Bank B's assets exceed Bank B's liabilities

Question 5

Credit is ________.

Accepted Answer

A)  the loan that a debtor receives 
B)  the income that an employee earns 
C)  the value of the assets inherited by individuals from their parents 
D)  the annual cost of maintaining an asset 
A)  the loan that a debtor receives 
B)  the income that an employee earns 
C)  the value of the assets inherited by individuals from their parents 
D)  the annual cost of maintaining an asset

Question 6

The following table shows the assets and liabilities for Safeco Bank.
  
-Refer to the table above.Assuming that Safeco Bank loses 30 percent of its long-term investments,what is Safeco Bank's Stockholders' equity now?

Accepted Answer

A)  $1,000 
B)  $0, and the bank is shut down 
C)  $10,000 
D)  $15,000 
A)  $1,000 
B)  $0, and the bank is shut down 
C)  $10,000 
D)  $15,000

Question 7

The following table lists some statistics on Boring Bank.
  
-Refer to the table above.If the required reserve ratio changes to 20 percent,and Boring Bank makes only the necessary changes to comply with regulations,how will the bank's total assets and total liabilities change?

Accepted Answer

A)  Total assets will decrease by $20, and total liabilities will remain the same. 
B)  Total assets will increase by $20, and total liabilities will decrease by $20. 
C)  Both total assets and total liabilities will decrease by $20. 
D)  Both total assets and total liabilities will remain the same. 
A)  Total assets will decrease by $20, and total liabilities will remain the same. 
B)  Total assets will increase by $20, and total liabilities will decrease by $20. 
C)  Both total assets and total liabilities will decrease by $20. 
D)  Both total assets and total liabilities will remain the same.

Question 8

Which of the following is a role of the Federal Deposit Insurance Corporation of the United States?

Accepted Answer

A)  It monitors the money supply. 
B)  It controls the real rate of interest. 
C)  It regulates banks that are insolvent. 
D)  It determines the monetary policy of the country. 
A)  It monitors the money supply. 
B)  It controls the real rate of interest. 
C)  It regulates banks that are insolvent. 
D)  It determines the monetary policy of the country.

Question 9

The following table shows the assets and liabilities for Safeco Bank.
  
-Refer to the table above.What is Safeco Bank's Stockholder's equity?

Accepted Answer

A)  $50,000 
B)  $75,000 
C)  $100,000 
D)  $150,000 
A)  $50,000 
B)  $75,000 
C)  $100,000 
D)  $150,000

Question 10

Everything else remaining unchanged,what is likely to happen to the credit demand curve of an economy if:
a)businesses in the economy see scope for growth and are planning to expand production in the future?
b)households are pessimistic about future incomes?
c)the government is planning to borrow money from financial institutions for investment in infrastructures?

Accepted Answer

a)If businesses in the economy see scope

Question 11

In the case of banks,"living wills" spell out ________.

Accepted Answer

A)  the amount of bank resources to be retained as stockholders' equity 
B)  the balance sheets of systemically important financial institutions 
C)  how a bank would sell its assets and pay off its creditors in the event of a shutdown 
D)  the long-term business development plans of systematically important financial institutions 
A)  the amount of bank resources to be retained as stockholders' equity 
B)  the balance sheets of systemically important financial institutions 
C)  how a bank would sell its assets and pay off its creditors in the event of a shutdown 
D)  the long-term business development plans of systematically important financial institutions

Question 12

If the nominal interest rate is greater than the real interest rate in an economy,________.

Accepted Answer

A)  the inflation rate must be positive in the economy 
B)  the inflation rate must be negative in the economy 
C)  the inflation rate must be zero in the economy 
D)  the real interest rate in the economy must be negative 
A)  the inflation rate must be positive in the economy 
B)  the inflation rate must be negative in the economy 
C)  the inflation rate must be zero in the economy 
D)  the real interest rate in the economy must be negative

Question 13

An individual plans to borrow a sum of $10,000 for 1 year.The nominal interest charged on the borrowed sum is 6 percent.
a)If he takes the loan,what will be the interest amount and the total amount that he would have to pay at the end of the year?
b)If the rate of inflation in the economy is 10 percent,then is it a good idea for him to take the loan? Why or why not?

Accepted Answer

a)If the individual takes the loan,he wi

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.Which of the following statements is correct?

Accepted Answer

A)  The $120,000 that John has already can be referred to as credit. 
B)  John could be a debtor or a lender. 
C)  The bank is considered the lender. 
D)  John's brothers are considered private debtors. 
A)  The $120,000 that John has already can be referred to as credit. 
B)  John could be a debtor or a lender. 
C)  The bank is considered the lender. 
D)  John's brothers are considered private debtors.

Question 15

If an individual borrows $200 at an annual rate of interest of 10 percent,what is the total amount that she will have to repay after 1 year?

Accepted Answer

A)  $20 
B)  $200 
C)  $210 
D)  $220 
A)  $20 
B)  $200 
C)  $210 
D)  $220

Question 16

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 quantity of credit when the credit demand curve is CD₂ and the credit supply curve is CS₁?

Accepted Answer

A)  $20 
B)  $30 
C)  $40 
D)  $50 
A)  $20 
B)  $30 
C)  $40 
D)  $50

Question 17

The following table lists various statistics for Bridger Bank.
  
-Refer to the table above.If Bridger Bank's total assets and total liabilities each increased by 10 percent,what would be the new level of stockholder's equity?

Accepted Answer

A)  $36 million 
B)  $44 million 
C)  $60 million 
D)  $66 million 
A)  $36 million 
B)  $44 million 
C)  $60 million 
D)  $66 million

Question 18

The biggest wave of bank failures in the United States occurred ________.

Accepted Answer

A)  before the Great Depression 
B)  during the Great Depression 
C)  in the early 1990s 
D)  during 2007 to 2009 
A)  before the Great Depression 
B)  during the Great Depression 
C)  in the early 1990s 
D)  during 2007 to 2009

Question 19

If an individual borrows $100 at an annual rate of interest of 5 percent,how much interest will he have to pay at the end of 1 year?

Accepted Answer

A)  $5 
B)  $10 
C)  $20 
D)  $50 
A)  $5 
B)  $10 
C)  $20 
D)  $50

Question 20

What are the three functions that banks perform as financial intermediaries?

Accepted Answer

The three functions that banks perform a

Which of the following equations is correct?

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 quantity of credit when the credit demand curve is CD₁ and the credit supply curve is CS₁?

What is meant by the term "rate of interest"? If the nominal rate of interest in an economy is 6 percent and the rate of inflation in the economy is 4 percent,what is the real rate of interest in the economy?

Consider two banks: Bank A and Bank B.Suppose the value of liabilities of both the banks is equal.However,Bank A is solvent,while Bank B is insolvent.This would imply that ________.

Credit is ________.

The following table shows the assets and liabilities for Safeco Bank. -Refer to the table above.Assuming that Safeco Bank loses 30 percent of its long-term investments,what is Safeco Bank's Stockholders' equity now?

The following table lists some statistics on Boring Bank. -Refer to the table above.If the required reserve ratio changes to 20 percent,and Boring Bank makes only the necessary changes to comply with regulations,how will the bank's total assets and total liabilities change?

Which of the following is a role of the Federal Deposit Insurance Corporation of the United States?

The following table shows the assets and liabilities for Safeco Bank. -Refer to the table above.What is Safeco Bank's Stockholder's equity?

In the case of banks,"living wills" spell out ________.

If the nominal interest rate is greater than the real interest rate in an economy,________.

If an individual borrows $200 at an annual rate of interest of 10 percent,what is the total amount that she will have to repay after 1 year?

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 quantity of credit when the credit demand curve is CD₂ and the credit supply curve is CS₁?

The following table lists various statistics for Bridger Bank. -Refer to the table above.If Bridger Bank's total assets and total liabilities each increased by 10 percent,what would be the new level of stockholder's equity?

The biggest wave of bank failures in the United States occurred ________.

If an individual borrows $100 at an annual rate of interest of 5 percent,how much interest will he have to pay at the end of 1 year?

What are the three functions that banks perform as financial intermediaries?

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

Which of the following equations is correct?

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 quantity of credit when the credit demand curve is CD₁ and the credit supply curve is CS₁?

What is meant by the term "rate of interest"? If the nominal rate of interest in an economy is 6 percent and the rate of inflation in the economy is 4 percent,what is the real rate of interest in the economy?

Consider two banks: Bank A and Bank B.Suppose the value of liabilities of both the banks is equal.However,Bank A is solvent,while Bank B is insolvent.This would imply that ________.

Credit is ________.

The following table shows the assets and liabilities for Safeco Bank. -Refer to the table above.Assuming that Safeco Bank loses 30 percent of its long-term investments,what is Safeco Bank's Stockholders' equity now?

The following table lists some statistics on Boring Bank. -Refer to the table above.If the required reserve ratio changes to 20 percent,and Boring Bank makes only the necessary changes to comply with regulations,how will the bank's total assets and total liabilities change?

Which of the following is a role of the Federal Deposit Insurance Corporation of the United States?

The following table shows the assets and liabilities for Safeco Bank. -Refer to the table above.What is Safeco Bank's Stockholder's equity?

In the case of banks,"living wills" spell out ________.

If the nominal interest rate is greater than the real interest rate in an economy,________.

If an individual borrows $200 at an annual rate of interest of 10 percent,what is the total amount that she will have to repay after 1 year?

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 quantity of credit when the credit demand curve is CD₂ and the credit supply curve is CS₁?

The following table lists various statistics for Bridger Bank. -Refer to the table above.If Bridger Bank's total assets and total liabilities each increased by 10 percent,what would be the new level of stockholder's equity?

The biggest wave of bank failures in the United States occurred ________.

If an individual borrows $100 at an annual rate of interest of 5 percent,how much interest will he have to pay at the end of 1 year?

What are the three functions that banks perform as financial intermediaries?

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