Question 1

As long as a bank's stockholders' equity is greater than zero,________.

Accepted Answer

A)  bank runs are not possible 
B)  the bank bears all the risk involved 
C)  the customers of the bank bear all the risk involved 
D)  the stockholders of the bank bear all the risk involved 
A)  bank runs are not possible 
B)  the bank bears all the risk involved 
C)  the customers of the bank bear all the risk involved 
D)  the stockholders of the bank bear all the risk involved

Question 2

Assuming all else equal,if households are optimistic about their future income,it is likely to cause a(n)________.

Accepted Answer

A)  downward movement along their credit demand curve 
B)  upward movement along their credit demand curve 
C)  right shift of their credit demand curve 
D)  left shift of their credit demand curve 
A)  downward movement along their credit demand curve 
B)  upward movement along their credit demand curve 
C)  right shift of their credit demand curve 
D)  left shift of their credit demand curve

Question 3

A bank run occurs when ________.

Accepted Answer

A)  a bank's assets exceed its liabilities 
B)  a bank sells its assets to its own stockholders 
C)  the central monetary authority regulates the functioning of banks 
D)  a bank experiences an extraordinarily large volume of withdrawals 
A)  a bank's assets exceed its liabilities 
B)  a bank sells its assets to its own stockholders 
C)  the central monetary authority regulates the functioning of banks 
D)  a bank experiences an extraordinarily large volume of withdrawals

Question 4

If the real interest rate is lower than the equilibrium real interest rate,________.

Accepted Answer

A)  interest rates tend to fall further 
B)  the quantity of credit demanded equals the quantity of credit supplied 
C)  the quantity of credit demanded falls short of the quantity of credit supplied 
D)  the quantity of credit supplied falls short of the quantity of credit demanded 
A)  interest rates tend to fall further 
B)  the quantity of credit demanded equals the quantity of credit supplied 
C)  the quantity of credit demanded falls short of the quantity of credit supplied 
D)  the quantity of credit supplied falls short of the quantity of credit demanded

Question 5

The following table lists various statistics for Bridger Bank.
  
-Refer to the table above.If Bridger Bank's total liabilities stay the same but stockholder's equity increases by 25 percent,then by what percentage did Bridger Bank's total assets change by?

Accepted Answer

A)  Decreased by 15 percent 
B)  Decreased by 4.2 percent 
C)  Increased by 5.4 percent 
D)  Increased by 25 percent 
A)  Decreased by 15 percent 
B)  Decreased by 4.2 percent 
C)  Increased by 5.4 percent 
D)  Increased by 25 percent

Question 6

The following table lists various statistics for Bridger Bank.
  
-Refer to the table above.What is the stockholder's equity of Bridger Bank?

Accepted Answer

A)  $50 million 
B)  $10 million 
C)  $60 million 
D)  $150 million 
A)  $50 million 
B)  $10 million 
C)  $60 million 
D)  $150 million

Question 7

Scenario: Alpha Bank has $100,000 in total assets and $45,000 in total liabilities. Beta Bank has $250,000 in total assets and $220,000 in total liabilities.
-Refer to the scenario above.What is Alpha Bank's Stockholders' equity?

Accepted Answer

A)  $45,000 
B)  $55,000 
C)  $65,000 
D)  $145,000 
A)  $45,000 
B)  $55,000 
C)  $65,000 
D)  $145,000

Question 8

The following figure plots real interest rate against quantity of credit.
  
-Refer to the figure above.Assume that the loanable funds market initially is in equilibrium at point D.What has to be true for the new equilibrium to be at point A?

Accepted Answer

A)  The inflation rate must increase. 
B)  The demand of credit must not shift. 
C)  Companies' or individuals' savings must decrease. 
D)  Companies' or individuals' investments must decrease. 
A)  The inflation rate must increase. 
B)  The demand of credit must not shift. 
C)  Companies' or individuals' savings must decrease. 
D)  Companies' or individuals' investments must decrease.

Question 9

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 a tendency for real interest rates to fall. 
B)  At all rates of interest above 2 percent, there will be a tendency for real interest rates to fall. 
C)  At all rates of interest above 3 percent, there will be a tendency for real interest rates to fall. 
D)  At all rates of interest above 4 percent, there will be a tendency for real interest rates to fall. 
A)  At all rates of interest above 1 percent, there will be a tendency for real interest rates to fall. 
B)  At all rates of interest above 2 percent, there will be a tendency for real interest rates to fall. 
C)  At all rates of interest above 3 percent, there will be a tendency for real interest rates to fall. 
D)  At all rates of interest above 4 percent, there will be a tendency for real interest rates to fall.

Question 10

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.Just before John purchases the house,the sales tax on big ticket items goes up by 5 percent.How might this affect John?

Accepted Answer

A)  John might have to take longer to pay off his house. 
B)  John might be less interested in buying the house. 
C)  John might have to pay higher interest. 
D)  All of the above could be true. 
A)  John might have to take longer to pay off his house. 
B)  John might be less interested in buying the house. 
C)  John might have to pay higher interest. 
D)  All of the above could be true.

Question 11

The following figure plots real interest rate against quantity of credit.
  
-Refer to the figure above.If the supply of credit shifts from S₁ to S₂,________.

Accepted Answer

A)  debtors will increase their savings 
B)  debtors will decrease their savings 
C)  debtors will increase their investment 
D)  debtors will decrease their investment 
A)  debtors will increase their savings 
B)  debtors will decrease their savings 
C)  debtors will increase their investment 
D)  debtors will decrease their investment

Question 12

An individual can borrow a certain sum of money from any of the three banks in her town-Bank 1,Bank 2,and Bank 3.Bank 1 offers her loans at an annual interest rate of 5 percent,Bank 2 offers her loans at an annual interest rate of 3 percent,and Bank 3 offers her a loan at an annual interest rate of 10 percent.A rational individual will ________.

Accepted Answer

A)  borrow from Bank 1 
B)  borrow from Bank 2 
C)  borrow from Bank 3 
D)  be indifferent about borrowing from any of the three banks 
A)  borrow from Bank 1 
B)  borrow from Bank 2 
C)  borrow from Bank 3 
D)  be indifferent about borrowing from any of the three banks

Question 13

Which of the following statements is true?

Accepted Answer

A)  If a firm deposits a sum of $500 in a bank, the sum is a part of the bank's assets. 
B)  If a firm deposits a sum of $500 in a bank, the sum is a part of the bank's liabilities. 
C)  If a bank lends a sum of $600 to a firm, the sum is a part of the bank's liabilities. 
D)  If a bank lends a sum of $200 to a household, the sum is a part of the bank's liabilities. 
A)  If a firm deposits a sum of $500 in a bank, the sum is a part of the bank's assets. 
B)  If a firm deposits a sum of $500 in a bank, the sum is a part of the bank's liabilities. 
C)  If a bank lends a sum of $600 to a firm, the sum is a part of the bank's liabilities. 
D)  If a bank lends a sum of $200 to a household, the sum is a part of the bank's liabilities.

Question 14

At the equilibrium rate of interest,________.

Accepted Answer

A)  the quantity of credit demanded is zero 
B)  the quantity of credit supplied is zero 
C)  the quantity of credit demanded equals the quantity of credit supplied 
D)  the quantity of credit demanded falls short of the quantity of credit supplied 
A)  the quantity of credit demanded is zero 
B)  the quantity of credit supplied is zero 
C)  the quantity of credit demanded equals the quantity of credit supplied 
D)  the quantity of credit demanded falls short of the quantity of credit supplied

Question 15

If the real interest rate is greater than the equilibrium real interest rate,________.

Accepted Answer

A)  interest rates tend to rise further 
B)  the quantity of credit demanded equals the quantity of credit supplied 
C)  the quantity of credit demanded falls short of the quantity of credit supplied 
D)  the quantity of credit supplied falls short of the quantity of credit demanded 
A)  interest rates tend to rise further 
B)  the quantity of credit demanded equals the quantity of credit supplied 
C)  the quantity of credit demanded falls short of the quantity of credit supplied 
D)  the quantity of credit supplied falls short of the quantity of credit demanded

Question 16

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

Accepted Answer

A)  $188 million 
B)  $218 million 
C)  $278 million 
D)  $346 million 
A)  $188 million 
B)  $218 million 
C)  $278 million 
D)  $346 million

Question 17

Scenario: Alpha Bank has $100,000 in total assets and $45,000 in total liabilities. Beta Bank has $250,000 in total assets and $220,000 in total liabilities.
-Refer to the scenario above.If Beta Bank is faced with a bank run,what must it do?

Accepted Answer

A)  Liquidate its long-term, illiquid assets 
B)  Not pay out the deposits that are being withdrawn 
C)  Rely on the FDIC to pay out the withdrawn deposits 
D)  Invest more of its short-term assets in long-term assets to protect them 
A)  Liquidate its long-term, illiquid assets 
B)  Not pay out the deposits that are being withdrawn 
C)  Rely on the FDIC to pay out the withdrawn deposits 
D)  Invest more of its short-term assets in long-term assets to protect them

Question 18

If the nominal interest rate in an economy is 4 percent and the real interest rate in the economy is 2 percent,the rate of inflation in the economy must be ________.

Accepted Answer

A)  2 percent 
B)  4 percent 
C)  −2 percent 
D)  0.5 percent 
A)  2 percent 
B)  4 percent 
C)  −2 percent 
D)  0.5 percent

Question 19

Companies that enable investors to use their savings to buy financial securities are referred to as ________.

Accepted Answer

A)  banks 
B)  hedge fund companies 
C)  private equity funds 
D)  asset management companies 
A)  banks 
B)  hedge fund companies 
C)  private equity funds 
D)  asset management companies

Question 20

The following table shows the assets and liabilities for Safeco Bank.
  
-Refer to the table above.Assuming that Safeco Bank loses 20 percent of its long-term investments,what is its stockholders' equity now?

Accepted Answer

A)  $0 
B)  $8,000 
C)  $16,000 
D)  $50,000 
A)  $0 
B)  $8,000 
C)  $16,000 
D)  $50,000

As long as a bank's stockholders' equity is greater than zero,________.

Assuming all else equal,if households are optimistic about their future income,it is likely to cause a(n)________.

A bank run occurs when ________.

If the real interest rate is lower than the equilibrium real interest rate,________.

The following table lists various statistics for Bridger Bank. -Refer to the table above.If Bridger Bank's total liabilities stay the same but stockholder's equity increases by 25 percent,then by what percentage did Bridger Bank's total assets change by?

The following table lists various statistics for Bridger Bank. -Refer to the table above.What is the stockholder's equity of Bridger Bank?

Scenario: Alpha Bank has $100,000 in total assets and $45,000 in total liabilities. Beta Bank has $250,000 in total assets and $220,000 in total liabilities. -Refer to the scenario above.What is Alpha Bank's Stockholders' equity?

The following figure plots real interest rate against quantity of credit. -Refer to the figure above.Assume that the loanable funds market initially is in equilibrium at point D.What has to be true for the new equilibrium to be at point A?

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 figure plots real interest rate against quantity of credit. -Refer to the figure above.If the supply of credit shifts from S₁ to S₂,________.

Which of the following statements is true?

At the equilibrium rate of interest,________.

If the real interest rate is greater than the equilibrium real interest rate,________.

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

Scenario: Alpha Bank has $100,000 in total assets and $45,000 in total liabilities. Beta Bank has $250,000 in total assets and $220,000 in total liabilities. -Refer to the scenario above.If Beta Bank is faced with a bank run,what must it do?

If the nominal interest rate in an economy is 4 percent and the real interest rate in the economy is 2 percent,the rate of inflation in the economy must be ________.

Companies that enable investors to use their savings to buy financial securities are referred to as ________.

The following table shows the assets and liabilities for Safeco Bank. -Refer to the table above.Assuming that Safeco Bank loses 20 percent of its long-term investments,what is its stockholders' equity now?

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

Exam 10: Credit Markets

As long as a bank's stockholders' equity is greater than zero,________.

Assuming all else equal,if households are optimistic about their future income,it is likely to cause a(n)________.

A bank run occurs when ________.

If the real interest rate is lower than the equilibrium real interest rate,________.

The following table lists various statistics for Bridger Bank. -Refer to the table above.If Bridger Bank's total liabilities stay the same but stockholder's equity increases by 25 percent,then by what percentage did Bridger Bank's total assets change by?

The following table lists various statistics for Bridger Bank. -Refer to the table above.What is the stockholder's equity of Bridger Bank?

Scenario: Alpha Bank has $100,000 in total assets and $45,000 in total liabilities. Beta Bank has $250,000 in total assets and $220,000 in total liabilities. -Refer to the scenario above.What is Alpha Bank's Stockholders' equity?

The following figure plots real interest rate against quantity of credit. -Refer to the figure above.Assume that the loanable funds market initially is in equilibrium at point D.What has to be true for the new equilibrium to be at point A?

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 figure plots real interest rate against quantity of credit. -Refer to the figure above.If the supply of credit shifts from S₁ to S₂,________.

Which of the following statements is true?

At the equilibrium rate of interest,________.

If the real interest rate is greater than the equilibrium real interest rate,________.

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

Scenario: Alpha Bank has $100,000 in total assets and $45,000 in total liabilities. Beta Bank has $250,000 in total assets and $220,000 in total liabilities. -Refer to the scenario above.If Beta Bank is faced with a bank run,what must it do?

If the nominal interest rate in an economy is 4 percent and the real interest rate in the economy is 2 percent,the rate of inflation in the economy must be ________.

Companies that enable investors to use their savings to buy financial securities are referred to as ________.

The following table shows the assets and liabilities for Safeco Bank. -Refer to the table above.Assuming that Safeco Bank loses 20 percent of its long-term investments,what is its stockholders' equity now?

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