Question 1

Which one of the following transactions or operations is entirely at the initiative of the Federal Reserve?

Accepted Answer

A) using public statements to manipulate the economy 
B) change in float 
C) change in bank borrowings 
D) change in Treasury cash holdings 
E) none of the above 
A) using public statements to manipulate the economy 
B) change in float 
C) change in bank borrowings 
D) change in Treasury cash holdings 
E) none of the above

Question 2

When a government borrows to finance budget deficits,crowding out may occur,which results in a restriction of available funds for private sector borrowers due to public sector demand.

Accepted Answer

A) True 
 B)False

Question 3

Nations that continually operate with an international trade surplus will become economically stronger.

Accepted Answer

A) True 
 B)False

Question 4

The output of goods and services in an economy is referred to as the gross domestic product.

Accepted Answer

A) True 
 B)False

Question 5

Budgetary deficits always have the effect of:

Accepted Answer

A) creating inflationary pressures 
B) crowding out private borrowers 
C) forcing the Federal Reserve to buy government securities 
D) creating governmental competition for private investment funds 
A) creating inflationary pressures 
B) crowding out private borrowers 
C) forcing the Federal Reserve to buy government securities 
D) creating governmental competition for private investment funds

Question 6

The Fed closely monitors the Treasury account and takes any changes into consideration in conducting daily open market operations in order to minimize the effect on bank reserves.

Accepted Answer

A) True 
 B)False

Question 7

Primary groups of policy makers that are actively involved in achieving a nation's economic policy objectives include all of the following EXCEPT:

Accepted Answer

A) the Supreme Court 
B) the President 
C) Congress 
D) all of the above are primary policy makers 
A) the Supreme Court 
B) the President 
C) Congress 
D) all of the above are primary policy makers

Question 8

Required reserves are the minimum amount of total reserves that a depository institution must hold.

Accepted Answer

A) True 
 B)False

Question 9

In September,2008 ____________ was acquired by Bank of America and _____________ declared bankruptcy when no viable financial alternatives surfaced.

Accepted Answer

A) Bank of America,Washington Mutual 
B) Lehman Brothers,Merrill Lynch 
C) Citicorp,Smith Barney 
D) Morgan Stanley,Chase 
E) none of the above 
A) Bank of America,Washington Mutual 
B) Lehman Brothers,Merrill Lynch 
C) Citicorp,Smith Barney 
D) Morgan Stanley,Chase 
E) none of the above

Question 10

The "perfect financial storm" that developed in 2008,which put the U.S.economy was on the verge of collapse was characterized by all of the following EXCEPT:

Accepted Answer

A) The housing price "bubble" burst in 2006 and began a sharp decline. 
B) Stock market prices peaked in 2007 and began a sharp decline. 
C) Many of the mortgage-related debt securities originated and sold to others,or held,by banks became difficult to value during the perfect financial storm and quickly became known as "troubled" or "tonic" assets. 
D) Individuals were defaulting on their home mortgages in increasing numbers due to falling home prices and increasing unemployment. 
E) Business firms and financial institutions,who had borrowed heavily during years of tight money and high interest rates,were faced with their own financial difficulties as economic activity increased markedly 
A) The housing price "bubble" burst in 2006 and began a sharp decline. 
B) Stock market prices peaked in 2007 and began a sharp decline. 
C) Many of the mortgage-related debt securities originated and sold to others,or held,by banks became difficult to value during the perfect financial storm and quickly became known as "troubled" or "tonic" assets. 
D) Individuals were defaulting on their home mortgages in increasing numbers due to falling home prices and increasing unemployment. 
E) Business firms and financial institutions,who had borrowed heavily during years of tight money and high interest rates,were faced with their own financial difficulties as economic activity increased markedly

Question 11

If required reserves are larger than the total reserves of an institution,the difference is called excess reserves.

Accepted Answer

A) True 
 B)False

Question 12

Debt management of the federal government includes:

Accepted Answer

A) determining which types of refunding to implement 
B) determining the types of securities to sell 
C) deciding which interest rate patterns to use 
D) all the above 
A) determining which types of refunding to implement 
B) determining the types of securities to sell 
C) deciding which interest rate patterns to use 
D) all the above

Question 13

Open market operations differ from discounting operations in that they are:

Accepted Answer

A) initiated by member depository institutions 
B) designed to be of significance only to large city banks 
C) initiated by the President 
D) initiated by Congress 
E) none of the above 
A) initiated by member depository institutions 
B) designed to be of significance only to large city banks 
C) initiated by the President 
D) initiated by Congress 
E) none of the above

Question 14

If a customer makes new deposits of $10,000 to a bank and the reserve requirement is 15%,then excess reserves will be:

Accepted Answer

A) $1,500 
B) $8,500 
C) $10,000 
D) none of the above 
A) $1,500 
B) $8,500 
C) $10,000 
D) none of the above

Question 15

Bank reserves are not affected by:

Accepted Answer

A) currency in circulation 
B) changes in reserve requirements 
C) open market operation 
D) changes in the level of deposits of foreign banks at the Federal Reserve banks 
A) currency in circulation 
B) changes in reserve requirements 
C) open market operation 
D) changes in the level of deposits of foreign banks at the Federal Reserve banks

Question 16

In fall 2008,the U.S.Congress and President George W.Bush responded to the financial crisis with the passage of the _____________ in early October of that year.

Accepted Answer

A) Economic Stimulus Act 
B) Economic Recovery Act 
C) Economic Expansion Act 
D) Economic Booster Act 
E) none of the above 
A) Economic Stimulus Act 
B) Economic Recovery Act 
C) Economic Expansion Act 
D) Economic Booster Act 
E) none of the above

Question 17

The U.S.Treasury,under the leadership of Treasury Secretary _____________,played an important role in helping the U.S.survive the 2007-09 financial crisis by assisting with the acquisition of Bear Sterns by JP Morgan Chase in March 2008 and by trying to help other financial institutions on the brink of collapse find help through mergers with financially stronger institutions.

Accepted Answer

A) Henry Paulson 
B) Timothy Geithner 
C) Alan Greenspan 
D) Ben Bernanke 
E) none of the above 
A) Henry Paulson 
B) Timothy Geithner 
C) Alan Greenspan 
D) Ben Bernanke 
E) none of the above

Question 18

Which of the following statements is false?

Accepted Answer

A) The difference between total reserves and the monetary base is currency held by the nonbank public. 
B) The ability to alter the money supply and credit is based on the fact that our banking system does not utilize a fractional reserve system. 
C) The ability to predict M1 velocity,in addition to money supply changes,is important in achieving successful monetary policy making. 
D) A derivative deposit arising out of a loan from Bank A is transferred by check to Bank B,where reserve requirement are again imposed. 
A) The difference between total reserves and the monetary base is currency held by the nonbank public. 
B) The ability to alter the money supply and credit is based on the fact that our banking system does not utilize a fractional reserve system. 
C) The ability to predict M1 velocity,in addition to money supply changes,is important in achieving successful monetary policy making. 
D) A derivative deposit arising out of a loan from Bank A is transferred by check to Bank B,where reserve requirement are again imposed.

Question 19

The federal government pays for the services it provides primarily through:

Accepted Answer

A) service fees 
B) creating money 
C) borrowing 
D) selling assets owned by the government 
E) none of the above 
A) service fees 
B) creating money 
C) borrowing 
D) selling assets owned by the government 
E) none of the above

Question 20

High inflation has been a significant problem in the United States during the past decade.

Accepted Answer

A) True 
 B)False

Which one of the following transactions or operations is entirely at the initiative of the Federal Reserve?

When a government borrows to finance budget deficits,crowding out may occur,which results in a restriction of available funds for private sector borrowers due to public sector demand.

Nations that continually operate with an international trade surplus will become economically stronger.

The output of goods and services in an economy is referred to as the gross domestic product.

Budgetary deficits always have the effect of:

The Fed closely monitors the Treasury account and takes any changes into consideration in conducting daily open market operations in order to minimize the effect on bank reserves.

Primary groups of policy makers that are actively involved in achieving a nation's economic policy objectives include all of the following EXCEPT:

Required reserves are the minimum amount of total reserves that a depository institution must hold.

In September,2008 was acquired by Bank of America and _ declared bankruptcy when no viable financial alternatives surfaced.

The "perfect financial storm" that developed in 2008,which put the U.S.economy was on the verge of collapse was characterized by all of the following EXCEPT:

If required reserves are larger than the total reserves of an institution,the difference is called excess reserves.

Debt management of the federal government includes:

Open market operations differ from discounting operations in that they are:

If a customer makes new deposits of $10,000 to a bank and the reserve requirement is 15%,then excess reserves will be:

Bank reserves are not affected by:

In fall 2008,the U.S.Congress and President George W.Bush responded to the financial crisis with the passage of the _____________ in early October of that year.

Which of the following statements is false?

The federal government pays for the services it provides primarily through:

High inflation has been a significant problem in the United States during the past decade.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuation

Securities Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters

Exam 5: Policy Makers and the Money Supply

Which one of the following transactions or operations is entirely at the initiative of the Federal Reserve?

When a government borrows to finance budget deficits,crowding out may occur,which results in a restriction of available funds for private sector borrowers due to public sector demand.

Nations that continually operate with an international trade surplus will become economically stronger.

The output of goods and services in an economy is referred to as the gross domestic product.

Budgetary deficits always have the effect of:

The Fed closely monitors the Treasury account and takes any changes into consideration in conducting daily open market operations in order to minimize the effect on bank reserves.

Primary groups of policy makers that are actively involved in achieving a nation's economic policy objectives include all of the following EXCEPT:

Required reserves are the minimum amount of total reserves that a depository institution must hold.

In September,2008 ____________ was acquired by Bank of America and _____________ declared bankruptcy when no viable financial alternatives surfaced.

The "perfect financial storm" that developed in 2008,which put the U.S.economy was on the verge of collapse was characterized by all of the following EXCEPT:

If required reserves are larger than the total reserves of an institution,the difference is called excess reserves.

Debt management of the federal government includes:

Open market operations differ from discounting operations in that they are:

If a customer makes new deposits of $10,000 to a bank and the reserve requirement is 15%,then excess reserves will be:

Bank reserves are not affected by:

In fall 2008,the U.S.Congress and President George W.Bush responded to the financial crisis with the passage of the _____________ in early October of that year.

Which of the following statements is false?

The federal government pays for the services it provides primarily through:

High inflation has been a significant problem in the United States during the past decade.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuation

Securities Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters

In September,2008 was acquired by Bank of America and _ declared bankruptcy when no viable financial alternatives surfaced.