CAS EC 202 Lecture Notes - Lecture 5: Open Market Operation, Monetary Base
Get access
Related Documents
Related Questions
6. If there is a shortage of loanable funds, then
a. |
the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is above equilibrium. |
b. |
the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium. |
c. |
the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium. |
d. |
the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is below equilibrium. |
Ā
7. We associate the term debt finance with
a. |
the bond market and we associate the term equity finance with the stock market. |
b. |
the stock market and we associate the term equity finance with the bond market. |
c. |
financial intermediaries and we associate the term equity finance with financial markets. |
d. |
financial markets and we associate the term equity finance with financial intermediaries. |
8. If the demand for loanable funds shifts to the right, then the equilibrium interest rate
a. |
and the quantity of loanable funds rises. |
b. |
and the quantity of loanable funds falls. |
c. |
rises and the quantity of loanable funds falls. |
d. |
falls and the quantity of loanable funds rises. |
Ā
9. Long-term bonds are
a. |
riskier than short-term bonds, and so interest rates on long-term bonds are usually lower than interest rates on short-term bonds. |
b. |
riskier than short-term bonds, and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds. |
c. |
less risky than short-term bonds, and so interest rates on long-term bonds are usually lower than interest rates on short-term bonds. |
d. |
less risky than short-term bonds, and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds. |
10. Compared to bondholders, stockholders
a. |
face higher risk and have the potential for higher returns. |
b. |
face higher risk but receive a fixed payment. |
c. |
face lower risk and have the potential for higher returns. |
d. |
face lower risk but receive a fixed payment. |
11. The old adage, 'don't put all your eggs in one basket',ĀĀ is very similar to a modern bit of advice concerning financial matters:
a. |
Buy low-risk bonds. |
b. |
Use a medium of exchange. |
c. |
Diversify. |
d. |
Intermediate. |
12. A budget surplus is created if
a. |
the government sells more bonds than it buys back. |
b. |
the government spends more than it receives in tax revenue. |
c. |
private saving is greater than zero. |
d. |
None of the above is correct. |
1. The market in which loans are bought and sold is called the:
Ā | Ā |
loan market. |
Ā | Ā |
money market. |
Ā | Ā |
secondary loan market. |
Ā | Ā |
primary loan market. |
2. Which of the following is omitted in a barter transaction?
Ā | Ā |
trade |
Ā | Ā |
medium of exchange |
Ā | Ā |
store of value |
Ā | Ā |
money |
3. If Bill performs plumbing upgrades for Alice in exchange for her incorporating his business, then their _________________________ will be satisfied.
Ā | Ā |
balance of trade |
Ā | Ā |
double coincidence of wants |
Ā | Ā |
convenience of exchange |
Ā | Ā |
division of labour |
4. If loans become far less available, then sectors of the economy that ______________ like business investment, home construction, and car manufacturing can be dealt a crushing blow.
Ā | Ā |
depend on borrowed money |
Ā | Ā |
typically generate extraordinary gains |
Ā | Ā |
make loans to financial capital markets |
Ā | Ā |
failed to diversify risk |
5. Stealth bank has deposits of $600 million. It holds reserves of $30 million and government bonds worth $80 million. If the bank sells its loans at the market value of $400 million, what will its total assets equal?
Ā | Ā |
$110 million |
Ā | Ā |
$710 million |
Ā | Ā |
$480 million |
Ā | Ā |
$510 million |
6. Lance paid $175,000 for his house in 2003 and sold it for $325,000 in 2006. What function did the house serve during the time Lance owned it?
Ā | Ā |
medium of exchange |
Ā | Ā |
unit of account |
Ā | Ā |
store of value |
Ā | Ā |
unit of exchange |
7.Which of the following terms is considered to be a narrow definition of the money supply that includes, among other things, currency?
Ā | Ā |
savings |
Ā | Ā |
money |
Ā | Ā |
M2 |
Ā | Ā |
M1 |
8. Which of the following institutions determines the quantity of money in the economy as its most important task?
Ā | Ā |
U.S. Department of the Treasury |
Ā | Ā |
Federal Open Market Committee |
Ā | Ā |
Central Bank |
Ā | Ā |
Federal Reserve Board of Governors |
9. How are the specific interest rates for the lending and borrowing markets determined?
Ā | Ā |
U.S. Treasury Department Board policy |
Ā | Ā |
by the forces of supply and demand |
Ā | Ā |
through open market operations |
Ā | Ā |
by altering the discount rate |
10.When the central bank lowers the reserve requirement on deposits:
Ā | Ā |
the money supply increases and interest rates decrease. |
Ā | Ā |
the money supply and interest rates decrease. |
Ā | Ā |
the money supply and interest rates increase. |
Ā | Ā |
the money supply decreases and interest rates increase. |