1.

Assets with greater liquidity:

a) Also have greater returns
b) Are generally tax-free
c) Help savers smooth spending over time
d) Are avoided by rational people.
2. Which of the following is an example of a barter transaction?
a) An individual pays her electric bill with a check
b) An individual pays her electric bill with currency.
c) An individual provides three light bulbs to her neighbor in exchange for
two gallons of milk.
d) An individual deposits three twenty-dollar bills in her checking account.
3. Patrick places his pocket change into his savings bank on his desk each evening. By
his actions, Patrick indicates that he believes that money is a:
a) medium of exchange.
b) unit of account.
c) store of value.
d) unit of specialization.
4. The Consumer Price Index (CPI) in the previous year was 125, and this year the
CPI was 132. If the average rate of time preference is 3%, what should the nominal
rate of interest equal?
a) 2.6%
b) 3.0%
c) 8.6%
d) 10.0%
5. Deflation refers to
a) a sustained fall in the general level of prices.
b) a reduction in the quantity of money and credit relative to other goods
c) a sustained loss in purchasing power.
d) the losses that result when debtors go bankrupt.
6. The money supply is _____ related to expected deposit outflows, and is _____
related to the market interest rate.
a) negatively; negatively
b) negatively; positively
c) positively; negatively
d) positively; positively
7. Which of the following statement is true about M3?
a) Its total value is smaller than that of M2
b) Apart from those assets also included in M1 it includes no assets that offer
check-writing features.
c) Its total value is more than four times as large as M2.
d) It includes large-denomination time deposits.
8. What is the monthly payment for a 12%, 24-month used car loan if you borrow
$6000?
a) $250.01
b) $262.24
c) $282.44
d) $302.87
9. A two-year discount note is currently priced at $9,325; therefore, it currently yields:
a) 3.56%
b) 3.62%
c) 6.75%
d) 7.24%
10. Interest rates increased continuously during the 1970s. The most likely explanation
is
a) banking failures that reduced the money supply.
b) a rise in the level of income.
c) the repeated bouts of recession and expansion.
d) increasing expected rates of inflation.
11. If, while you are holding a coupon bond, the interest rates on other similar bonds
fall, you know that
a) the coupon payments on your bond will fall.
b) the market price of your bond will rise.
c) the par value of your bond will rise.
d) the market price of your bond will fall.
12. The adverse selection problem in financial markets creates a profit opportunity
because:
a) it opens a gap between the cost of short-term funds and the cost of long-term
funds.
b) savers are willing to pay for information about the quality of potential
borrowers. (không hiểu vì sao lại chọn đáp án này :< )
c) it results in the value of a company's stock being well below the value of the
company's assets.
d) it makes bond-financed projects cheaper than stock-financed projects.
13. The moral hazard problem in financial markets
a) Is difficult if not impossible to solve.
b) Results in inefficient pricing of financial assets.
c) Is a type of information cost that is often surmounted by having the
borrower pledge assets as collateral.
d) All of the above.
14. Money market mutual funds
a) hold portfolios of stocks.
b) hold portfolios of short-term assets.
c) are always load funds.
d) hold only U.S. Treasury securities.
15. Of the following financial intermediaries, which holds the least liquid assets
a) Life insurance companies
b) Property and casualty insurance company
c) Money market mutual funds
d) Commercial banks
16. If you deposit a $50 check in the bank, before the check has cleared, the change in
your bank's balance sheet will be
a) a $50 increase in reserves and a $50 increase in checkable deposits.
b) a $50 increase in cash items in the process of collection and a $50 increase in
reserves.
 c) a $50 increase in cash items in the process of collection and a $50 increase
in checkable deposits.
d) a $50 increase in cash and a $50 increase in checkable deposits.
17. A bank run involves
a) a failure by a bank to get the maximum return on its investments.
b) large numbers of depositors withdrawing their deposits in a short period of
time.
c) Widespead exposure of bank employees to a stomach virus.
d) fraud on the part of a bank’s management.
18. Reserves equal
a) Deposits with the Fed plus vault cash
b) Deposits with the Fed plus holdings of U.S. government securities.
c) Currency in circulation plus vault cash
d) Currency outstanding plus currency in circulation
19. Why do banks avoid holding excess reserves?
a) The Fed levies a 10% penalty on any reserves held above the required level.
b) Savers are often reluctant to place their deposits with banks that hold excess
reserves.
c) The Office of the Comptroller of the Currency monitors excess reserves more
closely than any other bank asset.
d) The Fed pays little interests on reserves (more could be earned from
lending).
20. What is the principal means by which the Central Bank attempts to change the
monetary base?
a) Discount loans
b) Changes in required reserve ratio
c) Moral suasion
d) Open market operations
21. Deposit insurance
a) Encourages banks to engage in riskier lending practices than without it
b) Stops runs on banks completely
c) Encourages banks to hold excess reserves
d) Encourages depositor vigilance about bank safety and soundness.
22. When inflation is higher than expected, it redistributes wealth from
a) Employers to employees under nominal wage contracts.
b) Lenders to borrowers
c) Borrowers to lenders
d) The federal governments to taxpayers.
23. Which of the following are true concerning the distinction between interest rates
and returns?
a) The return can be expressed as difference between the current yields and capital
gains.
b) The rate of return will be greater than the interest rate when the price of the
bond fall between time t and time t+1.
c) The rate of return on a bond will not necessarily equal the interest rate on
that bond.
 d) The return can be expressed as the sum of the discount yield and the rate of
capital gains.
24. You want to buy an ordinary annuity that will pay you $4000 a year for the next 20
years. You expect annual interest rate will be 8% over that time period. The
maximum price you would be willing to pay for the annuity is closet to:
a) $32,000
b) $39,272
c) $40,000
d) $80,000
25. With continuous compounding at 10% for 30 years, the future value of an initial
investment of $2000 is closet to:
a) $34,989
b) $40,171
c) $164,500
d) %328,282
26. In 3 years you are to receive $5000. If the interest rate were to suddenly increase,
the present value of that future amount to you would:
a) Fall
b) Rise
c) Remain unchanged
d) Cannot be determined
27. Which of the following is not the goal of financial regulation?
a) Ensuring the soundness of Federal system.
b) Ensuring that investors never suffer losses
c) Reducing moral hazzard
d) Reducing adverse selection
28. Which of the following are investment intermediaries?
a) Life insurance companies
b) Pension funds
c) Mutual funds
d) State and local government retire funds
29. Asset transformation can be described as
a) Borrowing long and lending short
b) Borrowing and lending only for the short time
c) Borrowing and lending for long term
d) Borrowing short and lending long.
30. The primary liabilities of depositary institutions are:
a) Loans
b) Deposits
c) Shares
d) Bonds
31. Which of the following statement if false?
a) A bank’s assets are its uses of funds
b) Bank capital is recorded as an asset on the bank balance sheet
c) A bank issues liabilities to acquire funds
d) The bank’s assets provide the bank with income.
32. Banks earn profit by selling ___ with attractive combinantions of liquidity, risk,
and return, and using the proceeds to buy ___ with a different set of characteristics.
a) Loans; deposits
b) Securities; deposits
c) Liabilities; assets
d) Assets; liabilities
33. When $1 million is deposited at a bank, the required reserve ratio is 20 percent, and
the bank chooses not to hold any excess reserves but makes loans instead, then, in
the bank’s final balance sheet:
a) The assets at the bank increase by $800,000
b) The liabilities of the bank increase by $800,000
c) Reserves increase by $160,000
d) The liabilities of the bank increase by $1,000,000
34. The primary purpose of deposit insurance is to:
a) Prevent banking panics
b) Improve the flow of information to investors
c) Protect bank shareholders against losses
d) Protect bank employees from unemployment
35. If a bank has excess reserves of $15,000 and demand deposit liabilities of $80,000,
and if the reserve requirement is 20 percent, then the bank has total reserves of
a) $11,000
b) $21,000
c) $31,000
d) $41,000
36. The open market operations refer to the sale and purchase of the Central bank of
a) Foreign exchange
b) Gold
c) Company securities
d) Government securities
37. The formula for M1 multiplier is
a) m = (1+c)/(r+e+c)
b) m = 1/(r+e+c)
c) m = [1/(r+e+c)] x MB
38. Which set of goals can, at times, conflict in the short run?
a) High employment and economic growth
b) Interest rate stability and financial market stability
c) Exchange rate stability and financial market stability
d) High employment and price level stability
39. The political business cycle refers to the phenomenon that just before elections,
politicians enact ___ policies. After the elections, the bad effects of these policies
(for example, ___) have to be counteracted with ___ policies.
a) Expansionary; higher unemployment; contractionary
b) Contractionary; higher unemployment; expansionary
c) Expansionary; higher inflation rate; contractionary
d) Contractionary; higher inflation rate; expansionary
40. The four players in the money supply process include
a) Banks, depositors, central banks, and borrowers.
 b) Banks; depositors, borrowers and the Treasury
c) Banks, depostiors, the central bank, and the Treasury
d) Banks, borrowers, the central bank, and the Treasury
41. The monetary base minus reserves equals
a) Discount loans
b) The borrowed base
c) The nonborrowed base
d) Currency in circulation
42. When the Federal Reserve calls in a discount loan from a bank, the monetary base
___ and reserves ___
a) Remains unchanged; decrease
b) Decreases; decrease
c) Remains unchanged; increase
d) Increases; remain unchanged
43. There are two ways in which the Fed can provide additional reserves to the banking
system: it can ___ government bonds or it can ___ discount loans to commerical
banks
a) Sell; extend
b) Sell; call in
c) Purchase; extend
d) Purchase; call in
44. When the Fed supplies the banking system with an extra dollar of reserves, deposits
increase by more than one dollar a process called
a) Extra deposit creation
b) Multiple deposit creation
c) Expansionary deposit creation
d) Stimulative deposit creation
45. If the required reserve ratio is equal to 10 percent, a single bank can increase its
loans up to a maxium amount equal to
a) Its excess reserves (vì đề nói a single bank chứ ko phải banking system)
b) 10 times its excesss reserves
c) 10 percent of its excess reserves
d) Its total reserves
46. The most common definition that central bankers ue for price stability is
a) Low stable deflation
b) An inflation rate of zero percent
c) High and stable inflation
d) Low and stable inflation
47. Economists believe that countries recently suffering hyperinflation have
experienced
a) Reduced growth
b) Incerased growth
c) Reduded prices
d) Lower interest rates
48. A central feature of monetray policy strategies in all countries is the use of a
nominal variable that monetary policymakers use as an intermediate target to
 achieve an ulimate goal such as price stability. Such variable is called a nominal
anchor. A nominal anchor promotes price stability by
a) Outlawing inflation
b) Stabilizing interest rates
c) Keeping inflation expectations low
d) Keeping economic growth low
49. If the central bank pursues a monetary policy that is more expansionary than what
firms and people expect, then the central bank must be trying to
a) Constrain output in the short run
b) Boost output in the short run
c) Constrain prices
d) Boost prices in the short run
50. Even if he Fed could completely control the money supply, monetary policy would
have critics because
a) The Fed’s goals do not include high employment, making labor unions a critic
of the Fed
b) The Fed’s primary goal is exchange rate stability, causing it to ignore domestic
economic conditions.
c) The Fed is asked to achieve many goals, some of which are incompatible
with others.
d) It is required to keep Treasury security prices high.