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Question
Politicians in a democratic society may be shortsighted because of their desire to win reelection; thus, the political process can
A) impart an inflationary bias to monetary policy.
B) impart a deflationary bias to monetary policy.
C) generate a political business cycle in which, just before an election, expansionary policies are pursued to lower unemployment and interest rates.
D) cause both A and C of the above to occur.
Answer
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Related questions
Q:
The most common type of mortgage-backed security is
A) the mortgage pass-through, a security that has the borrower's mortgage payments pass through the trustee before being disbursed to the investors.
B) collateralized mortgage obligations, a security which reduces prepayment risk.
C) the participation certificate, a security which passes the borrower's mortgage payments equally among all the owners of the certificates.
D) the securitized mortgage, a security which increases the liquidity of otherwise illiquid mortgages.
Q:
Mortgage-backed securities
A) have been growing in popularity in recent years as institutional investors look for attractive investment opportunities.
B) are securities collateralized by a pool of mortgages.
C) are securities collateralized by both insured and uninsured mortgages.
D) are all of the above.
E) are only A and B of the above.
Q:
REMICs are most like
A) Freddie Mac pass-through securities.
B) Ginnie Mae pass-through securities.
C) participation certificates.
D) collateralized mortgage obligations.
Q:
The Federal National Mortgage Association (Fannie Mae)
A) was set up to buy mortgages from thrifts so that these institutions could make more loans.
B) funds purchases of mortgages by selling bonds to the public.
C) provides insurance for certain mortgage contracts.
D) does all of the above.
E) does only A and B of the above.
Q:
A loan-servicing agent will
A) package the loan for an investor.
B) hold the loan in their investment portfolio.
C) collect payments from the borrower.
D) do both A and C of the above.
E) do both B and C of the above.
Q:
Second mortgages serve the following purposes:
A) they give borrowers a way to use the equity they have in their homes as security for another loan.
B) they allow borrowers to get a tax deduction on loans secured by their primary residence or vacation home.
C) they allow borrowers to convert their conventional mortgages into GEMs.
D) all of the above.
E) only A and B of the above.
Q:
Growing-equity mortgages (GEMs)
A) help the borrower pay off the loan in a shorter time.
B) have such low payments in the first few years that the principal balance increases.
C) offer borrowers payments that are initially lower than the payments on a conventional mortgage.
D) do all of the above.
E) do only A and B of the above.
Q:
During the last years of a balloon mortgage loan, the lender applies
A) most of the monthly payment to the outstanding principal balance.
B) all of the monthly payment to the outstanding principal balance.
C) most of the monthly payment to interest on the loan.
D) all of the monthly payment to interest on the loan.
E) the monthly payment equally to interest on the loan and the outstanding principal balance.
Q:
Which of the following is true of mortgage interest rates?
A) Longer-term mortgages have lower interest rates than shorter-term mortgages.
B) Mortgage rates are lower than Treasury bond rates because of the tax deductibility of mortgage interest rates.
C) In exchange for points, lenders reduce interest rates on mortgage loans.
D) All of the above are true.
E) Only A and B of the above are true.
Q:
Which of the following are important ways in which mortgage markets differ from stock and bond markets?
A) The usual borrowers in capital markets are government entities, whereas the usual borrowers in mortgage markets are small businesses.
B) The usual borrowers in capital markets are government entities and large businesses, whereas the usual borrowers in mortgage markets are small businesses.
C) The usual borrowers in capital markets are government entities and large businesses, whereas the usual borrowers in mortgage markets are small businesses and individuals.
D) The usual borrowers in capital markets are businesses and government entities, whereas the usual borrowers in mortgage markets are individuals.
Q:
A stock's market value will be higher the higher the investor's required rate of return is, all else being equal.
Q:
The Gordon growth model assumes that a stock's dividend grows at a constant rate forever.
Q:
Common stock is the riskiest corporate security, followed by preferred stock and then bonds.
Q:
All stocks pay dividends, as that is the only way an investor can profit from holding stock.
Q:
The subprime financial crisis led to one of the worst bear markets in the last 50 years. Stock prices likely fell due to
A) an increase in required returns on equity investments.
B) a decline in growth prospects for U.S. companies.
C) Both A and B are likely reasons.
D) None of the above are correct.
Q:
A high price earnings ratio (PE) gives what interpretation?
A) The market expects earnings to fall in the future.
B) The market feels the firm's earnings are very high risk and are willing to pay a premium for them.
C) The market expects the earnings to rise in the future.
D) The firm is not paying a dividend.
Q:
Because passbook savings are ________ liquid for the depositor than checking accounts, they earn ________ interest rates.
A) less; higher
B) less; lower
C) more; higher
D) more; lower
Q:
Which of the following statements is false?
A) Checkable deposits are usually the lowest-cost source of bank funds.
B) Checkable deposits are the primary source of bank funds.
C) Checkable deposits are payable on demand.
D) Checkable deposits include NOW accounts.
Q:
Which of the following statements is true?
A) A bank's assets are its sources of funds.
B) A bank's liabilities are its uses of funds.
C) A bank's balance sheet shows that total assets equal total liabilities plus equity capital.
D) All of the above are true.
Q:
A central bank ________ of domestic currency and corresponding ________ of foreign assets in the foreign exchange market leads to an equal ________ in its international reserves and the monetary base.
A) sale; purchase; increase
B) sale; sale; decline
C) purchase; sale; increase
D) purchase; purchase; decline
Q:
A central bank sale of ________ to purchase ________ in the foreign exchange market results in an equal rise in its international reserves and the monetary base.
A) foreign assets; domestic currency
B) foreign assets; foreign currency
C) domestic currency; foreign assets
D) domestic currency; domestic currency
Q:
Explain graphically the speculative attacks that occurred against the British pound in 1992, the Mexican peso in 1994, the Thai baht in 1997, the Brazilian real in 1999, and the Argentine peso in 2002.
Q:
By the end of 2010, China had accumulated more than $2 trillion of international reserves.
Q:
In a fixed exchange rate system, a country whose currency is undervalued will lose international reserves.
Q:
An unsterilized intervention in which domestic currency is sold to purchase foreign assets leads to a gain in international reserves.
Q:
The official reserve transactions balance is referred to as
A) the capital account.
B) the current account.
C) the trade balance.
D) the net change in government international reserves.
Q:
________ is when the domestic currency is backed 100% by a foreign currency and in which the note-issuing authority establishes a fixed exchange rate to this foreign currency and stands ready to exchange domestic currency for the foreign currency at this rate whenever the public requests it.
A) dollarization
B) currency board
C) devaluation
D) revaluation
Q:
The official reserve transactions balance
A) equals the current account balance plus the items in the capital account.
B) tells us the net amount of international reserves that must move between central banks in order to finance international transactions.
C) has an important impact on the money supply.
D) is all of the above.
Q:
A balance of payments ________ is associated with a ________ of international reserves.
A) deficit; loss
B) deficit; gain
C) surplus; loss
D) balance; gain
Q:
Leading up to the foreign exchange crisis of September 1992, the Bank of England wanted to pursue a(n) ________ monetary policy and the German Bundesbank wanted to pursue a(n) ________ monetary policy.
A) expansionary, expansionary
B) expansionary; contractionary
C) contractionary; expansionary
D) contractionary; contractionary