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Banking
Q:
The leading federal regulatory body for financial markets in the United States is the
A) Federal Bureau of Investigation.
B) Securities and Exchange Commission.
C) Federal Financial Market Bureau.
D) Investors Protection Agency.
Q:
Financial intermediaries
A) include banks and other depository institutions.
B) include the New York and American Stock exchanges.
C) directly issue claims on individual borrowers to savers.
D) are owned and operated by the federal government.
Q:
Consider a $2 billion open market purchase of U.S. Treasury securities by the Federal Reserve. The Banking System's balance sheet will specifically show: A. only an increase in liabilities of $2 billion.B. only a decrease in assets of $2 billion.C. no net change in assets or liabilities, only a change in the composition of assets with securities decreasing and reserves increasing by $2 billion respectively.D. no net change in assets or liabilities, only a change in the composition of assets with securities increasing and reserves decreasing by $2 billion respectively.
Q:
The main role of financial intermediaries is to
A) provide funds to the federal government to cover the budget deficit.
B) borrow funds from savers and lend them to borrowers.
C) provide advice to consumers on how they should handle their finances.
D) help ensure that there is enough money in circulation.
Q:
Consider a $2 billion open market purchase of U.S. Treasury securities by the Federal Reserve. The Fed's balance sheet will show: A. only an increase in the asset of securities of $2 billion.B. only show an increase in the liability of reserves of $2 billion.C. no change in the size of the balance sheet, just the composition of assets will change from cash to securities.D. an increase in the asset category of securities and the liability category of reserves by $2 billion.
Q:
Which of the following is NOT a financial intermediary?
A) mutual fund
B) bank
C) stock exchange
D) insurance company
Q:
A central bank's sale of securities from its portfolio will: A. decrease the size of its balance sheet.B. have no impact at all on the balance sheet.C. only change the composition of its liabilities.D. only change the composition of its assets.
Q:
When a business purchases a $50,000 computer system by writing a check, the business's balance sheet will: A. only show an increase in liabilities of $50,000.B. show an increase in assets and liabilities for $50,000.C. not reflect any increase in assets or liabilities, only a change in the composition of assets.D. only show an increase in assets of $50,000.
Q:
Which of the following is NOT a financial intermediary?
A) NASDAQ
B) Allstate Insurance Company
C) Bank of America
D) Vanguard Total Stock Market Index Fund
Q:
When a business purchases a $25,000 computer system by writing a check, the business's balance sheet will: A. show an increase in assets and liabilities of $25,000.B. only show an increase in assets of $25,000.C. only show an increase in liabilities of $25,000.D. still show the same total amount of assets as before the purchase.
Q:
A central bank's purchase of securities made by writing checks on itself will: A. decrease the size of its balance sheet.B. have no impact at all on the balance sheet.C. increase the size of their balance sheet.D. only change the composition of its assets.
Q:
Funds flow from lenders to borrowers
A) indirectly through financial markets.
B) directly through financial intermediaries.
C) indirectly through financial intermediaries.
D) primarily through government agencies.
Q:
When the Federal Reserve purchases a U.S. Treasury bond for $1 million by writing a check, when the check returns, the Fed's balance sheet will show: A. an increase in assets and a decrease in liabilities of $1 million.B. only an increase in assets of $1 million.C. only an increase in liabilities of $1 million.D. an increase in assets and liabilities of $1 million.
Q:
Which president said, "Prosperity is just around the corner"?
A) Herbert Hoover near the start of the Great Depression
B) Franklin Delano Roosevelt near the start of the Great Depression
C) George W. Bush near the start of the Great Recession
D) Barack Obama near the start of the Great Recession
Q:
One trait a central bank has over other businesses including banks is that it: A. receives all of its funding from the government.B. can control the size of its balance sheet.C. doesn't have stockholders.D. doesn't have a board of directors.
Q:
If you purchase a Treasury bond, the Treasury bond is
A) an asset to you as well as an asset to the U.S. government.
B) an asset to you, but a liability to the U.S. government.
C) a liability to you, but an asset to the U.S. government.
D) a liability to you as well as a liability to the U.S. government.
Q:
In dollar amounts: A. the monetary base is larger than M2 and M1 is less than M2.B. M1 is smaller than the monetary base and M2 is larger than both.C. the monetary base is larger than M1 and M2.D. the monetary base is smaller than M1 and M2 is larger than M1.
Q:
Financial markets
A) channel funds indirectly between borrowers and lenders.
B) channel funds directly from lenders to borrowers.
C) act as go-betweens by holding a portfolio of assets and issuing claims based on that portfolio to savers.
D) generally provide lenders with lower returns than do financial intermediaries.
Q:
The monetary base is also known as: A. M1.B. M2.C. high-powered money.D. free reserves.
Q:
If a bank grants you a mortgage, the mortgage is
A) an asset to you as well as an asset to the bank.
B) an asset to you, but a liability to the bank.
C) a liability to you, but an asset to the bank.
D) a liability to you as well as a liability to the bank.
Q:
The monetary base is the sum of: A. reserves and currency in the hands of the public.B. reserves and M2.C. currency in the hands of the public and M2.D. currency in the hands of the public M1.
Q:
The monetary base is the sum of: A. reserves and M2.B. M1 and reserves.C. currency in the hands of the public, reserves and M1.D. currency in the hands of the public and reserves in the banking system.
Q:
The experience of the Marcos Presidency in the Philippines in 1986 showed: A. the importance of keeping the central bank independent from political pressure.B. published central bank balance sheets do not always reflect reality.C. transparency is critical if people are going to trust a central bank.D. all of the answers given are correct.
Q:
Most responsible central banks publish their balance sheet: A. at least once a year.B. quarterly.C. at least monthly.D. semi-annually.
Q:
Vault cash is not included in the central bank's liability category of currency because: A. only non-bank currency is in the liability category of currency.B. vault cash really is only electronic funds.C. vault cash is in the asset category of reserves.D. it is the liability of the U.S. Treasury.
Q:
Monetary policy operations for central banks are run through changes in the liability category of: A. government's accounts.B. currency.C. reserves.D. gold.
Q:
Vault cash is: A. equal to the total amount of reserves and is an asset of the central bank.B. not reserves but is a liability of the central bank.C. a part of reserves and an asset of commercial banks.D. not reserves but is an asset of central banks.
Q:
Reserves are: A. assets of the central bank and liabilities of the commercial bank.B. assets of the commercial banks and liabilities of the central bank.C. liabilities of the commercial and central banks.D. assets and liabilities for the central bank.
Q:
Which of the following statements is most correct? A. Reserves are assets of the central bank and liabilities of the U.S. Treasury.B. Reserves are assets of the central bank and liabilities of the commercial banks.C. Reserves are liabilities of the commercial banks and assets of the U.S. Treasury.D. Reserves are assets of the commercial banks and liabilities of the central bank.
Q:
As a portion of total assets measured in billions of dollars, the least important asset on the Fed's balance sheet is: A. gold.B. securities.C. foreign exchange reserves.D. loans.
Q:
Gold is: A. the most important asset on the Fed's balance sheet.B. extremely important as an asset for the Fed.C. a small portion of the Fed's assets.D. very important for monetary policy in the U.S.
Q:
As a portion of total assets measured in billions of dollars, the most important asset on the Fed's balance sheet is: A. gold.B. securities.C. foreign exchange reserves.D. loans.
Q:
Liabilities of commercial banks show up on the Fed's balance sheet as part of its: A. liabilities.B. securities.C. foreign exchange reserves.D. loans.
Q:
Bonds issued by the U.S. Treasury would: A. not be held by the Fed.B. be held by the Fed as part of its securities.C. be held by the Fed as part of its foreign exchange reserves.D. be held by the Fed as part of its loans.
Q:
Bonds issued by a foreign government in its own currency would: A. not be held by the Fed.B. be held by the Fed as part of its securities.C. be held by the Fed as part of its foreign exchange reserves.D. be held by the Fed as part of its loans.
Q:
In the U.S., loans made by Federal Reserve to banks fall in the categories of: A. discount loans.B. reserves.C. discount loans and reserves.D. discount loans and foreign exchange reserves.
Q:
Which of the following statements is most correct? A. Discount loans are initiated by the Federal Reserve.B. Discount loans are made when banks need relatively small amounts of cash for the long term.C. Discount loans are made when banks need relatively large amounts of cash for the long term.D. Discount loans are made when banks need relatively small amounts of cash for the short term.
Q:
The quantity of securities held by the Federal Reserve is controlled through: A. the U.S. Treasury.B. the Fed's annual budget.C. open market operations.D. the purchases made by the regional Reserve banks.
Q:
A central bank holds foreign exchange reserves for: A. diversification purposes.B. foreign exchange interventions.C. safekeeping.D. diversification and safekeeping.
Q:
If the Federal Reserve is to be independent, then the quantity of securities it purchases is determined by: A. the Federal Reserve itself.B. Congress.C. the amount the public does not want to purchase at the going price.D. the Treasury.
Q:
For the Federal Reserve's balance sheet, the asset listed Securities would include: A. private and public debt.B. mainly U.S. Treasury and municipal bonds.C. bonds issued by commercial banks.D. U.S. Treasury securities.
Q:
A liability of the central bank in functioning as the bankers' bank is: A. accounts of commercial banks.B. securities.C. loans.D. currency.
Q:
The main asset held by a central bank in its role as the Banker's Bank is: A. foreign exchange reserves.B. currency.C. loans.D. securities.
Q:
A central bank's balance sheet would categorize each of the following as liabilities, except: A. currency.B. loans.C. the government's account.D. accounts of the commercial banks.
Q:
A central bank's balance sheet will categorize the following as liabilities: A. currency.B. loans.C. securities.D. foreign exchange reserves.
Q:
Each of the following items would appear as assets on the central bank's balance sheet, except: A. loans.B. securities.C. currency.D. foreign exchange reserves.
Q:
What are the three branches that make up the Federal Reserve System?
Q:
The collapse of the Thai currency, the baht, was partially due to: A. inaction by the Federal Reserve.B. the European Central Bank.C. information provided by the central bank of Thailand.D. information not provided by the central bank of Thailand.
Q:
Why did it take almost 150 years before the U.S. had a permanent central bank?
Q:
Based on the membership of the Eurosystem in 2014, the median country is likely to be: A. very large.B. fairly small.C. Italy.D. growing more rapidly than the others.
Q:
The make-up of the Governing Council of the European Central Bank and the methods used to calculate price stability for the monetary system can potentially result in: A. small countries having undue influence on the decisions of the Council.B. monetary policy that is well suited for some countries but ill-suited for others.C. a policy for the median country rather than a policy well suited for any country.D. all of the results listed are possible.
Q:
The method used by the ECB to measure inflation for meeting its objectives: A. gives equal weight to each member country.B. gives greater relative weight to smaller countries.C. can result in a contractionary monetary policy being used in a country where inflation is already very low.D. is based on wholesale rather than retail prices.
Q:
The ECB's Governing Council has price stability as a primary objective. It has defined price stability as: A. a zero rate of inflation.B. an inflation rate less than 5 percent.C. an inflation rate below, but close to, 2 percent over the medium term.D. an inflation rate in the three to five percent range.
Q:
The European Central Bank has ensured independence by: A. explicitly forbidding the Governing Council from taking instructions from any government.B. making sure the ECB's financial interests supports member countries' political organizations.C. by appointing the Executive board members for life.D. not taking votes on policy matters.
Q:
The European Central Bank has ensured independence by appointing Executive Board members for: A. life.B. eight-year non-renewable terms.C. fourteen-year terms.D. twenty-year terms.
Q:
As of 2014, the euro had become the currency for: A. 7 countries.B. 12 countries.C. 18 countries.D. 25 countries.
Q:
France, Germany, and Italy are: A. all members of the European Union and the Euro system.B. all members of the Euro system but not the European Union.C. all members of the European Union but not the Euro system.D. not members of either the Euro system or the European Union; they have their own economic union.
Q:
In the meetings of the Governing Council of the European Central Bank, formal votes are: A. taken and published immediately.B. not taken, since formal voting could get in the way of good policy.C. taken but not published for five years.D. taken and released two years after the meetings.
Q:
Great Britain is: A. a member of the European Union but not a member of the Euro system.B. a member of the Euro system but not a member of the European Union.C. not a member of the Euro system or the European Union.D. a member of both the European Union and the Euro system.
Q:
Member countries of the Eurosystem agree to: A. pursue independent domestic monetary policies based on what is best for their own country, but not all member countries have adopted the euro as their currency.B. share a common monetary policy and fiscal policy.C. use the euro as their currency, but each country still pursues an independent monetary policy.D. share a common monetary policy and use the euro as their currency.
Q:
The Treaty of Maastricht was signed in: A. 1999.B. 2001.C. 1992.D. 1997.
Q:
Executive board members of the European System of Central Banks are appointed by: A. a committee made up of bank presidents in the member countries.B. a committee made up of heads of state of member countries.C. the finance ministers of member countries.D. the directors of the National Central Banks.
Q:
Comparing the European and the U.S. central bank systems, the Governing Council of the European system resembles: A. the Board of Governors.B. the Presidents of the Regional Federal Reserve Banks.C. the FOMC.D. the Chairman of the Board of Governors of the Fed.
Q:
Comparing the European and the U.S. central bank systems, the Executive Board of the European system resembles: A. the FOMC.B. the Board of Governors.C. the Presidents of the regional Federal Reserve Banks.D. the Chairman of the Board of Governors of the Fed.
Q:
Comparing the European and the U.S. central bank systems, the National Central Banks that make up part of the European System of Central Banks resembles: A. the U.S. Treasury.B. the Board of Governors.C. the FOMC.D. the regional Federal Reserve Banks.
Q:
By 2014, the euro had become the currency of: A. every country in Europe.B. eighteen countries in Europe.C. twenty-five countries in Europe.D. all European countries except Great Britain.
Q:
The Agreement to form a European monetary union was formalized in the Treaty of: A. Maastricht.B. Paris.C. Amsterdam.D. Milan.
Q:
Which statement best completes the following sentence; "The U.S. dollar is to the fifty states as the euro is to…"? A. The European Central BankB. The states of the European Monetary UnionC. The National Central BanksD. The European System of Central Banks
Q:
The objectives set for the Fed by Congress are: A. very specific; this adds to the Fed's accountability.B. by design, quite vague, allowing the Fed to really set its own goals.C. specific regarding inflation, but vague on all other goals.D. specific on the growth rate for the economy, but vague on all other objectives.
Q:
One valuable lesson investors should learn from the stock market behavior during the late 1990s and early 2000s is that the Fed: A. can control the stock market.B. can reduce the idiosyncratic risk of investing but not the systematic risk.C. can eliminate the risk from investing.D. cannot prevent a stock market decline.
Q:
The likelihood that the Fed will implement a change that will seriously harm the economy is minimized by the fact that: A. only bright, well-intentioned people are appointed to key roles at the Fed.B. Congress can remove the Chairman of the Fed at any time.C. the Board of Governors ultimately must answer to the U.S. President since he can replace them.D. there is decision making by committee.
Q:
Which of the following statements best completes the following: "The Fed's independence can only be revoked by…"? A. The U.S. PresidentB. The Secretary of the TreasuryC. CongressD. Changing the U.S. Constitution
Q:
During World War II, the Fed accommodated the war effort by: A. significantly curtailing credit in the economy.B. keeping bond prices high and interest rates low.C. selling any Treasury securities the public did not purchase.D. curtailing credit and keeping bond prices high.
Q:
A large step toward independence occurred for the Fed in 1935 when the: A. Fed went from two to twelve districts.B. Secretary of the Treasury and the Comptroller of the Currency were removed from the Board of Governors.C. Chairman of the Board of Governors was no longer a cabinet position.D. Fed was given the ability to control its own budget.
Q:
The interest rate changes that result from the FOMC meetings: A. can be altered only by Congress.B. can be altered by the Secretary of the Treasury during an economic crisis.C. cannot be changed by anyone other than the FOMC.D. can only be altered during a time of crisis by the U.S. President.
Q:
Most of the Fed's income is: A. paid to member banks in the form of a dividend.B. sent to the FDIC to shore up the depositor insurance fund.C. returned to the U.S. Treasury.D. used to build the Fed's portfolio of securities.
Q:
The Fed's revenue comes: A. from Congressional appropriation.B. from the Department of Commerce.C. from internally generated funds from interest on securities it holds and fees charged to banks for payments system services.D. solely from taxes placed on member banks.
Q:
Criteria used to judge a central bank's independence include each of the following, except: A. budgetary independence.B. long terms for members.C. cabinet or ministry level of authority.D. irreversible decisions.
Q:
Once the FOMC announces the result of its meeting the attendees: A. it must brief the financial news immediately after and answer questions posed to them.B. observe a twenty-four hour blackout period following the meeting during which they do not speak publicly about the economic outlook or current monetary policy.C. observe a blackout period that lasts for a week following the meeting during which they do not speak publicly about the economic outlook or current monetary policy.D. never discuss the policy issues addressed in the meetings.
Q:
Once the FOMC meetings adjourn, the public is made aware of the FOMC's decision: A. immediately after the meeting.B. forty-eight hours after the meeting adjourns.C. within five business days.D. twenty-four hours after the meeting adjourns.