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The four players in the money supply process include
Choose one answer.
a. banks, depositors, borrowers, and the U.S. Treasury.
b. banks, borrowers, the central bank, and the U.S. Treasury.
c. banks, depositors, the central bank, and borrowers.
d. banks, depositors, the central bank, and the U.S. Treasury. Correct
Marks for this submission: 1/1.
Question 2
Marks: 1
If a bank has excess reserves of $10,000 and demand deposit liabilities of $80,000, and if the reserve requirement is 20 percent, then the bank has actual reserves of Choose one answer.
a. $16,000.
b. $20,000.
c. $36,000.
d. $26,000.
Correct
Marks for this submission: 1/1.
Question 3
Marks: 1
Because of the adverse selection problem,
Choose one answer.
a. lenders are reluctant to make loans that are not secured by collateral.
b. lenders will write debt contracts that restrict certain activities of borrowers.
c. good credit risks are more likely to seek loans causing lenders to make a disproportionate amount of loans to good credit risks.
d. lenders may refuse loans to individuals with high net worth, because of their greater proclivity to "skip town." Correct
Marks for this submission: 1/1.
Question 4
Marks: 1
The effect of an open market purchase on reserves differs depending on how the seller of the bonds keeps the proceeds. If the proceeds are kept in ________, the open market purchase has no effect on reserves; if the proceeds are kept as ________, reserves increase by the amount of the open market purchase. Choose one answer.

a. currency; currency
b. deposits; currency
c. currency; deposits
d. deposits; deposits
Correct
Marks for this submission: 1/1.
Question 5
Marks: 1
When the Federal Reserve purchases a government bond from a bank, reserves in the banking system ________ and the monetary base ________, everything else held constant. Choose one answer.
a. decrease; decreases
b. decrease; increases
c. increase; decreases
d. increase; increases
Correct
Marks for this submission: 1/1.
Question 6
Marks: 1
A lesson of the Enron collapse is that government regulation Choose one answer.
a. increases the problem of asymmetric information.
b. should be reduced.
c. always fails.
d. can reduce but not eliminate asymmetric information.
Correct
Marks for this submission: 1/1.
Question 7
Marks: 1
The concept of adverse selection helps to explain all of the following except Choose one answer.
a. why the financial system is so heavily regulated.
b. why indirect finance is more important than direct finance as a source of business finance.
c. why firms are more likely to obtain funds from banks and other financial intermediaries, rather than from the securities markets.
d. why direct finance is more important than indirect finance as a source of business finance. Correct
Marks for this submission: 1/1.
Question 8
Marks: 1
If the anatomy of a financial crisis is thought of as a sequence of events, which of the following events would be least likely to be the initiating cause of the financial crisis? Choose one answer.

a. Increase in uncertainty
b. Unanticipated decline in price level
c. Stock market decline
d. Increase in interest rates
Correct
Marks for this submission: 1/1.
Question 9
Marks: 1
Regulators attempt to reduce the riskiness of banks' asset portfolios by Choose one answer.
a. encouraging banks to hold risky assets such as common stocks.
b. establishing a minimum interest rate floor that banks can earn on certain assets.
c. requiring collateral for all loans.
d. limiting the amount of loans in particular categories or to individual borrowers. Correct
Marks for this submission: 1/1.
Question 10
Marks: 1
Financial innovation has caused
Choose one answer.
a. banks to suffer declines in their income advantages in acquiring funds, although it has not caused a decline in cost...
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