Keiser Eco4223 Quiz 1 (Score 100%)

QuestionQuestion 1The financial system is primarily a means by whicha. funds are transferred from savers to borrowers.b. money is put into circulation.c. the government puts into operation its plans for the economy.d. business firms distribute their goods.Question 2Economists define risk asa. the difference between the domestic interest rates and foreign interest rates.b. the chance that the value of financial assets will change from what you expect.c. the ease with which an asset can be exchanged for other assets or for goods and services.d. the difference between the return on common stock and the return on corporate bonds.Question 3Economists define liquidity asa. the difference between the return on the asset and the return on a long-term U.S. Treasury bond.b. the fraction the asset makes up of an investor’s portfolio.c. the ease with which an asset can be exchanged for money.d. the difference between the total demand for an asset and the total supply of the asset.Question 4The objectives of the Federal Reserve include:a. Stable prices (low inflation)b. Low unemployment ratesc. Adequate rates of economic growthd. All of the aboveQuestion 5A debt instrument representsa. an ownership claim by the purchaser on the issuer.b. a promise by a borrower to repay principal plus interest to a lender.c. an attempt by a borrower in default to restore his or her credit.d. a nontaxable asset, owned primarily by large corporations.Question 6If foreign interest rates risea. the demand for domestic currency rises, causing it to appreciate.b. the demand for domestic currency falls, causing it to depreciate.c. the demand for domestic currency rises, causing it to depreciate.d. the demand for domestic currency falls, causing it to appreciate.Question 7If a commercial bank lends out all of its’ available funds, it risks becoming:a. Insolvent.b. Illiquid.c. Unprofitabled. Taken over by the FDICQuestion 8Congress created the Federal Reserve Systema. to serve as a lender of last resort.b. to process the receipt of taxes received by the Internal Revenue Service.c. to regulate the value of the U.S. dollar against foreign currencies.d. to provide a source of mortgage loans to the residential housing market.Question 9Bond prices and interests ratesa. Vary directlyb. Vary inverselyc. Are unrelatedd. Have an unpredictable relationshipQuestion 10The most frequently used tool of monetary policy is:a. the Discount Rateb. The Federal Funds Ratec. Open Market Operationsd. The Required Reserve RatioQuestion 11If the economy is in recession, then the Federal Reserve would stimulate the national economy by:a. Selling bonds which increases interest ratesb. Increasing the Discount Ratec. Buying bonds which decreases interest ratesd. Increasing the Required Reserve RatioQuestion 12The federal government agency that insures customer deposits at commercial banks isa. The OCCb. The Federal Reservec. The FDICd. The OTSQuestion 13In addition to the Board of Governors, the Federal Reserve System has how many Regional Banks?a. 4b. 8c. 10d. 12Question 14The maximum amount that a commercial can lend is equal to:a. Total Depositsb. Total Reservesc. Total Excess Reservesd. None of the aboveQuestion 15The major function(s) of money is/are:a. Medium of Exchangeb. Unit of Accountc. Store of Valued. All of these are major functions of moneyQuestion 16Which of the following is NOT included in aggregate demand?a. Demand for goods and services for consumptionb. Investment in business plant and equipmentc. Net exportsd. Investment in Treasury bondsQuestion 17A shift of the AD curvea. to the right is considered expansionary, and a shift to the left is considered contractionary.b. to the left is considered expansionary, and a shift to the right is considered contractionary.c. to the right or to the left is considered contractionary.d. to the right or to the left is considered expansionary.Question 18The aggregate supply curve represents levels of output that producers are willing to sell ata. each level of the real interest rate.b. each level of real GDP.c. each price level.d. each inflation rate.Question 19A central bank may be reluctant to see its currency appreciate becausea. rising prices of imports will contribute to inflation.b. falling prices of exports will contribute to inflation.c. the country’s goods may become uncompetitive in world markets.d. the country’s monetary base will increase.Question 20Which of the following accurately describes the Fed’s inflation target?a. It is implicit rather than explicit.b. It seeks to maintain an average inflation rate of 2% per year.c. It seeks to keep inflation at 2% all the time.d. Its goal is to achieve zero inflation.

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