econ practice exam

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3) The additional incentive that the purchaser of a Treasury security requires to buy a long-term security rather than a short-term security is called the A) term premium. B) market premium. C) tax premium. D) risk premium.
A
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7) When the long-term interest rates are smaller than short-term interest rates, this implies that the economy is more likely to enter A) a recession. B) a boom time. C) an expansion. D) a period of increasing output.
A
8) According to the liquidity premium theory, a yield curve that is flat means that A) the yield curve has nothing to do with expectations of bond purchasers. B) bond purchasers expect short-term interest rates to rise in the future. C) bond purchasers expect short-term interest rates to fall in the future. D) bond purchasers expect short-term interest rates to stay the same.
C
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10) Higher the bank's asset-to-capital ratio, A) Higher its ROE is for every dollar return on its assets. B) lower its leverage is. C) less exposed to insolvency it is. D) safer the bank is.
A
12) Which of the following are reported as liabilities on a bank's balance sheet? A) reserves B) consumer loans C) checkable deposits D) deposits with other banksC14) A bank's net worth is synonymous with its: A) assets + bank's liabilities. B) capital. C) required reserves. D) assets.B15) Considering the balance sheet for all commercial banks in the U.S., the largest category of assets is: A) U.S. Government Securities. B) required reserves. C) cash items. D) loans.D16) Considering the balance sheet for all commercial banks in the U.S., the largest category of liabilities is: A) mortgage loans B) borrowings from non-banks in the U.S. C) deposits D) borrowing from other banks in the U.S.C17) The share of checkable deposits in total bank liabilities has A) remained virtually unchanged since 1960. B) expanded dramatically over time. C) shrunk over time. D) expanded moderately over time.C18) When Jane Brown writes a $100 check to her nephew and he deposits the check at his bank, Ms. Brown's bank ________ assets of $100 and ________ liabilities of $100. A) gains; loses B) loses; gains C) gains; gains D) loses; losesD19) The Federal Deposit Insurance Corporation (FDIC) was created: A) prior to the stock market crash of 1929. B) in 1927 as a part of the McFadden Act. C) in 1933 as a part of the Glass-Steagall Act. D) when the Federal Reserve was created in 1914.C20) As a result of the global financial crisis several of the large, free-standing investment banking firms chose to become bank holding companies. This means that they will now be regulated by A) the Treasury. B) the state banking authorities. C) the Federal Reserve. D) the FDIC.C21) A major disruption in financial markets characterized by sharp declines in asset prices and firm failures is called a A) free-rider problem. B) financial crisis. C) fiscal imbalance. D) "lemons" problem.B22) The Glass-Steagall Act of 1933: A) eliminated the FDIC. B) required all state banks to get federal charters. C) required federally chartered banks to meet the branching restrictions of the states. D) required commercial banks to sell off their investment banking operations.D23) The Gramm-Leach-Bliley Act: A) reinforced the Glass-Steagall Act's limitation on commercial banks' availability to merge with insurance or securities firms by increasing the penalties for doing so. B) repealed the Riegle-Neal Interstate Banking and Branching Efficiency Act. C) repealed the Glass-Steagall Act's prohibition of mergers between commercial banks and insurance or securities firms. D) repealed the McFadden Act's restriction on bank branching.C24) Which of the following is NOT one of the provisions of Dodd-Frank Act of 2010? A) Extends Fed's regulatory powers to shadow banks. B) Requiring SIFIs to submit approved living wills. C) Limitations on Fed's emergency lending authority. D) Restrictions on certain trading activities by large banks.A25) Banks face liquidity risk because A) governments tend to run high budget deficits. B) they are unable to borrow from the Federal Reserve. C) households and businesses may seek to borrow a large amount of funds in a short period of time. D) they can have difficulty meeting their depositor's demands to withdraw money.D26) Which of the following is NOT a form of a short-term liability in the shadow banking system? A) bank deposits B) repurchase agreements C) commercial paper D) money market mutual fund sharesA27) As a result of the 2007-2009 financial crisis, which of the following Big Five investment banks had to legally re-organize itself in order to accept bailout funds? A) Merrill Lynch. B) Bear Stearns C) Lehman Brothers D) Morgan StanleyD28) The government's too-big-to-fail policy applies to: A) banks that have branches in more than two states. B) certain highly populated states where a bank run impacts a large percent of the total population. C) large corporate payroll accounts held by some banks where many people would lose their income. D) large banks whose failure would start a widespread panic in the financial system.D29) Under the purchase-and-assumption method of dealing with a failed bank, the FDIC: A) finds another bank to take over the insolvent bank. B) sells off the profitable loans of the failed bank in an open auction. C) takes over the day to day management of the bank. D) sells the failed bank to the Federal Reserve.A30) The specific goals of central banks include all of the following except: A) low and stable inflation. B) high and stable real growth. C) high stock prices. D) a stable exchange rate.C31) The three branches of the Federal Reserve System include each of the following, except: A) the Federal Deposit Insurance Corporation. B) the Board of Governors. C) the twelve regional Federal Reserve Banks. D) the Federal Open Market Committee.A32) The Federal Reserve Bank of New York is unique from other Reserve banks because it: A) is where the Federal Reserve System's portfolio is managed. B) is the oldest and therefore the largest. C) is the only regional Bank located in a financial center. D) is the only regional Bank that serves just one state.A33) The largest Federal Reserve District geographically is serviced by: A) the Reserve Bank in Chicago. B) the Reserve Bank in New York. C) the districts are divided fairly equally. D) the Reserve Bank in San Francisco.D34) The Governors of the Federal Reserve System serve terms of: A) fourteen years. B) seven years. C) four years, the same as the U.S. President, and the terms are not renewable. D) four years that can be renewed.A35) The number of voting members on the Federal Open Market Committee is: A) 12. B) 8. C) 7. D) 19.A36) Which of the following is (are) not a permanent voting member(s) on the fome? A) The chair of the Board of Governors B) The President of the Federal Reserve Bank of New York C) The Secretary of the Treasury D) The seven Governors of the FedC37) Which of the books used at the FOMC meetings contains information about business conditions in twelve districts collected by the Federal Reserve Banks? A) Both the Beigebook and Bluebook B) The Beigebook C) The Bluebook D) The TealbookB38) All of the following help make the Fed independent of the political process EXCEPT A) Board members receive a long, nonrenewable appointment. B) financial independence. C) chair of Fed receives a lifetime appointment. D) Board members' terms expire at different times, reducing the possible number of appointees by any one president.C39) The European Central Bank is responsible for the monetary policy of A) all countries on the continent of Europe. B) the 19 sovereign countries that use the euro as their currency. C) all 28 countries in the European Union. D) the 5 largest European economies.B40) Under the European System of Central Banks, the National Central Banks have the same role as the ________ of the Federal Reserve System. A) Federal Advisory Council B) Board of Governors C) Federal Open Market Committee D) Federal Reserve BanksD