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savannahstate.edu/misc/dowlingw/3155/Practice%20Exams/practice_quiz_-_chapters_1_-_6.htm
1.
During most historical periods, the yield curve has been positively sloped.
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2.
A negatively sloped yield curve is associated with the anticipation that interest rates will decline.
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3.
A major function of the New York Stock Exchange is to raise money for firms.
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1/21
4.
In a short sale investors sell stock they own with the intention to buy it back within a short period of time.
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5.
The larger the margin requirement, the greater the proportion of a stock purchase the investor may borrow.
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6.
The use of margin increases the potential percentage return on an investment in stock.
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2/21
7.
Securities markets are often inefficient, so investors can anticipate beating the market over a period of
years.
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8.
When cash is deposited in a checking account, the reserves of commercial banks are increased.
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9.
Investments in money market mutual funds are insured up to $100,000 by the federal government.
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3/21
10.
Commercial banks may buy and sell reserves in the federal funds market.
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Multiple Choice
Identify the choice that best completes the statement or answers the question.
11.
demand deposits
b.
savings accounts
c.
certificates of deposit
d.
time deposits
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4/21
12.
state governments
b.
Congress
c.
d.
commercial banks
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13.
M-2 includes
1.
demand deposits
2.
savings accounts
3.
a.
1 and 2
b.
2 and 3
c.
1 and 3
d.
all three
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5/21
14.
A firm that guarantees the proceeds from the sale of a new issue of securities is the
a.
brokerage firm
b.
syndicate
c.
underwriter
d.
insurance company
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15.
If the initial offer price for new securities is too high, the underwriters may
1.
2.
3.
a.
1 and 2
b.
1 and 3
c.
2 and 3
d.
1, 2, and 3
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6/21
16.
An investment banker
1.
2.
3.
a.
1 and 2
b.
1 and 3
c.
2 and 3
d.
all three
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7/21
17.
2.
3.
4.
a.
1 and 3
b.
1 and 4
c.
2 and 3
d.
2 and 4
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18.
brokerage firms
b.
Congress
c.
the SEC
d.
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8/21
19.
b.
c.
d.
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20.
A specialist
a.
b.
c.
d.
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9/21
21.
is a market order
b.
c.
d.
is a limit order
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22.
b.
c.
d.
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10/21
23.
b.
c.
d.
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24.
demand deposits
b.
savings accounts
c.
certificates of deposit
d.
time deposits
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11/21
25.
commercial loans
b.
demand deposits
c.
common stock
d.
equity
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26.
M-2 includes
1.
demand deposits
2.
savings accounts
3.
a.
1 and 2
b.
2 and 3
c.
1 and 3
d.
all three
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12/21
27.
b.
c.
d.
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28.
b.
c.
d.
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13/21
29.
During a period of recession, a federal government surplus should retire debt owed
a.
b.
commercial banks
c.
d.
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30.
If the federal government runs a deficit and borrows from commercial banks,
1.
2.
3.
4.
a.
1 and 3
b.
1 and 4
c.
2 and 3
d.
2 and 4
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14/21
31.
If the federal government runs a deficit and finances the deficit by borrowing from the Federal Reserve,
1.
2.
3.
4.
a.
1 and 3
b.
1 and 4
c.
2 and 3
d.
2 and 4
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15/21
32.
saving
2.
borrowing
3.
lending
4.
purchasing goods
a.
1 and 2
b.
1 and 3
c.
2 and 3
d.
3 and 4
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33.
b.
c.
d.
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16/21
34.
lending
b.
borrowing
c.
retiring debt
d.
saving
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17/21
35.
2.
3.
4.
a.
1 and 3
b.
1 and 4
c.
2 and 3
d.
2 and 4
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Problem
36.
What is a nation's cash inflow (outflow) on its current account and its capital account given the following
information? Was there a net currency inflow or outflow?
imports
$145
exports
211
72
143
86
29
37
18/21
22
RESPONSE:
ANSWER:
Debit
Credit
Current account
exports
$211
imports
$145
22
37
$81
Capital account
direct investment abroad
72
143
29
86
$128
In this problem there is a net credit balance on both the current and capital accounts,
which means there is a currency inflow. This inflow may be used to increase foreign
reserves or repay any loans from the IMF.
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19/21
Supplementary
37.
If the reserve requirement for demand deposits is 10 percent, what is the maximum change in the money
supply that the banking system can create if
a.
the Federal Reserve puts $1,000,000 of new reserves in the banking system
b.
c.
RESPONSE:
20/21
ANSWER:
a.
b.
c.
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REF:
21/21