31 Jan E.none of the above are

BUSN602 Midterm Exam

Question 1

Which of the following are not included in M1?

A.negotiable orders of withdrawal

B.automatic transfer service accounts

C.money market deposit accounts

D.credit union share draft accounts

Question 2

If the stated or nominal interest rate is 10 percent and the inflation rate is 5 percent, the net or differential compounding rate would be ________ percent

A.ten

B.five

C.two

D.fifteen

Question 3

______________ occurs during economic expansions when demand for goods and services is greater than supply.

A.Administrative inflation

B.Speculative inflation

C.Cost-push inflation

D.Demand-pull inflation

Question 4

Inflation caused by an increase in the money supply is called:

A.demand-pull inflation

B.cost-push inflation

C.administrative inflation

D.a combination of administrative and speculative inflation

Question 5

Automatic stabilizers include all of the following except:

A.unemployment insurance

B.social security

C.welfare

D.pay-as-you-go tax system

Question 6

You need $8,000 four years from now for a down payment on your future house. How much money must you deposit today if your credit union pays 5% interest compounded annually? Pick the closest answer.

A.$6,269.59

B.$6,578.95

C.$6,394.12

D.$6,189.83

Question 7

A ____________ is a short-term debt instrument issued by commercial banks in denominations of $100,000 or more with typical maturities ranging from one month to one year that have an active secondary market that allows short-term investors to easily match their cash or liquidity needs when they arise.

A.negotiable certificate of deposit (NCD)

B.A repurchase agreement

C.government bond

D.money market security

E.none of the above

Question 8

Which of the following statements are correct?

A.debit cards provide for the immediate direct transfer of deposit accounts

B.debit cards may be used for cash advances, even when there is not sufficient money in the account

C.debit cards may not be used to make cash withdrawals from automatic teller machines

D.all the above

E.none of the above

Question 9

Which of the following financial institutions market “seasoned” instruments and securities?

A.brokerage firms

B.finance companies

C.mortgage lenders

D.none of the above

Question 10

The major factor that determines the volume of savings, corporate as well as individual, is the:

A.volume of spending

B.level of national income

C.amount of private pension plans

D.amount of life insurance policies

Question 11

Suppose you have a choice of two equally risky annuities, each paying $1,000 per year for 20 years. One is an annuity due, while the other is an ordinary annuity. Which annuity would you choose?

A.the ordinary annuity

B.the annuity due

C.either one because the annuities have the same present value

D.without information about the appropriate interest rate, we cannot tell which annuity is better

Question 12

Because of the financial crisis that began in 2008, by the end of 2009:

A.unemployment was in excess of 15 percent

B.many homeowners owed more money on their mortgage loans than the their homes were worth

C.home mortgage foreclosure rates and personal and business bankruptcies were rapidly declining as the recovery accelerated and strengthened

D.over 500 banks in the U.S. had already failed with over 2,000 more being considered financially weak

E.all of the above are true

Question 13

Changes in the growth rates for money supply and money velocity affect the growth rate in:

A.real economic activity

B.the rate of inflation

C.the turnover of goods and services

D.both a and b

Question 14

The budget-making process rests with the:

A.Congress

B.U.S. Treasury

C.President’s Council of Economic Advisors

D.U.S. Treasury in cooperation with the Fed

Question 15

The adequacy of capital for commercial banks as measured by regulatory authorities is:

A.a composite of various asset risk categories

B.a measure of investment success

C.based on the total amount of deposits of a bank

D.based on the ratio of federal government obligations to deposits

Question 16

In an inflationary period, interest rates have a tendency to:

A.rise

B.fall

C.stay the same

D.act erratically

Question 17

When it is a means of paying for goods and services and discharging debts, money is referred to as a:

A.store of purchasing power

B.medium of exchange

C.standard of value

D.liquid asset

Question 18

Which of the following institutions is not part of the modern banking system?

A.credit unions

B.savings and loan associations

C.mutual funds

D.mutual savings banks

Question 19

Which of the following would not be considered liquid?

A.money in savings accounts

B.coins

C.currency

D.all the above are liquid

E.none of the above are liquid

Question 20

The National Banking Act of 1864 provided for:

A.federally chartered banks

B.the establishment of a system of central banks

C.deregulation and monetary control

D.the establishment of deposit insurance