Devry FIN364 Week 4 Midterm 2015 (Latest Version)


1. Question : (TCO 1) Credit unions are _____ institutions.





Question 2. Question : (TCO 1) The household sector is the largest surplus sector and invests in the capital market ______.

directly by purchasing stocks and bonds

indirectly through mutual funds

indirectly through pension funds

All of the above

Question 3. Question : (TCO 1) Money markets are associated with _______ ; capital markets are associated with ______.

liquidity; marketability

spot; future

liquidity; economic investment

primary; secondary

Question 4. Question : (TCO 1) Secondary capital markets have promoted economic growth in the United States because

they have increased marketability of stocks and bonds.

they have increased the public's access to investment.

they have helped investors diversify.

All of the above

Question 5. Question : (TCO 1) Which of the following is not a debt security?

Corporate bonds

U.S. Government securities

Federal agency securities

Common stock

Question 6. Question : (TCO 1) A conditional contract granting its holder the right to buy assets in the future is a ______.


forward contract

futures contract


Question 7. Question : (TCO 1) The ease with which a financial claim can be resold is its ______.





Question 8. Question : (TCO 2) Who has a permanent vote on the FOMC?

President of the Federal Reserve Bank of New York

Federal Advisory Council

President of the Federal Reserve Bank of San Francisco


Question 9. Question : (TCO 2) An increase in Federal Reserve float

decreases bank reserve deposits in the Fed.

increases bank reserve deposits in the Fed.

has no impact upon bank reserves deposits in the Fed.

reduces the net loan granted by the Fed to member banks.

Question 10. Question : (TCO 2) If the Fed wanted to increase the money supply immediately but just slightly, it would most likely ______.

buy securities on the open market

lower the Discount Rate

lower reserve requirements

Any of the above would be suitable for this purpose.

Question 11. Question : (TCO 3) Unemployment should fall if ______.

wages increase and people expect prices to rise as well

wages increase and people expect prices to be stable

interest rates rise more than prices are expected to rise

the money supply increases

Question 12. Question : (TCO 3) Monetary policies directed toward increased economic growth may have what impact upon the value of the dollar in relation to other currencies?



No effect

None of the above

Question 13. Question : (TCO 3) The "tools" of monetary policy, whether "viable" or not, include all the following except______.

changing the discount rate

open market operations

changes in reserve requirements

changes in the Federal Funds rate

Question 14. Question : (TCO 3) Monetarists and Keynesians agree that______.

monetary policy influences the real sector

changes in the money supply drive changes in interest rates

changes in interest rates drive changes in the money supply

monetary policy does not influence the real sector

Question 15. Question : (TCO 2, 3) Which of the following was not a responsibility of the early Federal Reserve?

Replace the National Banking system

Improve the payments system

Establish more rigorous bank supervision

Act as "lender of last resort"

Question 16. Question : (TCO 4) Which of the following statements about interest rates is incorrect?

Bond prices and interest rates change inversely with one another.

The expected rate of inflation affects current market interest rates.

Short-term interest rates are not as volatile as long-term interest rates.

Interest rates are directly related to the level of output in the economy.

Question 17. Question : (TCO 4) Interest rates should increase if

the economy is in a boom.

inflationary expectations have decreased.

the Federal Reserve has decreased M1 and the supply of loanable funds.

inflationary expectations have increased.

Question 18. Question : (TCO 4) Interest rates move ______ with expected inflation and _____ with economic activity.

directly; inversely

inversely; inversely

directly; directly

inversely; directly

Question 19. Question : (TCO 4) If nominal interest rates are 10% and expected inflation is 5%, ______.

actual inflation exceeds 10%

the real rate of interest is 5%

market rates are expected to increase to 15%

expected interest rates are 5%

Question 20. Question : (TCO 4) With the real rate at 5%, most loans were made at 10% last year. This year, interest rates have declined to 8%. What was the expected inflation rate last year?





1. Question : (TCO 1) List and briefly describe the main risks managed by financial intermediaries.

Question 2. Question : (TCO 2) Explain why the Federal Reserve is less "independent" than it appears to be.

Question 3. Question : (TCO 3) What should happen to consumption if the monetary base increases? Explain.

Question 4. Question : (TCO 4) Explain why realized real rates of interest are sometimes negative but expected real rates are always positive. Give an example.


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    ******** * (TCO ** ****** ****** are ***** ************* *******
    The household ****** is *** ******* ******* ****** *** invests ** *** capital ****** ******* directly by ********** ****** *** ******
    ******* ****** ****** indirectly ******* *******
    *** ** *** ******
    3 Question * ****
    Money ******* *** **********
    _______ * ******* ******* *** associated with ******* ********** ************** ***** future liquidity;...
    Attached: Devry FIN364 Week 4 Midterm Latest 2015 March.docx


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