Which of the following is NOT an example of a backup line of credit? A) loan commitments B) overdraft privileges C) standby letters of credit D) mortgages ANSWER D
Date: September 10th, 2020
A central bank ________ of domestic currency and corresponding ________ of foreign assets in the foreign exchange market leads to an equal decline in its international reserves and the monetary base, everything else held constant. A) sale; purchase B) sale; sale C) purchase; sale D) purchase; purchase ANSWER C
Date: September 10th, 2020
Everything else held constant, when financial frictions increase, the real cost of borrowing ________ so that planned investment spending ________ at any given inflation rate. A) increases; falls B) decreases; falls C) decreases; rises D) increases; rises ANSWER A
Date: September 10th, 2020
The process of asset transformation refers to the conversion of A) safer assets into risky assets. B) safer assets into safer liabilities. C) risky assets into safer assets. D) risky assets into risky liabilities. ANSWER C
Date: September 10th, 2020
The sum of the current yield and the rate of capital gain is called the A) rate of return. B) discount yield. C) perpetuity yield. D) par value. ANSWER A
Date: September 10th, 2020
Banks earn profits from off-balance sheet loan sales A) by foreclosing on delinquent accounts. B) by selling the loans at discounted prices. C) by selling existing loans for more than the original loan amount. D) by calling-in loans before the maturity date. ANSWER C
Date: September 10th, 2020
Assume it is announced that a large number of new competitors have entered the market for mountain bikes, each offering a different model. Based on this information, this industry is best characterized as: A) perfectly competitive. B) a monopoly. C) monopolistically competitive. D) an oligopoly. ANSWER C
Date: September 10th, 2020
Everything else held constant, an increase in financial frictions ________ aggregate ________. A) increases; demand B) decreases; demand C) decreases; supply D) increases; supply ANSWER B
Date: September 10th, 2020
If additional information is not used when forming an optimal forecast because it is not available at that time, then expectations are A) obviously formed irrationally. B) still considered to be formed rationally. C) formed adaptively. D) formed equivalently. ANSWER B
Date: September 10th, 2020
All of the following are examples of off-balance sheet activities that generate fee income for banks EXCEPT A) foreign exchange trades. B) guaranteeing debt securities. C) back-up lines of credit. D) selling negotiable CDs. ANSWER D
Date: September 10th, 2020
