Finance Final

Question 1

What is the aggregate demand curve?

Answer 1

A curve that shows the relationship between aggregate expenditure on goods and services and the price level.

Question 2

What is Real money balances?

Answer 2

the value of money held by households and firms, adjusted for changes in the price level

Question 3

What is Aggregate supply?

Answer 3

the total quantity of output, or GDP, that firms are willing to supply at a given price level

Question 4

What is Short-run aggregate supply (SRAS) curve?

Answer 4

a curve that shows the relationship in the short run between the price level and the quantity of aggregate output supplied by firms

Question 5

What is Long-run aggregate supply (LRAS) curve?

Answer 5

a curve that shows the relationship in the long run between the price level and the quantity of aggregate output supplied by firms

Question 6

What is Supply shock?

Answer 6

an unexpected change in production costs or in technology that causes the short-run aggregate supply curve to shift

Question 7

What is Monetary neutrality?

Answer 7

the proposition that changes in the money supply have no effect on output in the long run

Question 8

What is a Business cycle?

Answer 8

an alternating periods of economic expansion and economic recession

Question 9

What is a Stabilization policy?

Answer 9

a monetary policy or fiscal policy intended to reduce the severity of the business cycle and stabilize the economy

Question 10

What is the Foreign exchange market intervention?

Answer 10

a deliberate action by a central bank to influence the exchange rate

Question 11

What are International reserves?

Answer 11

are central bank assets that are denominated in a foreign currency and used in international transactions

Question 12

What is an unsterilized foreign exchange intervention?

Answer 12

occurs when a central bank allows the monetary base to respond to the sale or purchase of domestic currency in the foreign exchange market

Question 13

What is sterilized foreign exchange intervention?

Answer 13

occurs when a foreign exchange intervention is accompanied by offsetting domestic open market operations, so that the monetary base is unchanged

Question 14

What are Capital controls?

Answer 14

are government-imposed restrictions on foreign investors buying domestic assets or on domestic investors buying foreign assets

Question 15

What are Exchange-rate regime?

Answer 15

a system for adjusting exchange rates and flows of goods and capital among countries

Question 16

What are Fixed exchange rate system?

Answer 16

a system in which exchange rates are set at levels determined and maintained by governments

Question 17

What is a Gold standard?

Answer 17

a fixed exchange rate system under which currencies of participating countries are convertible into an agreed-upon amount of gold.

Question 18

What is the International Monetary Fund (IMF) ?

Answer 18

a multinational organization established by the Bretton Woods agreement to administer a system of fixed exchange rates.

Question 19

What is Devaluation?

Answer 19

is the lowering of the official value of a country’s currency relative to other currencies

Question 20

What is Revaluation?

Answer 20

the raising of the official value of a country’s currency relative to other currencies

Question 21

What is a Flexible exchange rate system?

Answer 21

a system in which the foreign exchange value of a currency is determined in the foreign exchange market

Question 22

What is Managed float regime?

Answer 22

an exchange rate system in which central banks occasionally intervene to affect foreign exchange values; also called a dirty float regime

Question 23

What is the European Monetary Union?

Answer 23

1992, is the outcome of a plan drafted as part of the 1992 single European market initiative, in which exchange rates were fixed and eventually a common currency was adopted

Question 24

What is the euro?

Answer 24

the common currency of 16 European countries.

Question 25

What is Pegging ?

Answer 25

the decision by a country to keep the exchange rate fixed between its currency and another country’s currency

Question 26

(From Quiz) On a bank's balance sheet, ASSETS are....

Answer 26

the USES of acquired funds | You USE assets

Question 27

(From Quiz) On a bank's balance sheet, LIABILITIES are...

Answer 27

the SOURCES of acquired funds | Liabilities come from a SOURCE

Question 28

(From Quiz) Bank capital is equal to...

Answer 28

the difference between the value of the bank's assets and the value of its liabilities

Question 29

(From Quiz) Which of the following is not a bank liability?

Answer 29

Mortgage Loans

Question 30

(From Quiz) The difference between a savings deposit and a time deposit is

Answer 30

time deposits have specified maturities

Question 31

(From Quiz) What is the current limit on deposit balances that are covered by FDIC insurance?

Answer 31

$250,000

Question 32

(From Quiz) Federal funds are

Answer 32

short-term loans between banks

Question 33

(From Quiz) Any of a bank's reserves held at the Fed, beyond what is required are called

Answer 33

excess revenues

Question 34

(From Quiz) About what percentage of bank assets were in loans in 2012?

Answer 34

60%

Question 35

(From Quiz) The ratio of a bank's after-tax profit to its equity or capital is known as its

Answer 35

return on capital or equity

Question 36

(From Quiz) A bank's credit risk is the risk that

Answer 36

borrowers might default on their loans

Question 37

(From Quiz) As of 2012, about how many banks and S&Ls were there in the US?

Answer 37

7,000

Question 38

(From Quiz) The Fed's inability to instantaneously observe chances in inflation and economic growth result in a

Answer 38

information lag

Question 39

(From Quiz) An open market purchase of securities, by the Fed

Answer 39

increases the monetary base

Question 40

(From Quiz) In order to increase its target for the federal funds rate, the Fed would normally

Answer 40

conduct open market sales of securities it owns

Question 41

(From Quiz) A falling dollar makes US Goods

Answer 41

less expensive abroad and increases the volume of US exports

Question 42

(From Quiz) Which of the following is not considered to be a goal of the Federal Reserve's monetary policy?

Answer 42

fair wages

Question 43

(From Quiz) Members of the board of governors are appointed by...

Answer 43

the President of the US, subject of confirmation by the senate

Question 44

(From Quiz) Who owns the federal reserve banks?

Answer 44

Private commercial banks in each district that are members of the Fed Reserve System

Question 45

(From Quiz) Federal reserve districts

Answer 45

cut across state and economic boundaries

Question 46

(From Quiz) Which of the following is not included in aggregate demand?

Answer 46

Investments in treasury bonds

Question 47

(From Quiz) Currently, the world's dominate reserve currency is the

Answer 47

US Dollar

Question 48

(From Quiz) The exchange rate system followed by the US is known as

Answer 48

a flexible exchange rate system

Question 49

(From Quiz) Which of the following statements is correct?

Answer 49

A devaluation of the British pound would lower the prices of British goods in the US

Question 50

(From Quiz) Why may a central bank intervene in the foreign exchange market when its currency is appreciating?

Answer 50

Concerns about the country's exports becoming less competitive

Question 51

(From Quiz) How many federal reserve districts are there?

Answer 51

12

Question 52

(From Quiz) Why has the federal reserve chairman often been called the 2nd most important person in the nation?

Answer 52

because the fed is in control of monetary policy

Question 53

(From Quiz) Members of the federal reserve board of governors serve...

Answer 53

one nonrenewable 14 year term

Question 54

(From Quiz) Which of the following is a liability of the fed?

Answer 54

Currency in circulation

Question 55

(From Quiz) The British central bank is known as the

Answer 55

Bank of England

Question 56

What is Economic growth ?

Answer 56

is an increase in the economy’s output of goods and services over time.

Question 57

What are Open market operations?

Answer 57

are the Fed’s purchases and sales of securities, usually U.S. Treasury securities, in financial markets

Question 58

What is a Discount policy ?

Answer 58

is the policy tool of setting the discount rate and the terms of discount lending

Question 59

What is a Discount window?

Answer 59

the means by which the Fed makes discount loans to banks. This serves as the channel for meeting the liquidity needs of banks.

Question 60

What is the Federal funds rate?

Answer 60

the interest rate that banks charge each other on very short-term loans

Question 61

What is Monetary base?

Answer 61

the sum of bank reserves and | currency in circulation.

Question 62

What is a Discount loan?

Answer 62

a loan made by the Fed to a commercial bank

Question 63

What is the Dodd-Frank Wall Street Reform and Consumer Protection Act?

Answer 63

legislation passed during 2010 that was intended to reform regulation of the financial system

Question 64

What is the Federal Deposit Insurance Corporation (FDIC)?

Answer 64

is a federal government agency established by Congress in 1934 to insure deposits in commercial banks

Question 65

What is a Money market mutual fund?

Answer 65

a mutual fund that invests exclusively in short-term assets, such as Treasury bills, negotiable certificates of deposit, and commercial paper.

Question 66

What is a Pension fund?

Answer 66

a financial intermediary that invests contributions of workers and firms in stocks, bonds, and mortgages to provide for pension benefit payments during workers’ retirements

Question 67

Who is the current head of the federal reserve?

Answer 67

Janet Yellen

Question 68

When was the Federal Reserve created?

Answer 68

1913