Thursday, July 30, 2009
MGT411- Money & Banking MCQ's
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Question No: 24 ( Marks: 1 ) - Please choose one
If required reserves are expressed by RR ; the required reserve rate by rD and deposits by D; the simple deposit expansion multiplier is expressed as:
► (1/rD) D
► rD times 10
Question No: 25 ( Marks: 1 ) - Please choose one
The _____________ shows how the quantity of money is related to the monetary base:
► Money multiplier
► Deposit expansion multiplier
► Fiscal multiplier
► Tax multiplier
Question No: 26 ( Marks: 1 ) - Please choose one
Central banks today place most of their focus on which of the following?
► The unemployment rate
► The quantity of M2
► Interest rates
► Controlling the size of the money multiplier
Question No: 27 ( Marks: 1 ) - Please choose one
Which of the following statement is true regarding monetary policy tools?
► The Fed currently uses a quantity tool for monetary policy
► The required reserve rate is the most easily observable tool
► The federal funds rate is not the best tool because it fails the controllable test of a good monetary policy tool.
► The central banks cannot set a quantity and a price tool simultaneously
Question No: 28 ( Marks: 1 ) - Please choose one
Inflation can be thought of as which of the following?
► A decrease in the price of money
► An increase in the price of money
► No change in the price of money, just in the supply of money
► No change in the price of money, just in the demand for money
Question No: 29 ( Marks: 1 ) - Please choose one
If a central bank sets an explicit inflation target it would require which one of the following?
► More emphasis on the interest rate target and less on a money target
► To shift their focus entirely to a nominal interest rate target
► Willingness to live with more volatility in the interest rate
► To give up control of targeting the monetary base
Question No: 30 ( Marks: 1 ) - Please choose one
Inflation in the long run would be determined by which one of the following?
► The exchange rate
► Aggregate demand
► The rate of money growth
► Aggregate supply
Question No: 31 ( Marks: 1 ) - Please choose one
Liquidity is the risk that is arises as a result of which one of the following consequences?
► It arises because of sudden demands of funds
► It arises when two sides of the balance sheet do not match up
► It arises when banks make additional profit by using derivatives
► It arises when loan is not repaid
Question No: 32 ( Marks: 1 ) - Please choose one
For securities issued across international borders, changes in the legal and governmental environment can make it difficult for the investor to collect. Such a risk would be termed as:
► Credit risk
► Sovereign risk
► Insolvency risk
► Interest rate risk
Question No: 33 ( Marks: 1 ) - Please choose one
In general, if the financial institution's balance sheet displays assets and liabilities that are "mis-matched" to a significant degree, the institution faces:
► Operational risk
► Sovereign risk
► Interest rate risk
► Liquidity risk
Question No: 34 ( Marks: 1 ) - Please choose one
The idea that central banks should be independent of political pressure is an idea that:
► Is included in Federal Reserve Act in 1913
► Is relatively new
► Every central bank was founded upon
► Became quite popular in the early 1900's
Question No: 35 ( Marks: 1 ) - Please choose one
One thing that is true about economic policy in the U.S. is that:
► Monetary and Fiscal policy often times conflict
► Fiscal and monetary policy never conflict
► Monetary policy ultimately controls fiscal policy
► Fiscal policy ultimately controls monetary policy
Question No: 36 ( Marks: 1 ) - Please choose one
Which of the following is the component of monetary base?
► Currency in the hands of the public
► Reserves of the banking system
► Vault cash plus deposits at the central bank
► All of the given options
Question No: 37 ( Marks: 1 ) - Please choose one
In the long run, if we ignore changes in velocity then which of the following statement is true?
► Inflation will equal money growth less the growth in potential output
► Inflation will equal the rate of money growth
► Inflation will be zero
► Inflation will equal money growth plus the growth in potential output
Question No: 38 ( Marks: 1 ) - Please choose one
Complete crowding-out will occur if:
► The money supply rises when Government purchases increases
► An increase in Government purchases does not change Consumption
► Taxes rise when Government purchases increases
► An increase in Government purchases causes an equal fall in Consumption, Investment, and Net Exports
Question No: 39 ( Marks: 1 ) - Please choose one
An increase in the money supply will do all the following except:
► Increase real GDP in the short-run
► Increase Price level in the long-run
► Increase Price level in the short-run
► Increase real GDP in the long-run
Question No: 40 ( Marks: 1 ) - Please choose one
An increase in capital stock, which shifts long-run supply out, will:
► Lower prices and will not change output
► Increase prices and will not change output
► Lower prices and will increase output
► Increase prices as well as output
Question No: 41 ( Marks: 1 ) - Please choose one
Components of M1 DO NOT include which one of the following?
► Currency in the hands of public
► Demand deposits
► Small denominations time deposit
► Checkable deposits
Question No: 42 ( Marks: 1 ) - Please choose one
Which one of the following is the unique problem that banks face?
► They hold illiquid assets to meet liquid liabilities
► They hold liquid assets to meet illiquid liabilities
► They hold liquid assets to meet liquid liabilities
► Both banks' assets and liabilities are illiquid
Question No: 43 ( Marks: 3 )
Write down the categories of assets in the balance sheet of commercial banks.
Question No: 44 ( Marks: 3 )
How Central banks link tools to meet their objectives?
Question No: 45 ( Marks: 3 )
Name the factors that affect the transaction demand for money.
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