Week 3 – Chapters 1, 4 and 5 Quiz

uestion 1

U.S. debt management is generally designed to

lower interest rates.
stimulate economic activity.
encourage orderly economic growth and stability.
complement Federal Reserve monetary policy.


uestion 2

If the interest rate is greater than 0%, then a dollar today is worth

more than a dollar tomorrow
the same as a dollar tomorrow
less than a dollar tomorrow
there is not sufficient information to tell

uestion 3

When the United States Treasury makes a payment to a business, it usually takes the form of a

check drawn on the Central Bank of China.
check drawn directly against the U.S. Treasury.
special Treasury voucher.
check drawn against a bank in which tax balances are held.

uestion 4

Intermediaries that help the financial system operate efficiently and transfer funds from savers and investors to individuals, businesses, and governments that seek to spend or invest the funds are known as:

financial institutions
securities markets
government organizations

uestion 5

Which of the following is not a part of the financial environment?

Institutions and markets
Financial management

uestion 6

The basic policy instruments that the Fed uses to execute monetary policy include all of the following except

changing reserve requirements.
changing the lending/discount rate.
conducting closed market operations.
conducting open market operations.

uestion 7

Also known as Gennie Mae.

Government National Mortgage Association
Federal National Mortgage Association
Federal Home Loan Mortgage Corporation
Federal Reserve System


uestion 8

The most used monetary policy instrument used by the Fed is

open market operations.
changing the discount rate.
changing the reserve requirement.
issuing securities.

uestion 9

When the Federal Reserve System was created, it was thought that its most important influence over monetary conditions would be

lending to banks to bolster their reserve positions.
quantitative easing.
the issuance of Federal Reserve notes.
the changing of reserve requirements.

uestion 10

This act requires disclosure of information about the services and costs involved at the time of settlement when property is transferred from seller to buyer.

The Safe Real Estate Purchase Act
The Electronic Funds Transfer Act
The Real Estate Settlement Procedures Act
The Consumer Leasing Act

uestion 11

Although it enjoys substantial independence in its operations, the appointive power of the president and the ability of Congress to alter its structure make the ______________ a dependent political structure and one of the most powerful monetary organizations in the world.

Board of Governors (BOG)
Board of Directors (BOD)
Governing Body (GOB)
Financial Governors (FOG)

uestion 12

__________ are where the initial offering or origination of debt and equity securities takes place.

Money markets
Capital markets
Primary markets
Secondary markets

uestion 13

Government financing of large budgetary deficits

absorbs savings and decreases interest rates.
may crowd out private borrowers.
is known as monetizing the deficit.
reduces total consumer spending and demand.

uestion 14

During the 2007-2009 financial crisis, many major financial institutions and business corporations were on the verge of collapse or failure; however, some of the very largest corporations and financial institutions were deemed as being ________ because their failure would cause cascading negative repercussions throughout the U.S. and many foreign economies.

toxic firms
boat rockers
too large to ignore
too big to fail

uestion 15

A (n) ____________________ is necessary for the monetary system to carry out the financial function of transferring money, which in turn is a requirement for an effective financial system.

internet banking system
electronic data transfer system
wire transfer system
efficient payments mechanism


uestion 16

A depository institution’s vault cash and funds held at its regional Federal Reserve Bank.

Required reserves
Deficit reserves
Bank reserves
Excess reserves

uestion 17

The Federal Open Market Committee

typically buys and sells long-term corporate bonds
implements the most powerful and flexible monetary policy tool of the Fed
works out of Washington D.C.
deals with most of the commercial banks of the nation

uestion 18

This act sets up a procedure for correcting mistakes on credit records and requires that records be used only for legitimate business purposes.

The Fair Credit Reporting Act
The Electronic Funds Transfer Act
The Real Estate Settlement Procedures Act
The Consumer Leasing Act

uestion 19

Two risky assets can be combined to lower the overall risk of a portfolio. This principle is commonly referred to as

asset allocation
portfolio segmentation

uestion 20

Which of the following statements is most correct?

Open-market operations do not always lead to an increase in the volume of lending.
Open-market operations don’t always lead to an immediate change in the volume of deposits; this is especially true when bonds are purchased to expand deposit growth.
Open-market operations always lead to an immediate change in the volume of deposits; this is especially true when bonds are sold to restrict deposit growth.
Increasing reserve requirements always leads to an immediate increase in the volume of lending; this is especially true when bonds are sold to restrict deposit growth.


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