Question
16_ In the market for money, a decline in the expected inflation rate causes the demand for money to ________ and the demand curve to
16_
In the market for money, a decline in the expected inflation rate causes the demand for money to ________ and the demand curve to shift to the ________, everything else held constant.
a.
decrease; left
b.
decrease; right
c.
increase; right
d.
increase; left
17_
In general, banks make profits by selling ________ liabilities and buying ________ assets.
a.
short-term; longer-term
b.
risky; risk-free
c.
illiquid; liquid
d.
long-term; shorter-term
18_
Which of the following would a bank NOT hold as insurance against the highest cost of deposit outflow-bank failure?
a.
mortgages
b.
bank capital
c.
secondary reserves
d.
excess reserves
19_
Assume a bank has $200 million of assets with a duration of 2.5, and $190 million of liabilities with a duration of 1.05. If interest rates increase from 5 percent to 6 percent, the net worth of the bank falls by
a.
$2.4 million.
b.
$4.8 million.
c.
$1 million.
d.
$3.6 million.
20_
All else the same, when the Fed calls in a $100 discount loan previously extended to the First National Bank, reserves in the banking system
a.
increase by more than $100.
b.
decrease by more than $100.
c.
increase by $100.
d.
decrease by $100.
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