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.