A financial crisis is:

not possible in the modern financial environment.

a major disruption in the financial markets.

a feature of developing economies only.

typically followed by an economic boom.

Which of the following statements about financial markets and securities is true?

Many common stocks are traded over-the-counter, although the largest corporations usually have their shares traded at organized stock exchanges such as the New York Stock Exchange.

As a corporation gets a share of the broker's commission, a corporation acquires new funds whenever its securities are sold.

Capital market securities are usually more widely traded than shorter-term securities and so tend to be more liquid.

Prices of capital market securities are usually more stable than prices of money market securities, and so are often used to hold temporary surplus funds of corporations.

A discount bond selling for $15,000 with a face value of $20,000 in one year has a yield to maturity of:

3 percent.

20 percent.

25 percent.

33.3 percent.

An increase in the riskiness of corporate bonds will __________ the price of corporate bonds and __________ the price of Treasury bonds, everything else held constant.

increase; increase

reduce; reduce

reduce; increase

increase; reduce

As a source of funds for nonfinancial businesses, stocks are relatively more important in:

the United States.

Germany.

Japan.

Canada.

Which bank regulatory agency has the sole regulatory authority over bank holding companies?

The FDIC

The Comptroller of the Currency

The FHLBS

The Federal Reserve System

Which of the following is NOT a current duty of the Board of Governors of the Federal Reserve System?

Setting margin requirements, the fraction of the purchase price of the securities that has to be paid for with cash

Setting the maximum interest rates payable on certain types of time deposits under Regulation Q

Approving the discount rate "established" by the Federal Reserve banks

Voting on the conduct of open market operations

If the inflation rate in the United States is higher than that in Mexico and productivity is growing at a slower rate in the United States than in Mexico, then, in the long run, __________, everything else held constant.

the Mexican peso will appreciate relative to the U.S. dollar

the Mexican peso will depreciate relative to the U.S. dollar

the Mexican peso will either appreciate, depreciate, or remain constant relative to the U.S. dollar

there will be no effect on the Mexican peso relative to the U.S. dollar

Equilibrium output is reduced by an increase in:

planned investment.

taxes.

government spending.

net exports.

When the economy suffers a permanent negative supply shock and the central bank does not respond by changing the autonomous component of monetary policy, then:

inflation will be lower.

output will be at its potential.

output will be unchanged.

inflation will be unchanged.