Online Assessment: (10%)

BWFF3033 FMI
Answer ALL Question at the space provided in the second file name: ANSWER

(1) The financial intermediaries that the average person interacts with most frequently are
A) exchanges.
B) over-the-counter markets.
C) finance companies.
D) banks.

(2) A continuing increase in the growth of the money supply is likely followed by
A) a recession.
B) a depression.
C) an increase in the price level.
D) no change in the economy.

(3) Which of the following is NOT a secondary market?

A) foreign exchange market
B) futures market
C) options market
D) IPO market

(4) Equity instruments are traded in the ________ market.

A) money
B) bond
C) capital
D) commodities

(5) Bitcoin fails to satisfy which two of the three functions of money?
A) unit of account and store of value
B) medium of exchange and unit of account
C) medium of exchange and store of value
D) bitcoin satisfies all the functions of money

(6) The M1 measure of money includes

A) small denomination time deposits.
B) traveler's checks.
C) money market deposit accounts.
D) money market mutual fund shares.
(7) The Federal Reserve publishes the data on the monetary aggregates each week on
A) Thursday.
B) Monday.
C) Friday.
D) Wednesday.

(8) An increase in the riskiness of corporate bonds will ________ the yield on corporate bonds
and ________ the yield on Treasury securities, everything else held constant.
A) increase; increase
B) reduce; reduce
C) increase; reduce
D) reduce; increase

(9) Which of the following securities has the lowest interest rate?
A) junk bonds
B) U.S. Treasury bonds
C) investment-grade bonds
D) corporate Baa bonds

(10) According to the segmented markets theory of the term structure

A) the interest rate on long-term bonds will equal an average of short-term interest rates that
people expect to occur over the life of the long-term bonds.
B) buyers of bonds do not prefer bonds of one maturity over another.
C) interest rates on bonds of different maturities do not move together over time.
D) buyers require an additional incentive to hold long-term bonds.

(11) When the yield curve is flat or downward sloping, it suggests that the economy is more
likely to enter
A) a recession.
B) an expansion.
C) a boom time.
D) a period of increasing output.
(12) A corporation's dividend payment is set by
A) its board of directors.
B) its debtholders.
C) the corporation's CFO (chief financial officer).
D) the stockholders themselves.

(13) Information plays an important role in asset pricing because it allows the buyer to judge
more accurately
A) liquidity.
B) risk.
C) capital.
D) policy.

(14) The ability of a central bank to set monetary policy instruments is

A) political independence.
B) goal independence.
C) policy independence.
D) instrument independence.

(15) The central bank which is generally regarded as the most independent in the world because
its charter cannot be changed by legislation is the
A) Bank of England.
B) Bank of Canada.
C) European Central Bank.
D) Bank of Japan.

(16) Recent research indicates that inflation performance (low inflation) has been found to be
best in countries with
A) the most independent central banks.
B) political control of monetary policy.
C) money financing of budget deficits.
D) a policy of always keeping interest rates low.

(17) The monetary base declines when

A) the Fed extends discount loans.
B) Treasury deposits at the Fed decrease.
C) float increases.
D) the Fed sells securities.
(18) The money supply is ________ related to the nonborrowed monetary base, and ________
related to the level of borrowed reserves.
A) positively; negatively
B) negatively; not
C) positively; positively
D) negatively; negatively

(19) The two types of open market operations are

A) offensive and defensive.
B) dynamic and reactionary.
C) active and passive.
D) dynamic and defensive.

(20) Which of the following monetary policy tools is more effective when the economy faces the
interest rate zero-lower-bound problem?
A) open market operation
B) discount policy
C) required reserve ratio
D) the Fed's liquidity provision