Deck 1: Introducing Money, Banking, and Financial Markets

Question 1

The central bank of the United States is the

A) Federal Reserve.
B) Securities and Exchange Commission.
C) Federal Deposit Insurance Corporation.
D) Department of the Treasury.

Answer 1

A

Question 2

Studying money, banking, and financial markets will help you to

A) answer basic questions about financial relationships from family members.
B) better understand financial newspapers.
C) get a job after your graduate.
D) All of the above.

Answer 2

D

Question 3

Jobs in the private financial sector focus on __________; jobs in the public sector with the Federal Reserve, the Federal Deposit Insurance Corporation, or state agencies focus on __________.

A) profits; profits
B) safety; profits
C) profits; safety
D) safety; safety

Answer 3

C

Question 4

Which of the following statements is not true about money?

A) Money is sometimes viewed as a lubricant that greases the wheels of economic activity.
B) Without money, some transactions would be unimaginably difficult.
C) Money influences the behavior of the economy as a whole.
D) All of the above are true.

Question 5

Institutional traders do not typically engage in which of the following activities?

A) Quote bids and offers for securities on a continuous basis
B) Accommodate incoming purchase and sale orders from financial institutions
C) Alter quotes in response to changing market conditions
D) Act as stockbrokers

Question 6

Paul is a people-oriented person. Paul would probably function best as a

A) trader.
B) salesperson.
C) financial economist.
D) researcher.

Question 7

__________ generate(s)prices whenever securities are bought or sold.

A) Financial markets
B) Financial institutions
C) The Federal Reserve
D) The Securities and Exchange Commission

Question 8

Which of the following is least likely to purchase a large certificate of deposit (over $100,000)?

A) Money market mutual funds
B) Individual investors
C) Large corporations
D) Institutional investors

Question 9

Account executives work for

A) commercial banks.
B) securities firms.
C) thrift institutions.
D) corporations.

Question 10

The Federal Reserve

A) is uninvolved with banks.
B) has little impact on overall economic activity.
C) directly influences the lending and deposit creation activities of banks.
D) issues mandates telling businesses how much to invest.

Question 11

Retail CDs are most likely marketed by

A) people who are comfortable with interest rate calculations.
B) people who are comfortable with movements in the term structure of interest rates.
C) people with strong interpersonal skills.
D) people who interpret monetary policy actions taken by the Federal Reserve.

Question 12

A securities dealer, or trader, earns a profit by

A) charging a commission.
B) buying at the offer price and selling at the bid price.
C) buying at the bid price and selling at the offer price.
D) None of the above.

Question 13

Which of the following statements about banks is false?

A) They play a critical role in the economy.
B) They provide a place where individuals and businesses can invest their funds to earn interest with a minimum of risk.
C) They make loans, and are therefore very different from other financial institutions like finance companies and insurance companies.
D) They indirectly issue money in the form of deposits.

Question 14

An insurance company economist would

A) forecast interest rates.
B) talk only to their direct superiors, but not to the institution's corporate customers.
C) not be concerned about the costs and benefits of some internal investment project.
D) have little use for statistical analysis.

Question 15

A __________ will review a commercial bank's books to determine whether loans with delinquent payments impair a bank's capital.

A) loan officer
B) bank examiner
C) broker
D) bank teller

Question 16

The primary job of a financial economist within the fixed-income division of a major financial institution is to

A) conduct statistical analyses.
B) provide instant analysis to traders and salespeople.
C) alert traders and salespeople of the expected activities of the Federal Reserve.
D) construct concrete strategies for institutional investors based on expected interest rate movements.

Question 17

The definition of money does not refer to

A) coins and currency.
B) the monetary economy.
C) unemployment.
D) a tool used by the central bank to influence aggregate economic activity.

Question 18

A salesperson does not

A) monitor market conditions and alter quotes so he does not get stuck with an unwanted inventory.
B) try to uncover information about securities that institutional investors are most interested in.
C) provide information to traders about the sentiment within the investment community.
D) convince bank customers to buy securities that the bank has already acquired through the activities of its traders.

Question 19

Which of the following is not a reference to "banking" in "money, banking, and financial markets?"

A) Commercial banks
B) Savings banks
C) Financial intermediaries
D) Markets in which financial assets can be traded

Question 20

Which of the following types of financial institutions is most likely to be a market maker in mortgage-backed securities?

A) A commercial bank
B) An investment bank
C) A savings and loan association
D) A credit union

Question 21

Which of the following features is not associated with a commercial bank loan?

A) Convertibility
B) Covenants
C) Collateral requirements
D) Guarantees

Question 22

The prepayment uncertainty associated with __________ makes the maturity of these securities uncertain.

A) corporate bonds
B) corporate stocks
C) GNMA pass-through securities and other mortgage-related securities
D) certificates of deposit

Question 23

Which of the following entities does not have an extensive bank examination staff?

A) Office of the Comptroller of the Currency
B) Federal Deposit Insurance Corporation
C) Federal Reserve
D) Securities and Exchange Commission