Economics money and banking

If more than one answer seems correct, please give the answer that seems “most” correct. First National Bank Assets Liabilities Rate sensitive $20 million $50 million Fixed rate $80 million $50 million 1. If interest rates rise by 5 percentage points, say, from 10 to 15%, bank profits at First National Bank (measured using gap analysis) will _____ using the table above. A. Decline by $2.5 million B. Decline by $0.5 million C. Decline by $1.5 million D. Increase by $1.5 million 2. The theory that monetary policy conducted on a discretionary, day-by-day basis leads to poor long-run outcomes is referred to as the: A. Adverse selection problem. B. Moral hazard problem C. Time-inconsistency problem D. Nominal-anchor problem 3. One of the problems experienced by the savings and loan industry during the 1980s was: A. Slow glowth in lending. B. Heavy regulations in the new areas open to S&Ls. C. Close monitoring by the FSLIC D. Managers lack of expertise to manage risk in new lines of business 4. Bruce the Bank Manager can reduce interest rate risk by _____ the duration of the bank’s assets to increase their rate sensitivity or, alternatively, ______ the duration of the bank’s liabilities. A. Shortening; shortening B. Shortening; lengthening C. Lengthening; lengthening D. Lengthening; shortening 5. A nominal anchor promotes price stability by: A. Outlawing inflation B. Stabilizing interest rates C. Keeping inflation expectations low D. Keeping economic growth low 6. All of the following would reduce the agency problems of the originate-to-distribute model except: A. Clearer disclosure of mortgage terms B. More stringent licensing requirements C. Discouraging borrowers from “getting in over their head.” D. Encouraging more complex mortgage products 7. The inaccurate ratings provided by credit-rating agencies: A. Meant that investors actually look on less risk B. Were irrelevant since no one pays any attention to them anyway C. Meant that investors did not have the information they needed to make informed choices about their investments D. Will not be a problem when determining capital requirements under Basel 2.. 8. What makes the Federal Reserve so unique compared to other central banks around the world is its: A. Centralized structure B. Decentralized structure C. Regulatory functions D. Monetary policy functions 9. Which of the following is NOT an entity of the Federal Reserve System? A. Federal Reserve Banks B. The Comptroller of the Currency C. The board of Governors D. The Federal Open Market Committee 10. While the discount rate is “established” by the regional Federal Reserve Banks, in truth, the rate is determined by: A. Congress B. The president of the united stats C. The senate D. The Board of Governors 11. The primary indicator of the Fed’s stance on monetary policy is: A. The discount rate B. The federal funds rate C. The growth rate of the monetary base D. The growth rate of M2 12. The quantity of reserves demanded equals: A. Required reserves plus borrowed reserves B. Excess reserves plus borrowed reserves C. Required reserves plus excess reserves D. Total reserves minus excess reserves 13. The monetary liabilities of the Federal Reserve in clued: A. Securities and loans to financial institutions B. Currency in circulation and reserves C. Securities and reserves D. Currency in circulation and loans to financial institutions 14. The monetary base consists of: A. Currency in circulation and Federal Reserve notes B. Currency in circulation and the US Treasury’s monetary liabilities C. Currency in circulation and reserves D. Reserves and Federal Reserve Notes 15. Suppose that from a new checkable deposit, First National Bank holds two million dollars in vault cash, eight million dollars on deposit with the Federal Reserve, and nine million dollars in excess reserves. Given this information, we can say First National Bank faces a required reserve ratio of ______ percent. A. Ten B. Twenty C. Eighty D. Ninety 16. Suppose that from a new checkable deposit, First National Bank holds eight million dollars on deposit with the Federal Reserve, nine million dollars in excess reserves, and faces a required reserve ratio of ten percent. Given this information, we can say First National Bank has _____ million dollars in required reserves. A. One B. Two C. Nine D. Ten 17. when the Federal Reserve sells a government bond to a bank, reserves in the banking system_____ and the monetary base______, everything else held constant. A. Increase; increases B. Increase; decreases C. Decrease; increases D. Decrease; decreases 18. If a person selling bonds to the Fed cashes the Fed’s check, then reserves_____ and currency in circulation_____, everything else held constant. A. Remain unchanged; declines B. Remain unchanged; increases C. Decline; Remain unchanged D. Increase; Remain unchanged 19. If a person selling bonds to the Fed cashes the Fed’s check, then reserves_____ and currency in circulation_____, everything else held constant. E. Remain unchanged; declines F. Remain unchanged; increases G. Decline; Remain unchanged H. Increase; Remain unchanged 20. If the required reserve ratio is equal to 10 percent, a single bank can increase its loans up to a maximum amount equal to: A. Its excess reserves B. 10 times its excess reserves C. 10 percent of its excess reserves D. Its total reserves