BAF 302: Monetary and Financial System (Quiz 1)
CATHOLIC UNIVERSITY COLLEGE OF GHANA, FIAPRE
[Faculty of Economics & Business Administration]
There are 25 Questions in this Quiz for which you have 25 minutes to complete.
Choose the one alternative that best completes the statement or answers the question.
Lecturer: Isaac A. Amankwa
CATHOLIC UNIVERSITY COLLEGE OF GHANA, FIAPRE
[Faculty of Economics & Business Administration]
There are 25 Questions in this Quiz for which you have 25 minutes to complete.
Choose the one alternative that best completes the statement or answers the question.
Lecturer: Isaac A. Amankwa
An increase in discount loans by the Bank of Ghana leads to …………
A decline in the monetary base.
A decline in the money supply.
An increase in the money supply.
All of the above.
If in a strictly barter economy there are only 8 goods to be exchanged for each other, the number of ratios of exchange (relative prices) is …………
28
45
55
90
With regard to the velocity of money, the recent Monetarists assert that ………….
Velocity and the number of transactions per period are constant
Velocity is constant over relatively long periods of time
Velocity is predictable and has a stable long-term trend
Velocity is predictable
With regard to the velocity of money, the Keynesians argue that …………
Velocity and the number of transactions are constant
Velocity is constant and predictable
Velocity is a variable and unpredictable
Velocity has no effect on prices
Which of the following assets would be included in the theoretical definition of money supply?
Currency
Gold coins
Savings deposits
Only a) and c) of the above
The Central Bank of Ghana has three broad functions. Which of the following is odd?
Banking
Financial regulation and supervision
Implementation of fiscal policies
Implementation of the monetary policies
A financial intermediary is an institution that ………
Acts as the correspondent on behalf of inefficient financial institutions
Allocates government budget funds
Channels resources from surplus units to deficit units
Disburses moneys deposited on behalf of minors
The future value of ¢100 received in two years with interest rate I is:
¢100/(1+i)
¢100*(1+i)
¢100/(1+i)2
¢100*(1+i)2
Maturity transformation refers to the act of ……
Borrowing short and lending long
Collection of a large number of small amounts to satisfy the demand of large loans
Conversion of short-term deposits into long-term loans
Setting loan default against profitable loans
Financial inter-mediation benefits the society in each of the following ways except:
Increasing the degree of liquidity
Making more funds available to high-risk ventures
Maintaining commercial secrecy
Offering lower rates of interest
Which of the following theories of the term structure is (are) able to explain the fact that interest rates on bonds of different maturities tend to move together over time?
The expectations theory
The liquidity premium theory
The segmented markets theory
Both (a) and (c) of the above
Which of the following can be described as involving direct finance?
A corporation buys commercial paper issued by another corporation.
A corporation takes out a loan from a bank.
An insurance company buys shares of common stock in the over-the-counter markets.
People buy shares in a mutual fund.
The difference between money and income is that ......
Money is a flow and income is a stock.
Money is a stock and income is a flow.
There is no difference--money and income are both flows.
There is no difference--money and income are both stocks.
The risk that interest payments will not be made, or that the face value of a bond is not repaid when a bond matures is ....
Default risk
Exchange rate risk
Inflation risk
Interest rate risk
Financial intermediaries are classified in order to:
Consider each group for tax purposes
Define and enforce legal responsibility for each group
Delimit their functions
Grant them statutes as recognized banks, licensed deposit takers and exempt institutions
Three factors explain the risk structure of interest rates. What are they?
Liquidity, default risk, and the income tax treatment of a security.
Maturity, default risk, and the income tax treatment of a security.
Maturity, liquidity, and the income tax treatment of a security.
Maturity, default risk, and the liquidity of a security.
Which of the following statements accurately describes the three different measures of the money supply--M1, M2, and M2+?
The three measures do not move together, so they cannot be used interchangeably by policymakers.
The three measures' movements closely parallel each other, even on a month-to-month basis.
Short-run movements in the money supply are extremely reliable.
Both (a) and (c) of the above.
How often does the monetary policy committee (MPC) of Ghana meet in a year?
Once
Six times
Thrice
Twice
Which of the following legal frameworks regulate the operations of banking financial institutions in Ghana?
Act 179
Act 612
Act 673
Act 774
The Fisher effect is the ………… relationship between ………… and …………
Direct; expected inflation; interest rates
Direct; interest rates; bond prices
Inverse; expected inflation; interest rates
Inverse; interest rates; bond prices
When yield curves are upward sloping .........
Long-term interest rates are above short-term interest rates.
Medium-term interest rates are above both short-term and long-term interest rates.
Short-term interest rates are above long-term interest rates.
Short-term interest rates are about the same as long-term interest rates.
Typically, yield curves are ……………………………………..
Bowl shaped
Downward sloping
Flat
Upward sloping
Capital adequacy benefits a financial institution in several ways. Which of the following is odd?
It helps to regulate foreign participation in the financial markets
It serves as a cushion against bankruptcy
It serves as a source of finance for investment in technology
It serves as fund for the acquisition of other financial assets
The provision that “no person other than a body corporate incorporated in Ghana shall be eligible to apply for a licence to carry on the business of banking in Ghana” (Banking Act, 2004, p. 5) comes under which of the following headings under the guidelines for licence?
Application for licence
Permissible Activities of Banks
Refusal of licence
Restricting Eligibility to Corporate Bodies
The theory that explains equilibrium interest rate determination in the money market is known as the ……………………
Liquidity preference theory
Theory of term structure of interest rate
Loanable fund theory
Fisher effect
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