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 …………

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

BAF 302: Monetary and Financial System (Quiz 1)

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