Fin 201 Exam 1 Questions and Correct Answers
The U.S. Treasury
a) is primarily responsible for controlling inflation.
b) controls the growth of the money supply with its tools of monetary policy.
c) collects tax revenue and pays for the federal government's expenditures ongoods and
services.
d) can print money whenever it needs additional funds
C
Which of the following is a role of the U.S. Federal Reserve Bank?
a) works for the President of the United States.
b) sets the federal funds rate, which determines the level of short-term interest rates.
c) sets tax rates to help control the federal government budget deficit.
d) serves as a lender for corporations.
B
This year,
a) federal tax revenues are likely to exceed U.S. government expenditures.
b) the federal government is likely to generate a government budget deficit of about $36
trillion.
c) the federal government budget deficit is likely zero.
d) none of the above.
D
In the primary market,
a) one investor sells a company's securities to another investor.
b) investors trade securities of companies with only the highest quality credit ratings.
c) borrowers receive funds in return for newly issued securities.
, d) securities trade at prices that are always higher than security prices in the secondary
market.
C
Which of the following amounts is currently the smallest?
a) the U.S. gross domestic product (GDP)
b) the U.S. federal government budget deficit
c) the U.S. federal debt
B
When the demand for money increases while the supply stays the same,
a) interest rates tend to rise.
b) interest rates tend to fall.
c) interest rates remain unaffected.
d) interest rates tend to go to zero.
A
A high inflation rate exists when
a) the prices of goods and services are high.
b) the prices of goods and services are changing.
c) the percent increase in the aggregate price level is high.
d) the prices of goods and services are relatively stable.
C
Holding everything else constant, which of the following would most likely lead to a
broad-based increase in stock prices?
a) The increase in the PPI exceeds the increase in the CPI for several consecutive
months.
b) The increase in the CPI exceeds the increase in the PPI for several consecutive
The U.S. Treasury
a) is primarily responsible for controlling inflation.
b) controls the growth of the money supply with its tools of monetary policy.
c) collects tax revenue and pays for the federal government's expenditures ongoods and
services.
d) can print money whenever it needs additional funds
C
Which of the following is a role of the U.S. Federal Reserve Bank?
a) works for the President of the United States.
b) sets the federal funds rate, which determines the level of short-term interest rates.
c) sets tax rates to help control the federal government budget deficit.
d) serves as a lender for corporations.
B
This year,
a) federal tax revenues are likely to exceed U.S. government expenditures.
b) the federal government is likely to generate a government budget deficit of about $36
trillion.
c) the federal government budget deficit is likely zero.
d) none of the above.
D
In the primary market,
a) one investor sells a company's securities to another investor.
b) investors trade securities of companies with only the highest quality credit ratings.
c) borrowers receive funds in return for newly issued securities.
, d) securities trade at prices that are always higher than security prices in the secondary
market.
C
Which of the following amounts is currently the smallest?
a) the U.S. gross domestic product (GDP)
b) the U.S. federal government budget deficit
c) the U.S. federal debt
B
When the demand for money increases while the supply stays the same,
a) interest rates tend to rise.
b) interest rates tend to fall.
c) interest rates remain unaffected.
d) interest rates tend to go to zero.
A
A high inflation rate exists when
a) the prices of goods and services are high.
b) the prices of goods and services are changing.
c) the percent increase in the aggregate price level is high.
d) the prices of goods and services are relatively stable.
C
Holding everything else constant, which of the following would most likely lead to a
broad-based increase in stock prices?
a) The increase in the PPI exceeds the increase in the CPI for several consecutive
months.
b) The increase in the CPI exceeds the increase in the PPI for several consecutive
