ECONOMICS OF FINANCIAL MARKETS
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ECONOMICS OF FINANCIAL MARKETS
Instruction:
• Use the Blackboard submission link provided.
• Submit using only Word, .pdf, or image (.jpg, .png) formats.
• You can either type or write and scan your answer.
PART A: MULTIPLE CHOICE QUESTIONS
Each Question is worth 1 mark (25 Marks Total)
1. The cryptocurrency Bitcoin can satisfy which two of the three functions of money. Which
function does it NOT satisfy?
A. unit of account
B. store of value
C. medium of exchange
D. bitcoin satisfies all of the functions of money
2. Using the simple model of multiple deposit creation, what is the required reserve ratio equal to
when the multiplier is two?
A. 0 percent.
B. 25 percent.
C. 50 percent.
D. 100 percent.
3. Which of the following is involved in securitization?
A. the transformer
B. the servicer
C. the undertaker
D. the liberator
4. If a bank needs to raise the amount of capital relative to assets, a bank manager might choose to
A. sell securities the bank owns and put the funds into the reserve account.
B. pay higher dividends.
C. borrow more reserve from the Central Bank.
D. issue more shares.
5. Inflation targeting has the following advantages EXCEPT FOR ________.
A. increased monetary policy transparency
B. reduction of the time-inconsistency problem
C. immediate signal on the achievement of the target
D. consistency with democratic principles