1.

The central and organized place where secondary market participants trade securities is
called:
a) over-the-counter market.
b) common market.
c) exchange.
d) barter market.
2. Central bank is the natural place for inter-bank payments to be settled for all the following
reasons, EXCEPT:
a) This is a legally requirement in international practice.
b) All banks have their accounts at the central bank
c) To ensure the reliability and transparency of all transactions.
d) This has become a common practice for all banks.
3. The earliest central banks were mostly recorded in which region?
a) Africa
b) Asia
c) America (continent)
d) Europe
4. The evolution of the payment system through different methods to make payment as well as
forms of money can be best understood as the result of:
a) government regulations designed to promote the safety of the payments system.
b) competition among firms to make it easier for customers to purchase their products.
c) government regulations designed to improve the efficiency of the payments system.
d) innovations that reduced the costs of exchanging goods and services
5. Financial regulation has all of the following targets EXCEPT:
a) Ensuring the soundness of the financial system
b) Reducing information asymmetry
c) Supervising risks in the banking system
d) Ensuring returns for investors
6. Central banks act as the lender of last resort means:
a) to lend money to qualified banks, while everyone else cannot.
b) to lend money to all banks which are in need, while everyone else cannot.
c) to lend funds to financial institutions in difficult time, while everyone else cannot.
d) to lend funds in financially unstable time, while everyone else cannot.
7. The market where equity instruments are traded is called:
a) money
b) bond
c) capital
d) commodities
8.Equities are generally ...... than bonds, as the corporation must pay all of its ....... before .....
paying its .........
a) safer / equity holders / debt holders
b) riskier / debt holders / equity holders
 c) riskier / equity holders / debt holders
d) safer / debt holders / equity holders
9. For a commodity to be able to function as money, it needs all the following EXCEPT:
a) it must be easy to carry.
b) it must deteriorate quickly.
c) it must be divisible.
d) it must be widely accepted.
10.Even in inflation periods, and other assets can pay higher interest, people still hold money.
This can be because money is:
a) backed by gold.
b) the only thing widely accepted in economic exchange.
c) unique and there are no substitutes.
d) extremely liquid
11. Choose one example of the economies of scale that financial intermediaries can provide to
their customers:
a) investing in a diversified collection of assets.
b) spreading the cost of borrowed funds over many customers.
c) spreading the cost of writing a standardized contract over many borrowers.
d) providing depositors with a variety of savings certificates
12. The people who run central banks should not be politicians. This is:
a) to avoid conflict of interest
b) because of politician's limited understanding about finance
c) to better assign jobs for those who qualified
d) because politicians' term of service is only a few year.
13. Choose the most correct evolution of the payment system:
a) Barter, checks, paper currency, electronic funds transfers
b) Barter, coins made of precious metals, paper currency, checks, electronic funds
transfers
c) Barter, checks, paper currency, coins made of precious metals, electronic funds
transfers
d) Barter, coins made of precious metals, checks, paper currency, electronic funds
transfers
14. Choose the best explanation for the relationship between money and economic efficiency:
a) Money increases economic efficiency because it discourages specialization.
b) Money increases economic efficiency because it cost little to produce.
c) Money increases economic efficiency because it decreases transactions costs.
d) Money cannot have an effect on economic efficiency
15. A person deposit the money left in his pocket everyday into a savings account, this means
that this person believes that money is:
a) unit of specialization.
b) unit of account.
c) medium of exchange.
 d) store of value.
16. As for direct finance, capital is transferred through the ....... from ........... to ..........
a) financial market / borrowers / savers
b) financial market / savers / spenders
c) financial institutions / lenders / borrowers
d) financial institutions / investors / savers
17. Choose one example for direct finance:
a) You take out a mortgage from your local bank.
b) You borrow 50 million VND from a friend.
c) You buy shares of common stock in the secondary market.
d) You buy shares in a mutual fund.
18. Money is used as a unit of account, this:
a) reduces the number of prices that need to be calculated.
b) increases transaction costs.
c) does not earn interest.
d) discourages specialization
19. The monthly wage of someone is his/her:
a) liabilities.
b) money.
c) income.
d) wealth
20. It is believed that Central banks are first set up to serve the role of:
a) The government's bank to finance war.
b) The government's bank to stabilize its domestic economy.
c) The banker's bank to issue notes to everyone.
d) The banker's bank to finance investments.
21. Choose the correct statement from the following regarding features of debt and equity
instruments:
a) Bond holders are residual claimants.
b) The income from bonds is typically more variable than that from equities.
c) Bonds pay dividends.
d) They can both be long-term financial instruments.
22. Choose the correct example of short-term debt instrument:
a) A Treasury bond.
b) A thirty-year mortgage.
c) A sixty-month car loan.
d) A six month loan from a finance company
23. Choose the correct statement for the feature of financial markets and securities:
a) The maturity of a debt instrument is the number of years (term) to that
instrumentʹs expiration date.
b) A bond is a long-term security that promises to make periodic payments called
dividends to the firmʹs residual claimants.
 c) A debt instrument is intermediate term if its maturity is less than one year.
d) A debt instrument is intermediate term if its maturity is ten years or longer.
24. .... is the total collection of a person's property while ..... is used to make purchases.
a) Wealth; income
b) Money; income
c) Income; money
d) Money; wealth
e) Wealth ; money
25. Money is a stock concept, this means that:
a) the quantity of money is measured at a given point in time.
b) money never loses purchasing power.
c) it is used to make trades in the equity market.
d) we must attach a time period to the measure.
26. Banks' borrowings from Federal Reserve are called ................ and represent a ................ of
funds.
a) discount loans / use
b) fed funds / source
c) fed funds / use
d) discount loans / source
27. In a typical financial crisis in the U.S: ................. leads to .............., then.............
a) banking crises; increase in uncertainty; increase in interest rates
b) asset price declines; banking crises; unanticipated decline in price level
c) unanticipated decline in price level; banking crises; increase in interest rates
d) banking crises; increase in interest rates; unanticipated decline in price level
28. In a financial crisis: an unanticipated ............. in the price level causes the real burden of
debt on borrowing firms to ............
a) increase / rise
b) decrease / rise
c) increase / fall
d) decrease / fall
29. .................. often have deposits as primary liabilities while ............ often have premiums
from policies as main source of fund
a) Savings and loans associations / Contractual savings institutions
b) Investment intermediaries / Commercial banks
c) Mutual funds / Credit unions
d) Depository institutions / Investment intermediaries
30. When a central bank provides more discount loans to banks, the monetary base ................
and banking's reserves ................
a) remains unchanged / increase
b) increases / increase
c) remains unchanged / decrease
d) decreases / decrease
31. Regarding the effect of information asymmetry: ......... often happens before the transaction,
and .............. often happens after the transaction.
a) Adverse selection / Moral hazard
b) Principal-agent problem / lemons problem
c) Free-rider problem / devalued of asset problem
d) Moral hazard / Adverse selection
32. Compared to the Federal Reserve System of the U.S, the State Bank of Vietnam is
more ............. and less ...........
a) expansionary / regulatory
b) independent / centralized
c) regulatory / efficient
d) centralized / independent
33. In Keynesʹs Liquidity Preference Theory: demand for money is ............. related to .............
a) negatively / wealth
b) positively / interest rates
c) negatively / interest rates
d) negatively / income
34. Monetary base includes:
a) currency in circulation and the U.S. Treasury securities
b) currency in circulation and reserves
c) currency in circulation and Federal Reserve notes
d) reserves and Federal loan
35. The strongest argument AGAINST the independence of a central bank is:
a) voters have too much say about monetary policy.
b) the president has too much control over monetary policy on a day-to-day basis.
c) the Board of Governors is held responsible for policy missteps.
d) such system is undemocratic
36. In an open market operation purchase (e.g. Fed buys bonds from a bank): banking system's
reserves ............ and the monetary base ............... .
a) decrease / increases
b) increase / increases
c) decrease / decreases
d) increase / decrease
37. Which entity of the Federal Reserve ultimately decide the discount rate:
a) Twelve Federal Reserve banks
b) Federal Open Market Committee
c) Board of Governors
d) Federal Advisory Council
38. When an individual deposits currency into his/her bank account: the bank's
reserves ................ and the monetary ..............
a) remain unchanged / fall
b) rise / remains unchanged
 c) remain unchanged / rises
d) fall / remains unchanged
39. An increase in the monetary base that goes into ............... is not multiplied, while an
increase that goes into ................ can be multiplied.
a) deposits / currency
b) currency / deposits
c) currency / excess reserves
d) excess reserves / currency
42. Financial crisis in emerging market countries is more likely to be caused by:
a) fiscal imbalances.
b) decreases in foreign interest rates.
c) too strong oversight of the financial industry.
d) a foreign exchange crisis.
46. If the Federal fund rate is ........... the excess-reserves-interest rate, then an open market
purchase will .......... the quantity of reserves and the Federal fund rate will.........
a) equal to / increase / decrease
b) equal to / increase / remain unchanged
c) higher than / decrease / decrease
d) higher than / increase / increase
49. The velocity of money can be explained as:
a) the ratio of the money stock to high-powered money set by the central bank
b) the ratio of the money stock to interest rates.
c) the average number of times a dollar is spent in buying financial assets for a given
firm in a given period of time.
d) the average number of times that a dollar is spent in buying the total amount of final
goods and services.
50. Among ......... members of the FOMC, ........... are from the Board of Governors, ..............
are from Rederal Reserve Banks.
a) 12 / 5 / 7
b) 9 / 6 /3
c) 12 / 7 / 5
d) 9 / 3/ 6
55. Arrange the following assets from the most liquid to the least liquid:
a) house; savings bonds; currency
b) savings bonds; house; currency.
c) currency; house; savings bonds.
d) currency; savings bonds; house.
62. What is the difference between income and money?
a) money is a flow and income is a stock.
b) money is a stock and income is a flow.
c) there is no difference - money and income are both stocks.
d) there is no difference - money and income are both flows 
65. Financial institutions can .......... thanks to their economies of scale:
a) reduce transactions costs.
b) avoid adverse selection problems.
c) avoid the asymmetric information problem.
d) reduce moral hazard. 
67. Choose one correct example of "direct finance":
a) An insurance company buys shares of common stock in the over-the-counter markets.
b) People buy shares in a mutual fund.
c) A pension fund manager buys a short-term corporate security in the secondary market.
d) A corporation issues new shares of stock.
72. When someone buys ......., that person will own a portion of a company and may get the
right to vote on important issues (like management election).
a) bills
b) stock
c) notes
d) bonds 
77. Fed uses ........... to control the maximum interest rate and ............. to control the minimum
interest rate on the market for reserves.
a) discount rate / interest rate paid on excess reserves
b) interest rate paid on excess reserves / discount rate
c) federal fund rate / discount rate
d) discount rate / federal fund rate
80. According to the Simple model of Multiple Deposit Creation: if the required reserve ratio
is 10%, the deposit multiplier is:
a) 10
b) 100
c) 1
d) 0.1 
84. Political business cycle means that before elections, politicians often
pursue ................policies, which might produce ............ inflation.
a) expansionary / higher
b) expansionary / /lower
c) contractionary / higher
d) contractionary / lower 
88. The main reason for banks to hold excess reserve is:
a) reduce the interest-rate risk problem.
b) achieve higher earnings than they can with loans.
c) provide a safety net for deposit outflows.
d) satisfy requirements from central bank 
93. In open market sale (e.g. Fed sells bonds to a bank): reserves in the banking system.............
and the monetary base..........
a) decrease / decreases
 b) increase / increases
c) decrease / increases
d) increase / decreases 
94. Among the followings, which is classified as liabilities in balance sheet of a bank:
a) Loans
b) Reserves
c) U.S. Treasury securities
d) Discount loans 
100. People tend to save ………, leading to ……….. level of money in circulation, this
phenomenon is called……….
a) Less / higher / demand-pull inflation
b) Less / lower / demand – push inflation
c) More / lower / demand – pull inflation
d) More / higher / demand – push inflation
101. Price of universal materials …………, making businesses to ……………, leading to
……….. inflation.
a) Increases / produce less / cost – push
b) Decreases / produce more / cost – pull
c) Increases / sell less / cost – push
d) Decreases / sell more / cost – pull
102. As reasons leading to inflation are often interacted (e.g. interwoven), economists can
identify the origins of inflation discussed in class based on:
a) Whether the government’s debt is under control over long-term.
b) Whether the unemployment rate is below or above the natural level.
c) Whether it happens due to sudden changes in material prices or pro-long changes in
consumer behavior.
d) Whether it is accompanied by any government’s changes in policy (for example:
taxation)
109. The functions of money are
a. medium of exchange and unit of account.
b. medium of exchange, unit of account, and store of value.
c. medium of account and store of value.
d. store of value and unit of account.
110. A medium of exchange is
a. something that is generally acceptable in exchange for goods and services
b. a legally recognized asset that is generally accepted in exchange for goods and
services.
c. something that circulates and provides a standardized means of evaluating the
relative price of goods and services.
d. the ability of money to command purchasing power in the future
111. A unit of account
a. something that is generally acceptable in exchange for goods and services
 b. a legally recognized asset that is generally accepted in exchange for goods and
services.
c. something that circulates and provides a standardized means of evaluating
the relative price of goods and services.
d. the ability of money to command purchasing power in the future
112. Store of value
a. something that is generally acceptable in exchange for goods and services
b. a legally recognized asset that is generally accepted in exchange for goods and
services.
c. something that circulates and provides a standardized means of evaluating the
relative price of goods and services.
d. the ability of money to command purchasing power in the future
129. Financial intermediation refers to
A. the dealings between private banks and the central bank of that nation.
B. legislation which is directed toward the regulation of the baking industry.
C. indirect finance through the services of financial institutions that channel funds
from savers to investors.
D. the calculations involved in pricing financial instruments.

131. An example of adverse selection is when

A. only the least creditworthy firms will be willing to borrow.
B. the poorest run banks are mostly likely to be audited.
C. investors choose the riskiest financial instruments in an attempt to gain maximum returns.

D. banks display a bias in their dealings with customers.

132. An example of moral hazard is when

A. borrowed money is used to fund illegal activity.
B. the possibility of default on a loan is reduced by background checks.
C. the borrower engages in more risky behavior after receiving the funds than would
have been the case prior to receiving the funds.
D. the risks associated with a floating rate loan far exceed those associated with a fixed rate
loan.

134. The interest rate the Federal Reserve charges banks on loans is called the
A. interbank loan.
B. cost-of-carry rate.
C. LIBOR.
D. discount rate.

135. In addition to conducting monetary policy, a primary function of most central banks
includes
A. monitoring the workings of fiscal policy and providing recommendations to the
baking sector.
B. performance of banking functions for their government and the provision of financial
services to private banks.
C. assistance in the management of private banks and provision of governmental budget
estimates.
D. facilitating information exchange among commercial banks and investment firms.

140. Which one is not a function of intermediation?

a. It facilitates the acquisition of payment for goods and services.
b. It facilitates the creation of a portfolio.
c. It eases the liquidity constraints of households and firms.
d. It provides a safekeeping service for those with excess funds.

142. If you transfer $1,000 from your savings account to your checking account:
A. M1 decreases by $1,000, and M2 increases by $1,000.
B. M1 increases by $1,000, and M2 decreases by $1,000.
C. M1 and M2 don't change.
D. M1 increases by $1,000, but M2 doesn't change.
E. M2 decreases by $1,000, but M1 doesn’t change.

148. The Fed can ___ the level of reserves of the banking system by ___ government bonds.
(A) Decrease; buying.
(B) Decrease; selling.
(C) Decrease; issuing.
(D) Increase; issuing.
(E) Increase; selling

160. The sum of the Fedʹs monetary liabilities and the U.S. Treasuryʹs monetary liabilities is
called:
A. the money supply.
B. currency in circulation.
C. bank reserves.
D. the monetary base.

161. Which of the following actions is an example of expansionary fiscal policy?

A. a decrease in welfare payments
B. a purchase of government securities in the open market
C. a decrease in the Bank rate
D. a decrease in the corporate profits tax rates
162.. The Fisher’s Quantity Theory of Money begins with an identity known as
the…………………..
A. demand for money
B. theory of asset demand
C. real money balances
D. equation of exchange

169. Which of the following is included in M1?

A. gold
B. credit cards
C. checkable deposits
D. stocks

170. A raise in the reserve ratio……………

A. increases the expenditure multiplier.
B. increases the money multiplier.
C. lowers the expenditure multiplier.
D. lowers the money multiplier.

173. U.S. Treasury bills have lower default risk and more liquidity than negotiable CDs.
Consequently, the demand for Treasury bills is ………, and they have a ……………….. interest
rate.
A. higher; lower
B. lower; higher
C. costly; significant
D. valuable; costly

175. An investment bank purchases securities from a Corporation at a predetermined price and
then resells them in the market. This process is called………………….
A) underwriting.
B) underhanded.
C) understanding.
D) undertaking.

176. Banks acquire the funds that they use to purchase income-earning assets from such sources
as………….
A. cash items in the process of collection
B. savings accounts.
C. reserves.
D. deposits at other banks.
183. Having interest rate stability…………………..
A) allows for less uncertainty about future planning.
B) leads to demands to curtail the Fed's power.
C) guarantees full employment.
D) leads to problems in financial markets.

184. If the nominal interest rate on a checking account is 2% and the inflation rate is 3% this
year, the real interest rate is:
A. 5%
B. 2%
C. -1%
D. 1%

185. If people expect that the ………………….will continue, a wage-price spiral may occur.
A. lower rate inflation
B. stable inflation
C. cost-push inflation
D. higher rate of inflation
188. Sustained downward movements in the business cycle are referred to as….
A) inflation.
B) recessions.
C) economic recoveries.
D) expansions.

189. During a recession, output declines resulting in

A) lower unemployment in the economy.
B) higher unemployment in the economy.
C) no impact on the unemployment in the economy.
D) higher wages for the workers.

192. ………………policy involves decisions about government spending and taxation.

A) Monetary
B) Fiscal
C) Financial
D) Systemic

193. The two types of open market operations are …………………

A. offensive and defensive.
B. dynamic and reactionary.
C. active and passive.
D. dynamic and defensive.
199. In Keynes's liquidity preference framework, individuals are assumed to hold their wealth in
two forms:
A) real assets and financial assets.
B) stocks and bonds.
C) money and bonds.
D) money and gold.

200. Keynes assumed that money has………………….rate of return.

A) a positive
B) a negative
C) a zero
D) an increasing

210. Reducing risk through the purchase of assets whose returns do not always move together is
……………………
A) diversification.
B) intermediation.
C) intervention.
D) discounting.

214. The present value of an expected future payment ________ as the interest rate increases.
A) falls
B) rises
C) is constant
D) is unaffected

215. An increase in the time to the promised future payment ________ the present value of the
payment.
A) decreases
B) increases
C) has no effect on
D) is irrelevant to

220. Which of the following are true of fixed payment loans?

A) The borrower repays both the principal and interest at the maturity date.
B) Installment loans and mortgages are frequently of the fixed payment type.
C) The borrower pays interest periodically and the principal at the maturity date.
D) Commercial loans to businesses are often of this type

221. A credit market instrument that pays the owner a fixed coupon payment every year until the
maturity date and then repays the face value is called a
A) simple loan.
B) fixed-payment loan.
C) coupon bond.
D) discount bond

226. A ________ is bought at a price below its face value, and the ________ value is repaid at
the
maturity date.
A) coupon bond; discount
B) discount bond; discount
C) coupon bond; face
D) discount bond; face

230. The nominal interest rate minus the expected rate of inflation
A) defines the real interest rate.
B) is a less accurate measure of the incentives to borrow and lend than is the nominal interest
rate.
C) is a less accurate indicator of the tightness of credit market conditions than is the nominal
interest rate.
D) defines the discount rate.

235. 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
A) interest rate risk.
B) inflation risk.
C) moral hazard.
D) default risk.