FMAI25 Self assessment (topics B1-B2)

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This sample test is built on the topics "Financial crises" and "Central banks"

1. During financial crises, increasing interest rates are: *

1 point

one of the factors increasing asymmetric information issues

the desirable result of monetary policy aiming at cooling down the mounting imbalance

the outcome of asset bubbles bursting

2. In financial crises, banks: *

1 point

are involved only when the turmoil is anticipating a depression

always suffer negative consequences, depending on their size and localisation

are the usual trigger for them

3. In financial crises, debt deflation: *

1 point

is a necessary passage to regain economic growth

is a cause of the worse financial crises

occurs only for those more severe and persistent

4. The 1929 crisis: *

1 point

is due to irrational exuberance on stocks

is due to the ease of access to markets and credit

is the result of a number of banking defaults

5. The stock market, when crises hit: *

1 point

loses value in those driven by credit, gains in those based on irrational exuberance

loses strong first, but is the first to regain pre-crisis level among markets

substitutes the money market in transfering resources to borrowers

6. Financial crises: *

1 point

are very similar on their origination, development and outcomes

are hardly comparable

have similar outcomes, but specific causes

7. Subprime mortgages: *

1 point

were the main cause of the 2007-09 crisis

were one of the tools that enhanced and diffused markets' imbalances

did not play a leading role in the 2007-09 crisis, despite its name

8. One of the following is a typical example of conflicts of interest emerging in the 2007-09 crisis: *

1 point

rating agencies providing solicited ratings above fundamental values

investment banks funding themselves on money markets to enter securitizations

high US interest rates attracting foreign capitals

9. A CDO is an instrument: *

1 point

indexed to real estate variables

originated by securitization of mortgages

guaranteed by government or similar entities

10. Considering the "COVID" crisis, which of the following causes in the general model describes better its triggering? *

1 point

Worsening conditions of financial intermediaries

Increase of interest rates and asset bubbles

Increase of uncertainty

11. Which of the following is usually called "the FED"? *

1 point

the FAC

the Governor

the FOMC

12. Unlike the FRS, the ESCB: *

1 point

is more independent

is more prone to political influence

has fewer monetary policy tools

13. The main asset of a central bank is: *

1 point

government bonds

stocks and shares

bank deposits

14. The main liability of a central bank is: *

1 point

government bonds

stocks and shares

bank deposits

15. After a financial crisis hits, balance sheet volumes of a central bank: *

1 point

rise

are not impacted

fall

16. After a financial crisis, the balance sheet item of a central bank suffering the largest change is *

1 point

currency in circulation

government bonds

loans to banks

17. An increase of reserve requirements for banks, in the market for reserves: *

1 point

causes a reduction in interest rates

does not inluence interest rates, unless these are as high as those on bank loans

causes an increase in interest rates

18. What is the "forward guidance" of central banks? *

1 point

A pool of operations that lead to slow but steady decreases or increases in interest rates

Activities of the central bank through derivatives

The use of planning and communication to reduce uncertainties on monetary policies

19. Inflation, within a monetary policy, is: *

1 point

The nominal anchor

An intermediate objective

The main objective

20. Unlike the FED, the ECB has a... *

1 point

hierarchical mandate

dual mandate

a mandate prohibiting effects on exchange rates

A. Imagine that Bank Alfa wants to keep total reserves with the central bank equal to 5% of deposits, and it now holds 1 billion Euro in deposits and 30 million Euro in excess reserves. How much required reserve would be needed after receiving an additional 1 million Euro of deposits? (write simply the figure without commas, dots, signs or other symbols, rounded to the unit: for instance, if the result is 1.100,65 write "1101") *

5 points

B. Bank Beta has only the required reserve, equal to 150, and holds deposits as high as 1500. After 50 is spent by depositors, the bank wants to know if the reserve requirement is still met or no. Write the integer number, using "-" before it to indicate the lack of reserves, and the "+" for the excess. *

5 points

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