EXAM 1 STUDY GUIDE
- What happens to output and unemployment during a recession? Increase or decrease?
- What are the three roles of money and what do they mean? i.e. unit of account, medium of exchange and store of value. Can you distinguish between them?
- What is asymmetric information?
- What is the difference between a bond and a stock?
- What is fiat money?
- What is agency theory? Who are the agents and who are the principals?
- High economic growth in a country is contingent on what?
- What is the difference between monetary and fiscal policy? Who controls each?
- When does a corporation make money from selling stock? The primary or secondary market? Who helps a firm go public?
- What is the difference between adverse selection and moral hazard? What is the definition of each?
- What is collateral?
- What is the purpose of deposit insurance?
- When does a government have a surplus? When does it have a deficit?
- How are securities held on the balance sheet of investors? What about the corporation that issues them?
- What are the disadvantages of a barter economy? Does the economy get more efficient? Why?
- What is hyperinflation? What happens in an economy when there is hyperinflation?
- What are restrictive covenants in a bond indenture? Can you give some examples?
- What is a call report?
- Why is financial regulation and supervision difficult in our economy?
- What is the difference between micro- and macroprudential supervision?
- What are bank reserves and what money does that figure include?
- Why are financial intermediaries even more important in developing countries than in industrialized ones?
- Why is it important for a bank to be well capitalized? Do they have more or less to lose in failure? Are they more or less likely to pursue risky activities?
- Why has there been a drop in the number of bank failures since the Great Depression?
- How are banks most likely to meet a reserve shortfall?
- What is the difference between a value at risk test and a stress test?
- What is mark to market accounting?
- How do off balance sheet activities affect a bank’s risk profile?
- What is the liquidity management of a bank concerned with?
- How can banks reduce the principal-agent problem associated with trading activities?