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amer-11
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2013-07-11 17:14:08
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  1. Fiscal policy refers to the taxing and spending policies of the federal government that are designed to achieve national economic goals.
    a) True
    b) False
    a) True

    Fiscal policy is designed to promote price stability, economic growth, and full employment
  2. Hedge funds are typically partnerships.

    a) True
    b) False
    a) True
  3. The largest source of federal government revenue is corporate income taxes.

    a) True
    b) False
    b) False

    The largest source of federal government revenue is individual income taxes.
  4. The largest category of federal government expenditure is interest on the federal debt.

    a) True
    b) False
    b) False

    The two largest categories of federal expenditures are Social Security and national defense.
  5. The impact of massive federal government borrowings on the economy is easy to identify.

    a) True
    b) False
    b) False

    The impact of federal government borrowing and spending on the economy is one of the most hotly debated issues in economics.
  6. If the federal government retires U.S. Treasury securities by running surpluses, total spending in the economy will tend to decline.

    a) True
    b) False
    b) False

    There is little consensus about the effects of debt retirement. Efficient market theory states that the government is transparent and there should be little or no impact on the economy.
  7. Today, the gross public debt is a higher percentage of the U.S. Gross Domestic Product (GDP) than it was during World War II.

    a) True
    b) False
    b) False

    While the absolute size of the debt is higher today than at the end of World War II, it is about 60 percent of GDP compared to over 100 percent of GDP in 1946.
  8. Federal Reserve Notes are an official part of the U.S. public debt.

    a) True
    b) False
    b) False

    Federal Reserve notes, the most common form of paper money circulating in the United States, are not officially part of the public debt but are obligations of the Federal Reserve Banks.
  9. U.S. Savings Bonds are a minute part of the nonmarketable public debt compared to government account series issued to various government trust funds.

    a) True
    b) False
    a) True

    U.S. Savings Bonds only represent around 2 percent of nonmarketable public debt.
  10. About one-half of the U.S. Treasury?s debt is held by other government agencies, trust funds, and the Federal Reserve.

    a) True
    b) False
    a) True

    About 51 percent of the federal government debt is held by the government itself.
  11. The auction method is the principal means of selling new issues of U.S. Treasury notes, bonds, and bills.

    a) True
    b) False
    a) True

    Most U.S. Treasury notes, bonds, and bills are sold using an auction method. Small investors are given an opportunity to purchase through noncompetitive tenders up to a maximum amount determined by the Treasury.
  12. Under the book-entry form of issuing marketable public debt, the investor receives an engraved certificate as evidence of the Treasury's debt obligation.

    a) True
    b) False
    b) False  

    Under the book-entry form of issuing marketable public debt, the investor does not receive an engraved certificate. Instead, the investor's name and amount of securities purchased are recorded in an Account Master Record in the TREASURY DIRECT System.
  13. The most important housekeeping goal of federal debt management is to keep the interest burden as low as possible.

    a) True
    b) False
    a) True  

    The asked yield shows the yield to maturity based on yesterday's asked price.
  14. Most state and local government revenues are derived from local sources of funds, that is, from the citizens these governmental units serve.

    a) True
    b) False
    a) True

    About 78 percent of state and local government revenue is derived from local sources.
  15. The largest category of expenditure for state and local governmental units is education.

    a) True
    b) False
    a) True

    About 34 percent of state and local government expenditures are for education, by far the largest item of expenditure.
  16. Unlike most state government bonds, the interest paid by a state government on its bond-anticipation notes is typically fully taxable for purposes of the federal income tax.

    a) True
    b) False
    b) False

    The federal income tax treatment of interest paid on both state government bonds and bond-anticipation notes is the same. They are usually tax-exempt securities.
  17. A general obligation bond is normally backed by the "full faith and credit" of the issuing government.

    a) True
    b) False
    a) True

    The full faith and credit backing makes general obligation bonds the most secure type of municipal debt.
  18. Revenue bonds are not normally backed by the taxing power of a governmental unit, but depend for their value on the revenue-generating capacity of the particular project they support.

    a) True
    b) False
    a) True

    • If the particular project funded by the revenue bond falters, the promised interest and principal payments may not materialize.
    •  
  19. An option bond is one that gives the issuing governmental unit the option of retiring the bond after a specified period.

    a) True
    b) False
    b) False

    An option bond is one that gives the holder the option of selling it back to the issuing governmental unit or its designated agent at par after a specified period.
  20. The tax-exempt feature of municipal securities represents a clear government subsidy to low-tax-bracket investors.

    a) True
    b) False
    b) False

    The tax-exempt feature of municipal securities represents a subsidy to high-tax-bracket investors.
  21. The FDIC provides insurance for municipal bonds.

    a) True
    b) False
    b) False

    Insurance for municipal bonds is provided by the insurance industry.
  22. Most municipal bonds are term bonds.

    a) True
    b) False
    b) False

    Most municipal bonds are serial securities.
  23. Which of the following is the largest source of revenue for the federal government?

    A) corporate income taxes
    B) individual income taxes
    C) estate and gift taxes
    D) social insurance taxes
    B) individual income taxes

    For example, it is estimated that, for 2007, individual income taxes will produce about 45 percent of the federal government's revenues.

    The others are incorrect because corporate income taxes will produce about 11 percent, social insurance taxes such as FICA will produce about 37 percent, and estate and gift taxes will account for less than one percent of the federal government's revenues.
     
    (this multiple choice question has been scrambled)
  24. Which of the following types of state and local government securities typically have the longest original maturity?

    A) tax-anticipation notes
    B) general obligation bonds
    C) revenue-anticipation notes
    D) bond-anticipation notes
    B) general obligation bonds

    The others incorrect because they are all short-term securities, whereas general obligation bonds are long-term securities.
    (this multiple choice question has been scrambled)
  25. The size of the money supply is affected by the federal government borrowing from which of the following sources?
     
    I. depository institutions
    II. Federal Reserve Banks

    A) I only
    B) II only
    C) Both I and II
    D) Neither I nor II
    • C) Both I and II
    •  
    • Federal government borrowing from both depository institutions and Federal Reserve Banks increases the size of the money supply.
  26. The goals of public debt management by the U.S. Treasury include which of the following?

    I. to reduce the frequency of refunding

    II. to stabilize the economy

    A) I only
    B) II only
    C) Both I and II
    D) Neither I nor II
    C) Both I and II
    (this multiple choice question has been scrambled)
  27. Which of the following statements concerning insurance for municipal bonds is (are) correct?

    I. The insurance guarantees timely payment of principal but not of interest.

    II. The insurance is provided by the federal government.

    A) Both I and II
    B) I only
    C) II only
    D) Neither I nor II
    D) Neither I nor II

    I is incorrect because the insurance guarantees timely payment of both interest and principal. II is incorrect because the insurance is provided by private insurance companies.
     
    (this multiple choice question has been scrambled)
  28. Which of the following statements concerning municipal debt is (are) correct?

    I. The tax-exempt feature represents a government subsidy to high-tax-bracket investors.

    II. The tax-exempt feature tends to increase market volatility.

    A) II only
    B) Neither I nor II
    C) I only
    D) Both I and II
    D) Both I and II
    (this multiple choice question has been scrambled)
  29. All the following are part of the marketable public debt of the federal government EXCEPT

    A) U.S. Treasury bonds
    B) Government Account series securities
    C) U.S. Treasury notes
    D) U.S. Treasury bills
    B) Government Account series securities

    Government Account series securities are issued by the U.S. Treasury to various government agencies and trust funds, such as the Social Security Administration, and are nonmarketable securities for the agencies and trust funds.
     
    (this multiple choice question has been scrambled)
  30. All the following statements concerning the International Banking Act of 1978 are correct EXCEPT

    A) It limited interstate branching of foreign banks.
    B) It provided for foreign bank access to the Fed's discount window.
    C) It authorized the Fed to impose reserve requirements on branches of foreign banks. D) It narrowed the powers of Edge Act corporations of U.S. banks.
    D) It narrowed the powers of Edge Act corporations of U.S. banks.

    The International Banking Act of 1978 granted broader powers to Edge Act corporations of U.S. banks to enable them to compete more effectively with branches and agencies of foreign banks.
  31. All the following tend to exert a positive influence on the growth of state and local government borrowing EXCEPT

    A) state laws requiring balanced budgets
    B) the movement of the U.S. population to the suburbs
    C) reduction in federal government funding of local projects
    D) an upgrading of citizens' expectations concerning the quality of government services
    A) state laws requiring balanced budgets

    State balanced-budget laws exert a negative influence on the growth of state and local government borrowing.
     
    (this multiple choice question has been scrambled)
  32. All the following are characteristics of most municipal bonds EXCEPT

    A) high credit ratings
    B) high price volatility
    C) unfavorable federal income tax treatment
    D) serialization
    C) unfavorable federal income tax

    The interest income from most municipal bonds is still accorded favorable federal income tax treatment.
    (this multiple choice question has been scrambled)
  33. Examples of marketable public debt issued by the Treasury include all the following EXCEPT

    A) bills
    B) notes
    C) savings bonds
    D) long-term bonds
    C) savings bonds

    Savings bonds are not marketable. They must be redeemed by the Treasury.
     
    (this multiple choice question has been scrambled)
  34. All the following are innovations that have been introduced in recent years in the field of municipal securities EXCEPT 

    A) revenue bonds
    B) securitized bonds   
    C) floaters   
    D) option bonds   
    A) revenue bonds

    Revenue bonds have been issued for many years by state and local governments, though their use has been increasing rapidly in recent years.
     
    (this multiple choice question has been scrambled)

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