Coursera

Warning: The hard deadline has passed. You can attempt it, but you will not get credit for it. You are welcome to try it as a learning exercise.

In accordance with the Coursera Honor Code, I (KK Fong) certify that the answers here are my own work.

Question 1

When the Treynor model is adapted to the money market, all of the following are true, EXCEPT...?

Quotes are in yields, not prices, so the bid is higher than the offer

The dealer is primarily concerned that his counterparty knows more about the true value of the security than he does

The dealer quote curve slopes up

The dealer is primarily concerned about liquidity risk

Question 2

Which of the following BEST characterizes the economics of a security dealer who funds his long and short security positions in the repo and reverse money markets?

The dealer changes yield quotes to control exposure to liquidity risk

The dealer changes price quotes to control exposure to price risk

The dealer is price taking in competitive markets

The dealer is able to control exposure to price and liquidity risk independently, taking on more of one and less of another as conditions change

Question 3

Considering the relationship between traditional banking and shadow banking, which of the following statements is INCORRECT?

The traditional picture of banking emphasizes allocation of saving from household depositors to business investors

Both systems face liquidity risk, but there is no solvency risk for shadow banking because that risk is completely transferred to other agents

The shadow banking system involves a shift from loan based credit to market based credit

Both traditional banking and shadow banking involve creation of private money of various types

Question 4

Consider monetary transmission during tight monetary policy. Which of the following is NOT a link in the transmission mechanism?

A rise in the term rate raises funding cost for bond dealers, so lowering expected profit on existing bond inventories

Higher profit expectations bid up the long term bond yields

The Fed raises the Fed Funds target rate

The rise in Fed Funds lowers the profitability of the liquidity spread for dealers unless the term rate rises proportionately

Question 5

Which of the following statements about monetary policy is INCORRECT?

According to the Taylor Rule, the Fed should raise interest rates when inflation exceeds the target

Monetary policy is all about shifting portfolio allocation on the liability side of the Fed's balance sheet

Control of short term rates gives the Fed some measure of control over both the quantity of credit and the price of credit

The appropriate stance of monetary policy depends on the balance of elasticity and discipline in the system as a whole

Question 6

Which of the following is the most important reason for a central bank NOT TO INTERVENE during a liquidity crisis?

Relaxing the survival constraint now puts off needed discipline to the future

A fall in consumption spending can lead to a multiplier effect that aggravates the crisis

A fall in security security values means collateral value goes down, making refinance more difficult

Liquidity problems in any market can lead to liquidity problems in the government securities markets

In accordance with the Coursera Honor Code, I (KK Fong) certify that the answers here are my own work.

You cannot submit your work until you agree to the Honor Code. Thanks!

Economics of Money and Banking, Part One

Top Navigation Bar

Economics of Money and Banking, Part One
by Perry G Mehrling

Side Navigation Bar

About the course

Course

Exercises

Community

Quiz 5 Help Center

Question 1

Question 2

Question 3

Question 4

Question 5

Question 6

Economics of Money and Banking, Part One

Economics of Money and Banking, Part Oneby Perry G Mehrling

Quiz 5 Help Center

Question 1

Question 2

Question 3

Question 4

Question 5

Question 6

Confirm Navigation

Economics of Money and Banking, Part One
by Perry G Mehrling