1. The interest rate large banks use as a benchmark rate to set their various loan rates is

a. the prime loan rate

b. the standard loan rate

c. the bank rate

d. the discount rate

2. When the U.S. dollar appreciates in the foreign exchange market, which of the following occurs?

a. foreign goods become less expensive in the U.S.

b. U.S. products become more expensive in foreign nations

c. the U.S. trade deficit tends to increase

d. all of the above occur

3. The Federal Reserve System

a. conducts monetary policy in the U.S.

b. issues government bonds and other forms of debt

c. sets the foreign exchange rate of the U.S. dollar

d. does all of the above

4. Common stocks (or corporate stocks)

a. represent an IOU on the part of the issuing firm

b. entitle the holder to contractual payments

c. were a poor investment over the period 1982-88

d. allow the holder to share in the earnings of the firm

5. The real interest rate is

a. the actual interest rate plus the inflation rate

b. the actual interest rate minus the inflation rate

c. the actual rate people pay rather than the advertised rate

d. none of the above

ANSWER KEY - 1a: 2d: 3a: 4d: 5b