Information Technology for Managers
Practice Questions
Course Introduction
Information Technology for Managers is designed to equip future business leaders with an essential understanding of how information systems and technologies drive organizational success. The course explores the strategic use of IT in business operations, decision-making, and competitive advantage, emphasizing topics such as IT infrastructure, emerging technologies, data management, cybersecurity, and digital transformation. Students will analyze real-world case studies and develop practical skills to effectively leverage technology for problem-solving and innovation in managerial roles, while gaining awareness of ethical, legal, and global considerations related to information technology management.
Recommended Textbook Management Information Systems Managing the Digital Firm 6th Canadian Edition by Kenneth
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Page 2
Chapter 1: Why Study Money, banking, and Financial Markets
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Sample Questions
Q1) Evidence from the United States and other foreign countries indicates that
A)there is a strong positive association between inflation and growth rate of money over long periods of time.
B)there is little support for the assertion that "inflation is always and everywhere a monetary phenomenon."
C)countries with low monetary growth rates tend to experience higher rates of inflation,all else being constant.
D)money growth is clearly unrelated to inflation.
Answer: A
Q2) The upward and downward movement of aggregate output produced in the economy is referred to as the A)roller coaster.
B)see saw.
C)business cycle.
D)shock wave.
Answer: C
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Chapter 2: An Overview of the Financial System
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Sample Questions
Q1) Describe the two methods of organizing a secondary market.
Answer: A secondary market can be organized as an exchange where buyers and sellers meet in one central location to conduct trades.An example of an exchange is the New York Stock Exchange.A secondary market can also be organized as an over-the-counter market.In this type of market,dealers in different locations buy and sell securities to anyone who comes to them and is willing to accept their prices.An example of an over-the-counter market is the federal funds market.
Q2) Which of the following is an example of an intermediate-term debt?
A)a fifteen-year mortgage
B)a sixty-month car loan
C)a six-month loan from a finance company
D)a thirty-year U.S.Treasury bond
Answer: B
Q3) The primary assets of a finance company are
A)municipal bonds.
B)corporate stocks and bonds.
C)consumer and business loans.
D)mortgages.
Answer: C
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Page 4
Chapter 3: What Is Money
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Sample Questions
Q1) Of the following,the largest is
A)money market deposit accounts.
B)demand deposits.
C)M1.
D)M2.
Answer: D
Q2) Which of the following sequences accurately describes the evolution of the payments system?
A)barter,coins made of precious metals,paper currency,checks,electronic funds transfers
B)barter,coins made of precious metals,checks,paper currency,electronic funds transfers
C)barter,checks,paper currency,coins made of precious metals,electronic funds transfers
D)barter,checks,paper currency,electronic funds transfers
Answer: A
Q3) Why are most of the U.S.dollars held outside of the United States?
Answer: Concern about high inflation eroding the value of their own currency causes many people in foreign countries to hold U.S.dollars as a hedge against inflation risk.
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Chapter 4: The Meaning of Interest Rates
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Sample Questions
Q1) The ________ is below the coupon rate when the bond price is ________ its par value.
A)yield to maturity;above B)yield to maturity;below C)discount rate;above D)discount rate;below
Q2) A consol paying $20 annually when the interest rate is 5 percent has a price of A)$100.
B)$200.
C)$400.
D)$800.
Q3) The nominal interest rate minus the expected rate of inflation
A)defines the real interest rate.
B)is a less accurate measure of the incentives to borrow and lend than is the nominal interest rate.
C)is a less accurate indicator of the tightness of credit market conditions than is the nominal interest rate.
D)defines the discount rate.
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Chapter 5: The Behavior of Interest Rates
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Q1) Everything else held constant,an increase in the riskiness of bonds relative to alternative assets causes the demand for bonds to ________ and the demand curve to shift to the ________.
A)rise;right
B)rise;left
C)fall;right
D)fall;left
Q2) When the interest rate is above the equilibrium interest rate,there is an excess ________ money and the interest rate will ________.
A)demand for;rise
B)demand for;fall
C)supply of;fall
D)supply of;rise
Q3) Everything else held constant,an increase in expected inflation,lowers the expected return on ________ compared to ________ assets.
A)bonds;financial
B)bonds;real
C)real estate;financial
D)real estate;real
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Page 7
Chapter 6: The Risk and Term Structure of Interest Rates
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Q1) According to the liquidity premium theory of the term structure
A)bonds of different maturities are not substitutes.
B)if yield curves are downward sloping,then short-term interest rates are expected to fall by so much that,even when the positive term premium is added,long-term rates fall below short-term rates.
C)yield curves should never slope downward.
D)interest rates on bonds of different maturities do not move together over time.
Q2) Which of the following statements are TRUE?
A)An increase in tax rates will increase the demand for Treasury bonds,lowering their interest rates.
B)Because the tax-exempt status of municipal bonds was of little benefit to bond holders when tax rates were low,they had higher interest rates than U.S.government bonds before World War II.
C)Interest rates on municipal bonds will be higher than comparable bonds without the tax exemption.
D)Because coupon payments on municipal bonds are exempt from federal income tax,the expected after-tax return on them will be higher for individuals in lower income tax brackets.
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Page 8
Chapter 7: The Stock Market, the Theory of Rational
Expectations, and the Efficient Market Hypothesis
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Q1) In the one-period valuation model,an increase in the required return on investments in equity
A)increases the expected sales price of a stock.
B)increases the current price of a stock.
C)reduces the expected sales price of a stock.
D)reduces the current price of a stock.
Q2) The efficient markets hypothesis implies that future changes in exchange rates should for all practical purposes be
A)unpredictable.
B)set by each country.
C)increasing.
D)pegged to a standard such as the U.S.dollar or the Euro.
Q3) If expectations are formed adaptively,then people
A)use more information than just past data on a single variable to form their expectations of that variable.
B)often change their expectations quickly when faced with new information.
C)use only the information from past data on a single variable to form their expectations of that variable.
D)never change their expectations once they have been made.
Page 9
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Chapter 8: An Economic Analysis of Financial Structure
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Q1) The problem of adverse selection helps to explain
A)why firms are more likely to obtain funds from banks and other financial intermediaries,rather than from securities markets.
B)why collateral is an important feature of consumer,but not business,debt contracts.
C)why direct finance is more important than indirect finance as a source of business finance.
D)why lenders refuse loans to individuals with high net worth.
Q2) Of the following sources of external finance for American nonfinancial businesses,the least important is A)loans from banks.
B)stocks.
C)bonds and commercial paper.
D)loans from other financial intermediaries.
Q3) How does collateral help to reduce the adverse selection problem in credit market?
Q4) Explain the principal-agent problem as it pertains to equity contracts.
Q5) Why does the free-rider problem occur in the debt market?
Q6) How does a mutual fund lower transactions costs through economies of scale?
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Page 10
Chapter 9: Banking and the Management of Financial Institutions
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Sample Questions
Q1) With a 10% reserve requirement ratio,a $100 deposit into New Bank means that the maximum amount New Bank could lend is
A)$90.
B)$100.
C)$10.
D)$110.
Q2) Banks hold capital because
A)they are required to by regulatory authorities.
B)higher capital increases the returns to the owners.
C)it increases the likelihood of bankruptcy.
D)higher capital increases the return on equity.
Q3) If a bank has $100,000 of checkable deposits,a required reserve ratio of 20 percent,and it holds $40,000 in reserves,then the maximum deposit outflow it can sustain without altering its balance sheet is
A)$30,000.
B)$25,000.
C)$20,000.
D)$10,000.
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Chapter 10: Economic Analysis of Financial Regulation
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Q1) Under the Basel Accord,assets and off-balance sheet activities were sorted according to ________ categories with each category assigned a different weight to reflect the amount of ________.
A)2;adverse selection
B)2;credit risk
C)4;adverse selection
D)4;credit risk
Q2) When comparing the banking crisis in the United States to the crises in Latin America,cost to the taxpayers of the government bailouts was
A)higher in Latin American than in the United States.
B)higher in the United States than in Latin America.
C)about the same in both Latin America and the United States.
D)positive in Latin America but negative in the United States.
Q3) As in the United States,an important factor in the banking crises in Latin America was the
A)financial liberalization that occurred in the 1980s.
B)decline in real interest rates that occurred in the 1980s.
C)high inflation that occurred in the 1980s.
D)sluggish economic growth that occurred in the 1980s.
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Page 12
Chapter 11: Banking Industry: Structure and Competition
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Q1) Since the passage of the International Banking Act of 1978,the competitive advantage enjoyed by foreign banks in the U.S.has been A)reduced.
B)mildly expanded.
C)completely eliminated.
D)greatly expanded.
Q2) The modern commercial banking system began in America when the A)Bank of United States was chartered in New York in 1801.
B)Bank of North America was chartered in Philadelphia in 1782.
C)Bank of United States was chartered in Philadelphia in 1801.
D)Bank of North America was chartered in New York in 1782.
Q3) The U.S.banking system is considered to be a dual system because
A)banks offer both checking and savings accounts.
B)it actually includes both banks and thrift institutions.
C)it is regulated by both state and federal governments.
D)it was established before the Civil War,requiring separate regulatory bodies for the North and South.
Q4) Discuss three ways in which U.S.banks can become involved in international banking.
Q5) Why did the interest rate volatility of the 1970s spur financial innovation?
Page 13
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Chapter 12: Financial Crises
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Q1) ________ is a process of bundling together smaller loans (like mortgages)into standard debt securities.
A)Securitization
B)Origination
C)Debt deflation
D)Distribution
Q2) The ________,the difference between the interest rate on Baa corporate bonds and U.S.Treasury bonds.rose sharply during the Great Depression.
A)credit boom
B)credit spread
C)adjustable-rate
D)default swap
Q3) One suggested method of reducing excessive risk-taking by SIFIs is to require them to hold ________ capital when credit is expanding rapidly and ________ capital when credit is contracting.
A)less;more
B)more;no
C)more;less
D)less;no
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Page 14
Chapter 13: Central Banks and the Federal Reserve System
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Q1) The Chairman of the Board of Governors is chosen from among the seven governors and serves a ________,renewable term.
A)one-year
B)two-year
C)four-year
D)eight-year
Q2) The teal book is the Fed research document containing
A)the forecast of national economic variables for the next three years.
B)forecasts of the money aggregates conditional on different monetary policy stances.
C)information on the state of the economy in each Federal Reserve district.
D)both A and B.
E)A,B and C.
Q3) Although reserve requirements and the discount rate are not actually set by the ________,decisions concerning these policy tools are effectively made there.
A)Federal Reserve Bank of New York
B)Board of Governors
C)Federal Open Market Committee
D)Federal Reserve Banks
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15
Chapter 14: The Money Supply Process
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Sample Questions
Q1) The equation that represents M2 in the model of the money supply process is
A)M2 = C + D.
B)M2 = C + D + T - MMF.
C)M2 = C + D - T + MMF.
D)M2 = C + D + T + MMF.
Q2) Everything else held constant,an increase in the excess reserve ratio will mean ________ in the M2 money multiplier and ________ in the M2 money supply.
A)an increase;an increase
B)an increase;a decrease
C)a decrease;an increase
D)a decrease;a decrease
Q3) The Fed's holdings of securities consist primarily of ________,but also in the past have included ________.
A)Treasury securities;bankers' acceptances
B)municipal securities;bankers' acceptances
C)bankers' acceptances;Treasury securities
D)Treasury securities;municipal securities
Q4) Explain why the simple deposit multiplier overstates the true deposit multiplier.
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Page 16
Chapter 15: Tools of Monetary Policy
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Q1) In the market for reserves,if the federal funds rate is between the discount rate and the interest rate paid on excess reserves,a ________ in the reserve requirement ________ the demand for reserves,lowering the federal funds interest rate,everything else held constant.
A)rise;decreases
B)rise;increases
C)decline;increases
D)decline;decreases
Q2) Open market purchases raise the ________ thereby raising the ________.
A)money multiplier;money supply
B)money multiplier;monetary base
C)monetary base;money supply
D)monetary base;money multiplier
Q3) Everything else held constant,in the market for reserves,when the federal funds rate is 3%,lowering the interest rate paid on excess reserves rate from 2% to 1%
A)lowers the federal funds rate.
B)raises the federal funds rate.
C)has no effect on the federal funds rate.
D)has an indeterminate effect on the federal funds rate.
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Page 17
Chapter 16: The Conduct of Monetary Policy: Strategy and Tactics
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Q1) During World War II,whenever interest rates would rise and the price of bonds would begin to fall,the Fed would
A)lower reserve requirements.
B)raise reserve requirements.
C)make open market purchases of government securities.
D)make open market sales of government securities.
Q2) In practice,the Fed's policy of targeting money market conditions in the 1960s proved to be
A)countercyclical,helping to stabilize the economy.
B)procyclical,destabilizing the economy.
C)procyclical,helping to stabilize the economy.
D)countercyclical,destabilizing the economy.
Q3) The FOMC finally moved to ________ on January 25,2012,when it issued its "Statement on Long-Run Goals and Monetary Policy Strategy."
A)inflation targeting
B)zero inflation policy
C)"just do it" policy
D)monetary targeting
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Chapter 17: The Foreign Exchange Market
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Q1) With a 10 percent interest rate on dollar deposits,and an expected appreciation of 7 percent over the coming year,the expected return on dollar deposits in terms of the foreign currency is
A)3 percent.
B)10 percent.
C)13.5 percent.
D)17 percent.
Q2) When the value of the dollar changes from £0.5 to £0.75,then the British pound has ________ and the U.S.dollar has ________.
A)appreciated;appreciated
B)depreciated;appreciated
C)appreciated;depreciated
D)depreciated;depreciated
Q3) As the relative expected return on dollar assets increases,foreigners will want to hold more ________ assets and less ________ assets,everything else held constant.
A)foreign;foreign
B)foreign;dollar
C)dollar;foreign
D)dollar;dollar
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Chapter 18: The International Financial System
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Q1) Under the current managed float exchange rate regime,countries with balance of payments ________ frequently do not want to see their currencies ________ because it makes foreign goods more expensive for domestic consumers and can stimulate inflation.
A)surpluses;depreciate
B)deficits;depreciate
C)surpluses;appreciate
D)deficits;appreciate
Q2) Because it provides some indication of what is happening to U.S.claims on foreign wealth and the demand for imports and exports,the ________ is closely followed by economists wanting information on the future movement of exchange rates.
A)trade balance
B)capital account
C)current account balance
D)statistical discrepancy
Q3) Explain the 1992 crisis that led to the breakdown of the European Union's Exchange Rate Mechanism.What disadvantages of exchange-rate targeting were exhibited during this crisis?
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20
Chapter 19: Quantity Theory, inflation, and the Demand for Money
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Q1) Keynes hypothesized that the transactions component of money demand was primarily determined by the level of
A)interest rates.
B)velocity.
C)income.
D)stock market prices.
Q2) Velocity is defined as
A)P + M + Y.
B)(P ×M)/Y.
C)(Y ×M)/P.
D)(P × Y)/M.
Q3) What factors determine the demand for money in the Baumol-Tobin analysis of transactions demand for money? How does a change in each factor affect the quantity of money demanded?
Q4) If there are economies of scale in the transactions demand for money,as income increases,money demand
A)increases proportionately.
B)increases less than proportionately.
C)increases more than proportionately.
D)does not change.
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Chapter 20: The Is Curve
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Q1) A decrease in autonomous planned investment spending,other things equal,shifts the ________ curve to the ________.
A)IS;right
B)IS;left
C)LM;left
D)LM;right
Q2) A shift in tastes toward foreign goods ________ net exports in the U.S.and causes the IS curve to shift to the ________ in the U.S.,everything else held constant.
A)decreases;right
B)decreases;left
C)increases;right
D)increases;left
Q3) If the consumption function is expressed as C = a + mpc × YD,then "mpc" represents A)autonomous consumer expenditure.
B)the marginal propensity to consume.
C)the expenditure multiplier.
D)disposable income.
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Chapter 21: The Monetary Policy and Aggregate Demand
Curves
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Q1) Everything else held constant,an autonomous easing of monetary policy will cause
A)aggregate demand to increase.
B)aggregate demand to decrease.
C)the quantity of aggregate demand to increase.
D)the quantity of aggregate demand to decrease.
Q2) When the financial crisis started in August 2007,inflation was rising and the Fed began an aggressive easing lowering of the federal funds rate,which indicated that
A)there was an upward movement along the monetary policy curve.
B)there was a downward movement along the monetary policy curve.
C)the monetary policy curve shifted upward.
D)the monetary policy curve shifted downward.
Q3) Inflationary pressures caused the FOMC to increase the federal funds rate by ¼ of a percentage point in June 2004,and by exactly the same amount at every subsequent FOMC meeting through June of 2006.Theses actions
A)caused an upward movement along the monetary policy curve.
B)caused a downward movement along the monetary policy curve.
C)shifted the monetary policy curve upward.
D)shifted the monetary policy curve downward.
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Chapter 22: Aggregate Demand and Supply Analysis
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Q1) Everything else held constant,an increase in financial frictions ________ aggregate
A)increases;demand
B)decreases;demand
C)decreases;supply
D)increases;supply
Q2) Suppose the economy is producing at the natural rate of output.Assuming a fixed natural rate of output and everything else held constant,the development of a new,more productive technology will cause ________ in the unemployment rate and ________ in the inflation in the long run.
A)an increase;an increase
B)a decrease;a decrease
C)a decrease;an increase
D)no change;no change
Q3) ________ flexible wages and prices imply that the short-run aggregate supply curve is ________.
A)More;flatter
B)Less;steeper
C)less;vertical
D)More;steeper
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Chapter 23: Monetary Policy Theory
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Q1) If aggregate output is below the natural rate level,nonactivists of policies would recommend that the government
A)do nothing.
B)try to eliminate the high unemployment by attempting to shift the aggregate supply curve to the right.
C)try to eliminate the high unemployment by attempting to shift the aggregate demand curve to the right.
D)try to eliminate the high unemployment by attempting to shift the aggregate demand curve to the left.
Q2) When the policy rate hits its lower bound and inflation keeps falling,this portion of the Monetary Policy curve is
A)downward sloping.
B)upward sloping.
C)flat.
D)undetermined.
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Chapter 24: The Role of Expectations in Monetary Policy
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Q1) Suppose that there is a negative aggregate demand shock and the central bank commits to an inflation rate target.But if the commitment is not credible,then
A)the public's expected inflation will remain unchanged.
B)the short-run aggregate supply curve will rise.
C)economic contraction will be worse.
D)all of the above.
E)both B and C.
Q2) Arguments for adopting a policy rule include
A)the time-inconsistency problem can lead to poor economic outcomes.
B)discretionary policies pursue overly expansionary monetary policies to boost employment in the short run but generate higher inflation in the long run.
C)policy makers and politicians cannot be trusted.
D)all of the above.
Q3) The rational expectations hypothesis implies that when macroeconomic policy changes
A)the economy will become highly unstable.
B)the way expectations are formed will change.
C)people will be slow to catch on to the change.
D)people will make systematic mistakes.
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Page 26
Chapter 25: Transmission Mechanisms of Monetary Policy
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Q1) Predicting the impact of institutional change on the effectiveness of monetary policy is best done with a
A)structural model.
B)reduced-form model.
C)black-box model.
D)scientific model.
Q2) In the late 1990s,the stock market bubble ________ the value of Tobin's q,and caused ________ in business equipment.
A)increased;underinvestment
B)increased;overinvestment
C)decreased;underinvestment
D)decreased;overinvestment
Q3) From the earlier 1990s until 2012,the Japanese monetary was ________ and stock and real estate prices were ________.
A)tight;rising.
B)easy;rising.
C)tight;falling.
D)easy;falling.
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Chapter 26: Web 1:financial Crises in Emerging Market
Economies
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Q1) All of the following might create problems from financial liberalization in emerging countries EXCEPT
A)ineffective screening of borrowers.
B)limits on risk-taking.
C)lax government supervision of banks.
D)lenders failure to monitor borrowers.
Q2) Before the South Korean financial crisis,sales by the top five chaebols (family-owned conglomerates)were
A)nearly 50% of GDP.
B)about 10% of GDP.
C)almost 90% of GDP.
D)nearly 25% of GDP.
Q3) The key factor leading to the financial crises in Mexico and the East Asian countries was
A)a deterioration in banks' balance sheets because of increasing loan losses.
B)severe fiscal imbalances.
C)a sharp increase in the stock market.
D)a sharp decline in interest rates.
Q4) What two key factors trigger speculative attacks leading to currency cries in emerging market countries?
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Chapter 27: Web 2:the Islm Model
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Q1) An increase in the quantity of money supplied shifts the money supply curve to the ________ and the LM curve to the ________,everything else held constant.
A)right;left
B)right;right
C)left;left
D)left;right
Q2) In the open-economy ISLM model,the goods market equilibrium condition is
A)output = consumption + investment + government spending.
B)output = consumption + investment + government spending - tax.
C)output = consumption + investment + government spending + net export.
D)output = potential output.
Q3) If the Federal Reserve conducts open market ________,the money supply ________,shifting the LM curve to the left,everything else held constant.
A)purchases;decreases
B)sales;decreases
C)purchases;increases
D)sales;increases
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Chapter 28: Web 3:nonbank Finance
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Sample Questions
Q1) Most mutual funds are
A)no-load funds.
B)load funds.
C)large-load funds.
D)small-load funds.
Q2) ________ assist in the initial sale of securities in the primary market;________ assist in the trading of securities in the secondary markets.
A)Investment banks;mutual funds
B)Commercial banks;mutual funds
C)Investment banks;securities brokers and dealers
D)Commercial banks;securities brokers and dealers
Q3) A sales commission is charged for the purchase of
A)no-load mutual funds.
B)load mutual funds.
C)sinking mutual funds.
D)syndicated funds.
Q4) Explain the factors that account for the large increase in market share experienced by mutual funds since 1980.
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Chapter 29: Web 4:financial Derivatives
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Q1) If Second National Bank has more rate-sensitive assets than rate-sensitive liabilities,it can reduce interest-rate risk with a swap that requires Second National to A)pay fixed rate while receiving floating rate.
B)receive fixed rate while paying floating rate.
C)both receive and pay fixed rate.
D)both receive and pay floating rate.
Q2) Options on futures contracts are referred to as A)stock options.
B)futures options.
C)American options.
D)individual options.
Q3) If you bought a long contract on financial futures you hope that interest rates A)rise. B)fall.
C)are stable.
D)fluctuate.
Q4) Show graphically and explain the profits and losses of buying futures relative to buying call options.
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Chapter 30: Web 5:conflicts of Interest in the Financial
Services Industry
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Q1) Evidence suggests that credit-rating agencies ________ exploited conflicts of interest because ________.
A)have not;it would cause their ratings to lose credibility and thus have a lower value in the marketplace
B)have not;they would have an increase in profits in the long-run
C)have;it would cause their ratings to lose credibility and thus have a lower value in the marketplace
D)have;they would have an increase in profits in the long-run
Q2) Under the Sarbanes-Oxley Act of 2002,the provision that gives more funding to the SEC is an example of
A)regulate for transparency.
B)supervisory oversight.
C)separation of functions.
D)socialization of information production.
Q3) Explain the type of conflicts of interest that can arise from the development of universal banking.
Q4) Describe what is meant by economies of scope and explain how financial institutions' realizing economies of scope has led to an increase in conflicts of interest.
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