Operations and Information Systems Management
Pre-Test Questions
Course Introduction
This course explores the strategic role of operations and information systems in modern organizations. Students will examine the principles and practices that guide the design, management, and improvement of business processes and information flows. Key topics include process analysis, quality management, supply chain coordination, enterprise resource planning, and the integration of information systems with operational strategies. By blending theoretical foundations with real-world case studies, the course equips students with analytical tools and critical thinking skills necessary to enhance organizational efficiency, effectiveness, and innovation in diverse business environments.
Recommended Textbook
Management Information Systems Managing the Digital Firm 6th Canadian Edition by Kenneth
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2967 Verified Questions
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Chapter 1: Why Study Money, banking, and Financial Markets
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Sample Questions
Q1) If the aggregate price level at time t is denoted by Pt,the inflation rate from time t - 1 to t is defined as
A) t = (Pt - Pt - 1)/Pt - 1.
B) t = (Pt + 1 - Pt - 1)/Pt - 1.
C) t = (Pt + 1 - Pt )/Pt.
D) t = (Pt - Pt - 1)/Pt.
Answer: A
Q2) What crucial role do financial intermediaries perform in an economy?
Answer: Financial intermediaries borrow funds from people who have saved and make loans to other individuals and businesses and thus improve the efficiency of the economy.
Q3) Nominal GDP is output measured in ________ prices while real GDP is output measured in ________ prices.
A)current;current
B)current;fixed
C)fixed;fixed
D)fixed;current
Answer: B
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Chapter 2: An Overview of the Financial System
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Sample Questions
Q1) Corporations receive funds when their stock is sold in the primary market.Why do corporations pay attention to what is happening to their stock in the secondary market?
Answer: The existence of the secondary market makes their stock more liquid and the price in the secondary market sets the price that the corporation would receive if they choose to sell more stock in the primary market.
Q2) Which of the following is a depository institution?
A)a life insurance company
B)a mutual savings bank
C)a pension fund
D)a finance company
Answer: B
Q3) Equity instruments are traded in the ________ market.
A)money
B)bond
C)capital
D)commodities
Answer: C
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Page 4
Chapter 3: What Is Money
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Sample Questions
Q1) ________ is the relative ease and speed with which an asset can be converted into a medium of exchange.
A)Efficiency
B)Liquidity
C)Deflation
D)Specialization
Answer: B
Q2) Which of the following is NOT included in the measure of M1?
A)NOW accounts
B)demand deposits
C)currency
D)savings deposits
Answer: D
Q3) If an individual moves money from a small-denomination time deposit to a demand deposit account
A)M1 increases and M2 stays the same.
B)M1 stays the same and M2 increases.
C)M1 stays the same and M2 stays the same.
D)M1 increases and M2 decreases.
Answer: A
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Chapter 4: The Meaning of Interest Rates
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Sample Questions
Q1) A coupon bond that has no maturity date and no repayment of principal is called a A)consol.
B)cabinet.
C)Treasury bill.
D)Treasury note.
Q2) Which of the following $5,000 face-value securities has the highest yield to maturity?
A)a 6 percent coupon bond selling for $5,000
B)a 6 percent coupon bond selling for $5,500
C)a 10 percent coupon bond selling for $5,000
D)a 12 percent coupon bond selling for $4,500
Q3) I purchase a 10 percent coupon bond.Based on my purchase price,I calculate a yield to maturity of 8 percent.If I hold this bond to maturity,then my return on this asset is A)10 percent.
B)8 percent.
C)12 percent.
D)there is not enough information to determine the return.
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Chapter 5: The Behavior of Interest Rates
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Sample Questions
Q1) In the figure above,the price of bonds would fall from P<sub>2</sub> to P<sub>1</sub> if
A)there is a business cycle recession.
B)there is a business cycle expansion.
C)inflation is expected to increase in the future.
D)inflation is expected to decrease in the future.
Q2) The supply curve for bonds has the usual upward slope,indicating that as the price ________,ceteris paribus,the ________ increases.
A)falls;supply
B)falls;quantity supplied
C)rises;supply
D)rises;quantity supplied
Q3) When the government has a surplus,as occurred in the late 1990s,the ________ curve of bonds shifts to the ________,everything else held constant.
A)supply;right
B)supply;left
C)demand;right
D)demand;left
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Chapter 6: The Risk and Term Structure of Interest Rates
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Sample Questions
Q1) The steeply upward sloping yield curve in the figure above indicates that
A)short-term interest rates are expected to rise in the future.
B)short-term interest rates are expected to fall moderately in the future.
C)short-term interest rates are expected to fall sharply in the future.
D)short-term interest rates are expected to remain unchanged in the future.
Q2) A decrease in the liquidity of corporate bonds will ________ the yield of corporate bonds and ________ the yield of Treasury bonds,everything else held constant.
A)increase;increase
B)decrease;decrease
C)increase;decrease
D)decrease;increase
Q3) Which of the following bonds would have the highest default risk?
A)municipal bonds
B)investment-grade bonds
C)U.S.Treasury bonds
D)junk bonds
Q4) If a higher inflation is expected,what would you expect to happen to the shape of the yield curve? Why?
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Chapter 7: The Stock Market, the Theory of Rational
Expectations, and the Efficient Market Hypothesis
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Sample Questions
Q1) 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.
Q2) The small-firm effect refers to the
A)negative returns earned by small firms.
B)returns equal to large firms earned by small firms.
C)abnormally high returns earned by small firms.
D)low returns after adjusting for risk earned by small firms.
Q3) If additional information is not used when forming an optimal forecast because it is not available at that time,then expectations are
A)obviously formed irrationally.
B)still considered to be formed rationally.
C)formed adaptively.
D)formed equivalently.
Q4) What rights does ownership interest give stockholders?
Page 9
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Chapter 8: An Economic Analysis of Financial Structure
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Sample Questions
Q1) Property that is pledged to the lender in the event that a borrower cannot make his or her debt payment is called A)collateral.
B)points.
C)interest.
D)good faith money.
Q2) One financial intermediary in our financial structure that helps to reduce the moral hazard from arising from the principal-agent problem is the A)venture capital firm.
B)money market mutual fund.
C)pawn broker.
D)savings and loan association.
Q3) One possible reason for slower growth in developing and transition countries is A)capital may not be directed to its most productive use.
B)strict accounting standards are too stringent for the banks to meet.
C)the weak link between government and financial intermediaries.
D)the lack of adverse selection and moral hazard problems.
Q4) Explain the principal-agent problem as it pertains to equity contracts.
Q5) Why does the free-rider problem occur in the debt market?
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Chapter 9: Banking and the Management of Financial Institutions
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Sample Questions
Q1) In general,banks would prefer to acquire funds quickly by ________ rather than
A)reducing loans;selling securities
B)reducing loans;borrowing from the Fed
C)borrowing from the Fed;reducing loans
D)"calling in" loans;selling securities
Q2) Net profit after taxes per dollar of assets is a basic measure of bank profitability called
A)return on assets.
B)return on capital.
C)return on equity.
D)return on investment.
Q3) Which of the following would NOT be a way to increase the return on equity?
A)Buy back bank stock.
B)Pay higher dividends.
C)Acquire new funds by selling negotiable CDs and increase assets with them.
D)Sell more bank stock.
Q4) How can specializing in lending help to reduce the adverse selection problem in lending?
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Chapter 10: Economic Analysis of Financial Regulation
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Sample Questions
Q1) The current supervisory practice toward risk management
A)focuses on the quality of a bank's balance sheet.
B)determines whether capital requirements have been met.
C)evaluates the soundness of a bank's risk-management process.
D)focuses on eliminating all risk.
Q2) When bad drivers line up to purchase collision insurance,automobile insurers are subject to the
A)moral hazard problem.
B)adverse selection problem.
C)assigned risk problem.
D)ill queue problem.
Q3) Because banks engage in regulatory arbitrage,the Basel Accord on risk-based capital requirements may result in
A)reduced risk taking by banks.
B)reduced supervision of banks by regulators.
C)increased fraudulent behavior by banks.
D)increased risk taking by banks.
Q4) The government safety net creates both an adverse selection problem and a moral hazard problem.Explain.
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Chapter 11: Banking Industry: Structure and Competition
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Q1) Although it has a population about half that of the United States,Japan has A)many more banks.
B)about 25 percent of the number of banks.
C)more than 5000 commercial banks.
D)fewer than 100 commercial banks.
Q2) The most important developments that reduced banks' income advantages include
A)the increase in off-balance sheet activities.
B)the growth of securitization.
C)the elimination of Regulation Q ceilings.
D)the competition from money market mutual funds.
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) What financial innovations helped banks to get around the bank branching restrictions of the McFadden Act?
Q5) Why did the interest rate volatility of the 1970s spur financial innovation?
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Chapter 12: Financial Crises
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Sample Questions
Q1) In a bank panic,the source of contagion is the
A)free-rider problem.
B)too-big-to-fail problem.
C)transactions cost problem.
D)asymmetric information problem.
Q2) Macroprudential supervision policies try to prevent a leverage cycle by changing capital requirements so that they ________ during an expansion and ________ during a downturn.
A)increase;decrease
B)increase;increase
C)decrease;increase
D)decrease;decrease
Q3) Dodd-Frank addressed many of the issues that led to the financial crisis.Which of the following was NOT addressed by Dodd-Frank regulations?
A)stricter consumer protection laws
B)privately owned,government-sponsored enterprises (GSEs)such as Fannie mae and Freddie Mac
C)resolution authority over the large financial institutions
D)higher requirements on firms dealing in derivatives
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Page 14
Chapter 13: Central Banks and the Federal Reserve System
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Sample Questions
Q1) Which of the following is an entity of the Federal Reserve System?
A)the U.S.Treasury Secretary
B)the FOMC
C)the Comptroller of the Currency
D)the FDIC
Q2) Member commercial banks have purchased stock in their district Fed banks;the dividend paid by that stock is limited by law to ________ percent annually.
A)four
B)five
C)six
D)eight
Q3) Which of the following functions is NOT performed by any of the twelve regional Federal Reserve Banks?
A)check clearing
B)conducting economic research
C)setting interest rates payable on time deposits
D)issuing new currency
Q4) Why does the Federal Reserve Bank of New York play a special role within the Federal Reserve System?
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Chapter 14: The Money Supply Process
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Sample Questions
Q1) Everything else held constant,a decrease in the required reserve ratio on checkable deposits causes the M1 money multiplier to ________ and the money supply to
A)decrease;increase B)increase;increase C)decrease;decrease D)increase;decrease
Q2) Everything else held constant,an increase in the required reserve ratio will result in ________ in M1 and ________ in M2.
A)an increase;an increase
B)an increase;a decrease
C)a decrease;an increase
D)a decrease;a decrease
Q3) If a bank has excess reserves of $4,000 and demand deposit liabilities of $100,000,and if the reserve requirement is 10 percent,then the bank has actual reserves of
A)$14,000.
B)$19,000.
C)$24,000.
D)$29,000.
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Chapter 15: Tools of Monetary Policy
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Sample Questions
Q1) Suppose,at a given federal funds rate,there is an excess supply of reserves in the federal funds market.If the Fed wants the federal funds rate to stay at that level,then it should undertake an open market ________ of bonds,everything else held constant.If the Fed does nothing,however,the federal funds rate will ________.
A)sale;increase
B)purchase;increase
C)sale;decrease
D)purchase;decrease
Q2) At its inception,the Federal Reserve was intended to be
A)the Treasury's banker.
B)the issuer of government debt.
C)a lender-of-last-resort.
D)a regulator of bank holding companies.
Q3) When bad storms slow the check-clearing process,float tends to ________ causing the Fed to initiate ________ open market ________.
A)decrease;defensive;sales
B)decrease;dynamic;purchases
C)increase;defensive;sales
D)increase;dynamic;purchases
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Chapter 16: The Conduct of Monetary Policy: Strategy and Tactics
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Sample Questions
Q1) The first country to adopt inflation targeting was
A)the United Kingdom.
B)Canada.
C)New Zealand.
D)Australia.
Q2) Even if the Fed could completely control the money supply,monetary policy would have critics because
A)the Fed is asked to achieve many goals,some of which are incompatible with others.
B)the Fed's goals do not include high employment,making labor unions a critic of the Fed.
C)the Fed's primary goal is exchange rate stability,causing it to ignore domestic economic conditions.
D)it is required to keep Treasury security prices high.
Q3) The Fed was committed to keeping interest rates low to assist Treasury financing of budget deficits
A)only during World War I.
B)during the Great Depression.
C)during World War I and World War II.
D)throughout the entire existence of the Fed.
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Chapter 17: The Foreign Exchange Market
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Q1) Everything else held constant,when a country's currency depreciates,its goods abroad become ________ expensive while foreign goods in that country become ________ expensive.
A)more;less
B)more;more
C)less;less
D)less;more
Q2) Everything else held constant,if a factor decreases the demand for ________ goods relative to ________ goods,the domestic currency will depreciate.
A)foreign;domestic
B)foreign;foreign
C)domestic;domestic
D)domestic;foreign
Q3) According to PPP,the real exchange rate between two countries will always equal
A)0.0.
B)0.5.
C)1.0.
D)1.5.
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19
Chapter 18: The International Financial System
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Sample Questions
Q1) A central bank's attempt to prevent an appreciation of its currency can stimulate domestic inflation if the ________ of its currency leads to ________ international reserves which ________ the monetary base.
A)purchase;higher;increases B)purchase;lower;decreases C)sale;lower;decreases D)sale;higher;increases
Q2) If a central bank does not want to see its currency ________ in value,it may pursue contractionary monetary policy to raise the domestic interest rate,thereby ________ its currency.
A)fall;strengthening B)fall;weakening C)rise;strengthening D)rise;weakening
Q3) A country that dollarizes A)maximizes its seignorage.
B)earns the same amount of seignorage as it would with a currency board.
C)earns the same amount of seignorage as it would with exchange-rate targeting. D)eliminates its seignorage.
E)must pay seignorage to other governments to use their currency.
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Chapter 19: Quantity Theory, inflation, and the Demand for Money
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Sample Questions
Q1) The velocity of money is defined as
A)real GDP divided by the money supply.
B)nominal GDP divided by the money supply.
C)real GDP times the money supply.
D)nominal GDP times the money supply.
Q2) As interest rates rise,the expected absolute return of money ________,money's expected return relative to bonds ________.
A)does not change;decrease
B)rises;decrease
C)does not change;increase
D)falls;decrease
Q3) Keynes hypothesized that the precautionary component of money demand was primarily determined by the level of
A)interest rates.
B)velocity.
C)income.
D)stock market prices.
Q4) Describe what the liquidity trap is.Explain how it can be problematic for monetary policymakers.
To
Chapter 20: The Is Curve
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Sample Questions
Q1) Keynes believed that unstable investment caused the Great Depression.Using the simple Keynesian model,explain how a fall in investment affects equilibrium output.
Q2) Using the information contained in Situation 20-1,if autonomous consumption increases by $100,then equilibrium aggregate output will change by A)-$1,000.
B)-$100.
C)$100.
D)$1,000.
Q3) In the Keynesian cross diagram,a decrease in investment spending because companies become more pessimistic about investment profitability causes the aggregate demand function to shift down,the equilibrium level of aggregate output to ________,and the IS curve to shift to the ________,everything else held constant.
A)rise;left
B)rise;right
C)fall;left
D)fall;right
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Chapter 21: The Monetary Policy and Aggregate Demand
Curves
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Q1) Everything else held constant,a decrease in government spending will cause the IS curve to shift to the ________ and aggregate demand will ________.
A)right;increase
B)right;decrease
C)left;increase
D)left;decrease
Q2) 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.
Q3) The Fed's policy actions of reacting to higher inflation by raising the real interest rate during 2004-2006 were
A)upward movements along the monetary policy curve.
B)downward movement along the monetary policy curve.
C)upward shifts of the monetary policy curve.
D)downward shifts of the monetary policy curve.
Page 23
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Chapter 22: Aggregate Demand and Supply Analysis
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Q1) A theory of aggregate economic fluctuations called real business cycle theory holds that
A)changes in the real money supply are the only demand shocks that affect the natural rate of output.
B)aggregate demand shocks do affect the natural rate of output.
C)aggregate supply shocks do affect the natural rate of output.
D)changes in net exports are the only demand shocks that affect the natural rate of output.
Q2) The Phillips curve indicates that when the labor market is ________,production costs will ________ and aggregate supply decreases.
A)easy;rise
B)easy;fall
C)tight;fall
D)tight;rise
Q3) Everything else held constant,aggregate demand increases when A)taxes are cut.
B)government spending is reduced.
C)animal spirits decrease.
D)the money supply is reduced.
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Chapter 23: Monetary Policy Theory
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Q1) Nonactivists of policies contend that a policy of shifting the aggregate ________ curve will be costly because it produces ________ volatility in both the price level and output.
A)supply;less B)supply;more C)demand;less D)demand;more
Q2) When the economy suffers a permanent negative supply shock and the central bank does not respond by changing the autonomous component of monetary policy,then
A)inflation will be lower.
B)output will be at its potential.
C)output will be lower.
D)inflation will not change.
E)both A and B.
Q3) Demand-pull inflation can result when
A)policymakers set an unemployment target that is too high.
B)a persistent budget deficit is financed by selling bonds to the public.
C)a persistent budget deficit is financed by selling bonds to the central bank.
D)workers get numerous wage increases.
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Chapter 24: The Role of Expectations in Monetary Policy
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Q1) The argument that econometric policy evaluation is likely to be misleading if policymakers assume stable economic relationships is known as
A)the monetarist revolution.
B)the Lucas critique.
C)public choice theory.
D)new Keynesian theory.
Q2) A policy in which the money supply is kept growing at a constant rate regardless of the state of the economy is
A)a Taylor rule.
B)a discretionary policy.
C)a policy rule advocated by monetarists.
D)advocated by activists.
Q3) The Lucas critique is an attack on the usefulness of
A)conventional econometric models as forecasting tools.
B)conventional econometric models as indicators of the potential impacts on the economy of particular policies.
C)rational expectations models of macroeconomic activity.
D)the relationship between the quantity theory of money and aggregate demand.
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Chapter 25: Transmission Mechanisms of Monetary Policy
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Q1) A model that is composed of many equations that show the channels through which monetary and fiscal policy affect aggregate output and spending is called a
A)reduced-form model.
B)median-voter model.
C)informed median-voter model.
D)structural model.
Q2) In a study published in 1963,Milton Friedman and Anna Schwartz found that in every business cycle they studied over nearly a hundred-year period,the growth rate of the ________ decreased before ________ decreased.
A)money supply;interest rates
B)money supply;output
C)budget deficit;interest rates
D)budget deficit;output
Q3) Monetarists' preference for reduced-form models is based on their belief that A)reverse causation is a problem.
B)structural models may understate money's effect on economic activity.
C)money supply changes are always endogenous.
D)monetary policy affects only investment spending.
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Chapter 26: Web 1:financial Crises in Emerging Market
Economies
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Q1) In emerging market countries,the deterioration in bank's balance sheets has more ________ effects on lending and economic activity than in advanced countries.
A)negative
B)positive
C)affirming
D)advancing
Q2) What two key factors trigger speculative attacks leading to currency cries in emerging market countries?
Q3) 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.
Q4) A sharp depreciation of the domestic currency after a currency crisis leads to A)higher inflation.
B)lower import prices.
C)lower interest rates.
D)decrease in the value of foreign currency-denominated liabilities.
28
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Chapter 27: Web 2:the Islm Model
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Q1) If the economy is on the IS curve,but is to the left of the LM curve,aggregate output will ________ and the interest rate will ________.
A)rise;rise
B)rise;fall
C)fall;rise
D)fall;fall
Q2) If the economy is on the LM curve,but is to the left of the IS curve,aggregate output will ________ and the interest rate will ________.
A)rise;rise
B)rise;fall
C)fall;rise
D)fall;fall
Q3) In the long-run ISLM model and with everything else held constant,the long-run effect of an expansionary monetary policy is to
A)increase real output and the interest rate.
B)not change either real output or the interest rate.
C)increase real output and leave the interest rate unchanged.
D)increase the interest rate and leave real output unchanged.
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Chapter 28: Web 3:nonbank Finance
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Sample Questions
Q1) Charging risk-based insurance premiums is a time-honored principle of insurance management to reduce A)moral hazard.
B)adverse selection.
C)free riding.
D)principal-agent problems.
Q2) The type of credit insurance that landed AIG into trouble in 2008 is called A)insurance rate swaps.
B)monoline insurance.
C)default insurance.
D)credit default swaps.
Q3) Fraudulent practices and other abuses of private pension funds led Congress to enact the
A)FDIC Act.
B)Federal Reserve Act.
C)FHLBS.
D)Employee Retirement Income Security Act.
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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Sample Questions
Q1) An option allowing the holder to buy an asset in the future is a A)put option.
B)call option.
C)swap.
D)forward contract.
Q2) A put option gives the owner the A)right to sell the underlying security.
B)obligation to sell the underlying security.
C)right to buy the underlying security.
D)obligation to buy the underlying security.
Q3) A financial contract that obligates one party to exchange a set of payments it owns for another set of payments owned by another party is called a A)hedge.
B)call option.
C)put option.
D)swap.
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) Which of the following policy measures authorized investors to bring lawsuits against credit-rating agencies for a reckless failure to get the facts when providing a credit rating?
A)the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
B)Sarbanes-Oxley Act of 2002
C)Global Legal Settlement of 2002
D)Gramm-Leach-Bliley Act of 1999
E)Riegle-Neal Act of 1994
Q2) Of the remedies for conflicts of interest,which one is the most intrusive?
A)regulate for transparency
B)separation of functions
C)supervisory oversight
D)socialization of information production
Q3) Which policy measure requires investment banks to sever the links between research and securities underwriting?
A)Sarbanes-Oxley Act of 2002
B)Global Legal Settlement of 2002
C)Gramm-Leach-Bliley Act of 1999
D)Riegle-Neal Act of 1994
Page 32
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