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Economics of Money, Banking, and Financial Markets, 12e (Mishkin) Chapter 10 Economic Analysis of Financial Regulation 10.1 Asymmetric Information as a Rationale for Financial Regulation 1) Depositors lack of information about the quality of bank assets can lead to A) […]

23) Regulations designed to provide information to the marketplace so that investors can make informed decisions are called A) disclosure requirements. B) efficient market requirements. C) asset restrictions. D) capital requirements. Answer: A Ques Status: Previous Edition AACSB: Application of […]

Economics of Money, Banking, and Financial Markets, 12e (Mishkin) Chapter 11 Banking Industry: Structure and Competition 11.1 Historical Development of the Banking System 1) The modern commercial banking system began in America when the A) Bank of United States was […]

45) Since 1974, commercial banks importance as a source of funds for nonfinancial borrowers A) has shrunk dramatically, from around 40 percent of total credit advanced to around 20 percent by 2017. B) has shrunk dramatically, from around 70 percent […]

Economics of Money, Banking, and Financial Markets, 12e (Mishkin) Chapter 12 Financial Crises 12.1 What is a Financial Crisis? 1) A major disruption in financial markets characterized by sharp declines in asset prices and firm failures is called a A) […]

Economics of Money, Banking, and Financial Markets, 12e (Mishkin) Chapter 13 Central Banks and the Federal Reserve System 13.1 Origins of the Federal Reserve System 1) The First Bank of the United States A) was disbanded in 1811 when its […]

Economics of Money, Banking, and Financial Markets, 12e (Mishkin) Chapter 14 The Money Supply Process 14.1 Three Players in the Money Supply Process 1) The government agency that oversees the banking system and is responsible for the conduct of monetary […]

31) If reserves in the banking system increase by $100, then checkable deposits will increase by $2,000 in the simple model of deposit creation when the required reserve ratio is A) 0.01. B) 0.05. C) 0.10. D) 0.20. Answer: B […]

33) Everything else held constant, an increase 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 […]

Economics of Money, Banking, and Financial Markets, 12e (Mishkin) Chapter 15 Tools of Monetary Policy 15.1 The Market for Reserves and the Federal Funds Rate 1) The interest rate charged on overnight loans of reserves between banks is the A) […]

13) When bad storms slow the check-clearing process, float tends to ________ causing the Fed to initiate defensive open market ________. A) decrease; sales B) decrease; purchases C) increase; sales D) increase; purchases Answer: C Ques Status: Previous Edition AACSB: […]

Economics of Money, Banking, and Financial Markets, 12e (Mishkin) Chapter 16 The Conduct of Monetary Policy: Strategy and Tactics 16.1 The Price Stability Goal and The Nominal Anchor 1) The most common definition that monetary policymakers use for price stability […]

5) If the Fed pursues a strategy of targeting an interest rate when fluctuations in money demand are prevalent A) fluctuations of nonborrowed reserves will be small. B) fluctuations of nonborrowed reserves will be large. C) the Fed will probably […]

Economics of Money, Banking, and Financial Markets, 12e (Mishkin) Chapter 17 The Foreign Exchange Market 17.1 Foreign Exchange Market 1) The exchange rate is A) the price of one currency relative to gold. B) the value of a currency relative […]

4) A decrease in the domestic interest rate causes the demand for domestic assets to shift to the ________ and the domestic currency to ________, everything else held constant. A) right; appreciate B) right; depreciate C) left; appreciate D) left; […]

Economics of Money, Banking, and Financial Markets, 12e (Mishkin) Chapter 18 The International Financial System 18.1 Intervention in the Foreign Exchange Market 1) A central bank ________ of domestic currency and corresponding ________ of foreign assets in the foreign exchange […]

35) Under the Exchange Rate Mechanism of the European Monetary System, when the British pound depreciated below its lower limit against the German mark, the German central bank was required to buy ________ and sell ________, thereby ________ international reserves. […]

Economics of Money, Banking, and Financial Markets, 12e (Mishkin) Chapter 19 Quantity Theory, Inflation and the Demand for Money 19.1 Quantity Theory of Money 1) The quantity theory of money is a theory of how A) the money supply is […]

10) Because Keynes assumed that the expected return on money was zero, he argued that people would A) never hold money. B) never hold money as a store of wealth. C) hold money as a store of wealth when the […]

Economics of Money, Banking, and Financial Markets, 12e (Mishkin) Chapter 20 The IS Curve 20.1 Planned Expenditure and Aggregate Demand 1) His analysis started with the recognition that the total quantity demanded of an economy’s output was the sum of […]

36) In an open economy, aggregate demand is the sum of A) consumer expenditure, actual investment spending, and government spending. B) consumer expenditure, planned investment spending, and government spending. C) consumer expenditure, actual investment spending, government spending, and net exports. […]

Economics of Money, Banking, and Financial Markets, 12e (Mishkin) Chapter 21 The Monetary Policy and Aggregate Demand Curves 21.1 The Federal Reserve and Monetary Policy 1) Because prices are slow to move in the short-run, when the Federal Reserve lowers […]

Economics of Money, Banking, and Financial Markets, 12e (Mishkin) Chapter 22 Aggregate Demand and Supply Analysis 22.1 Aggregate Demand 1) The aggregate demand curve is the total quantity of an economy’s A) intermediate goods demanded at different inflation rates. B) […]

15 15) Using the aggregate demand-aggregate supply model, explain and demonstrate graphically the short-run and long-run effects of an increase in the money supply. Answer: See figure below. An increase in the money supply increases aggregate demand, from AD to […]

Economics of Money, Banking, and Financial Markets, 12e (Mishkin) Chapter 23 Monetary Policy Theory 23.1 Response of Monetary Policy to Shocks 1) Policy makers cannot achieve both price stability and economic activity stability when facing A) temporary supply shocks. B) […]

Economics of Money, Banking, and Financial Markets, 12e (Mishkin) Chapter 24 The Role of Expectations in Monetary Policy 24.1 Lucas Critique of Policy Evaluation 1) Whether one views the discretionary policies of the 1960s and 1970s as destabilizing or believes […]

Economics of Money, Banking, and Financial Markets, 12e (Mishkin) Chapter 25 Transmission Mechanisms of Monetary Policy 25.1 Transmission Mechanism of Monetary Policy 1) Economic theory suggests that ________ interest rates are ________ important than ________ interest rates in explaining investment […]

Economics of Money, Banking, and Financial Markets, 12e (Mishkin) Chapter 26 Web Chapter 1: Financial Crises in Emerging Market Economies 26.1 Dynamics of Financial Crises in Emerging Market Economies 1) Financial crises generally develop along two basic paths A) mismanagement […]

Economics of Money, Banking, and Financial Markets, 12e (Mishkin) Chapter 27 Web Chapter 2: The ISLM Model 27.1 Keynes’s Fixed Price Level Assumption and the IS Curve 1) Because inflation was not a serious problem during the Great Depression, Keynes’s […]

17) Using the ISLM model, explain the effects of a monetary expansion combined with a fiscal contraction. How do the equilibrium level of output and interest rate change? Answer: The monetary expansion shifts the LM curve to the right which […]

60) If the federal government were to guarantee payment on municipal bonds, the yield on municipal bonds would ________ and the yield on U.S. Treasury bonds would ________, all else equal. A) decrease; increase B) increase; increase C) increase; decrease […]

Economics of Money, Banking, and Financial Markets, 12e (Mishkin) Chapter 7 The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis 7.1 Computing the Price of Common Stock 1) A stockholder’s ownership of a company’s stock gives […]

3) If the optimal forecast of the return on a security exceeds the equilibrium return, then A) the market is inefficient. B) no unexploited profit opportunities exist. C) the market is in equilibrium. D) the market is myopic. Answer: A […]

Economics of Money, Banking, and Financial Markets, 12e (Mishkin) Chapter 8 An Economic Analysis of Financial Structure 8.1 Basic Facts About Financial Structure Throughout the World 1) American businesses get their external funds primarily from A) bank loans. B) bonds […]

9) That most used cars are sold by intermediaries (i.e., used car dealers) provides evidence that these intermediaries A) have been afforded special government treatment, since used car dealers do not provide information that is valued by consumers of used […]

Economics of Money, Banking, and Financial Markets, 12e (Mishkin) Chapter 9 Banking and the Management of Financial Institutions 9.1 The Bank Balance Sheet 1) Which of the following statements are TRUE? A) A bank’s assets are its sources of funds. […]

28) Net profit after taxes per dollar of equity capital is a basic measure of bank profitability called A) return on assets. B) return on capital. C) return on equity. D) return on investment. Answer: C Ques Status: Previous Edition […]

PART ONE How to Use the Instructor’s Manual and Other Textbook Ancillaries Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 2 Copyright © 2019 by Pearson Education, Inc. All rights reserved. Organization of […]

PART TWO Overviews of the Textbook Chapters and Teaching Tips Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 14 Chapter 1 Why Study Money, Banking, and Financial Markets? Before embarking on a study […]

Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 32 Copyright © 2019 by Pearson Education, Inc. All rights reserved. The chapter then moves on to discuss monetary policy tactics: in particular, what policy […]

Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 309 Chapter 15: Tools of Monetary Policy The Market for Reserves and the Federal Funds Rate Demand and Supply in the Market for Reserves How […]

PART FOUR Transparency Masters: Chapter Outlines Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 290 Part 1 Introduction Chapter 1: Why Study Money, Banking, and Financial Markets? Why Study Financial Markets? Debt Markets […]

Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 51 Chapter 1 ANSWERS TO QUESTIONS 1. What is the typical relationship among interest rates on three-month Treasury bills, long- term Treasury bonds, and Baa […]

Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 127 Chapter 10 ANSWERS TO QUESTIONS 1. Why are deposit insurance and other types of government safety nets important to the health of the economy? […]

Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 136 Chapter 11 ANSWERS TO QUESTIONS 1. Do you think that before the National Bank Act of 1863 the prevailing conditions in the banking industry […]

Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 143 Chapter 12 ANSWERS TO QUESTIONS 1. How does the concept of asymmetric information help to define a financial crisis? Asymmetric information problems (adverse selection […]

Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 152 Chapter 13 ANSWERS TO QUESTIONS 1. Why was the Federal Reserve System set up with twelve regional Federal Reserve Banks, rather than one central […]

Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 158 Chapter 14 ANSWERS TO QUESTIONS Unless otherwise noted, the following assumptions are made in all questions: the required reserve ratio on checkable deposits is […]

Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 168 Chapter 15 ANSWERS TO QUESTIONS 1. If the manager of the open market desk hears that a snowstorm is about to strike New York […]

Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 179 Chapter 16 ANSWERS TO QUESTIONS 1. What are the benefits of using a nominal anchor for the conduct of monetary policy? A nominal anchor […]

Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 193 Chapter 17 ANSWERS TO QUESTIONS 1. Suppose that you are considering going on vacation abroad and that the euro has appreciated by 15% with […]

Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 201 Chapter 18 ANSWERS TO QUESTIONS 1. If the Federal Reserve sells dollars in the foreign exchange market but conducts an offsetting open market operation […]

Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 210 Chapter 19 ANSWERS TO QUESTIONS 1. How would you expect velocity to typically behave over the course of the business cycle? Since nominal GDP […]

Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 58 Chapter 2 ANSWERS TO QUESTIONS 1. If I can buy a car today for $5,000 and it is worth $10,000 in extra income to […]

Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 219 Chapter 20 ANSWERS TO QUESTIONS 1. “When the stock market rises, investment spending is increasing.” Is this statement true, false, or uncertain? Explain your […]

Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 230 Chapter 21 ANSWERS TO QUESTIONS 1. When the inflation rate increases, what happens to the federal funds rate? Operationally, how does the Fed adjust […]

Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 241 Chapter 22 ANSWERS TO QUESTIONS 1. Explain why the aggregate demand curve slopes downward and the short-run aggregate supply curve slopes upward. A rise […]

Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 254 Chapter 23 ANSWERS TO QUESTIONS 1. What does it mean when we say that the inflation gap is negative? When the inflation gap is […]

Chapter 24 ANSWERS TO QUESTIONS 1. What does the Lucas critique state about the limitations of our current understanding of the way in which the economy works? The Lucas critique says that policymakers’ priors about the effects of a given […]

Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 280 Chapter 25 ANSWERS TO QUESTIONS 1. From 2008 to 2017, auto loan rates in the United States declined from around 8% to near historic […]

Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 65 Chapter 3 ANSWERS TO QUESTIONS 1. Why is simply counting currency an inadequate measure of money? Since a lot of other assets have liquidity […]

Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 73 Chapter 4 ANSWERS TO QUESTIONS 1. Would a dollar tomorrow be worth more to you today when the interest rate is 20% or when […]

Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 80 Chapter 5 ANSWERS TO QUESTIONS 1. Explain why you would be more or less willing to buy a share of Microsoft stock in the […]

Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 92 Chapter 6 ANSWERS TO QUESTIONS 1. If junk bonds are “junk,” then why do investors buy them? Junk bonds are referred to as “junk” […]

Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 102 Chapter 7 ANSWERS TO QUESTIONS 1. What basic principle of finance can be applied to the valuation of any investment asset? The value of […]

Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 109 Chapter 8 ANSWERS TO QUESTIONS 1. For each of the following countries, identify the single most important (largest) and least important (smallest) source of […]

Mishkin • Instructor’s Manual for The Economics of Money, Banking, and Financial Markets, Twelfth Edition 119 Chapter 9 ANSWERS TO QUESTIONS 1. Why might a bank be willing to borrow funds from other banks at a higher rate than the […]