If the Fed injects reserves into the banking system and they are held as excess reserves,
then the monetary base ________ and the money supply ________.
A) remains unchanged; remains unchanged
B) remains unchanged; increases
C) increases; increases
D) increases; remains unchanged
When a lender refuses to make a loan, although borrowers are willing to pay the stated
interest rate or even a higher rate, the bank is said to engage in
A) coercive bargaining.
B) strategic holding out.
C) credit rationing.
D) collusive behavior.
Everything else held constant, an autonomous easing of monetary policy will cause
A) the quantity of aggregate demand to increase.
B) the quantity of aggregate demand to decrease.
C) aggregate demand to decrease.
D) aggregate demand to increase.
Credit card debt is
A) secured debt.
B) unsecured debt.
C) restricted debt.
D) unrestricted debt.
An increase in the foreign 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; depreciate
Most U.S. financial crises have started during periods of ________ either after the start
of a recession, a stock market crash, or the failure of a major financial institution.
A) high uncertainty
B) low interest rates
C) low asset prices
D) high financial regulation
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
Everything else held constant, if aggregate output is to the ________ of the LM curve,
then there is an excess supply of money which will cause the interest rate to ________.
A) right; fall
B) right; rise
C) left; fall
D) left; rise
The Fed accidentally discovered open market operations in the early
A) 1920s.
B) 1910s.
C) 1900s.
D) 1890s.
Evidence from business cycle fluctuations in the United States indicates that
A) a negative relationship between money growth and general economic activity exists.
B) recessions are usually preceded by declines in bond prices.
C) recessions are usually preceded by dollar depreciation.
D) recessions are usually preceded by a decline in the growth rate of money.
Assuming that the average duration of its assets is four years, while the average
duration of its liabilities is three years, then a 5 percentage point increase in interest
rates will cause the net worth of First National to ________ by ________ of the total
original asset value.
A) decline; 5 percent
B) decline; 10 percent
C) decline; 15 percent
D) increase; 20 percent
The McFadden Act of 1927
A) effectively prohibited banks from branching across state lines.
B) required that banks maintain bank capital equal to at least 6 percent of their assets.
C) effectively required that banks maintain a correspondent relationship with large
money center banks.
D) separated the commercial banks and investment banks.
The primary assets of a pension fund are
A) money market instruments.
B) corporate bonds and stock.
C) consumer and business loans.
D) mortgages.
An expansionary monetary policy increases net exports by ________ interest rates and
________ the value of the dollar.
A) lowering nominal; decreasing
B) lowering real; decreasing
C) raising nominal; increasing
D) raising real; increasing
Although the dominance of ________ over ________ is clear in all countries, the
relative importance of bond versus stock markets differs widely.
A) financial intermediaries; securities markets
B) financial intermediaries; government agencies
C) government agencies; financial intermediaries
D) government agencies; securities markets
The Depository Institutions Deregulation and Monetary Control Act of 1980
A) established higher reserve requirements for nonmember than for member banks.
B) established higher reserve requirements for member than for nonmember banks.
C) abolished reserve requirements.
D) established uniform reserve requirements for all banks.
Acquiring information on a bank’s activities in order to determine a bank’s risk is
difficult for depositors and is another argument for government
A) regulation.
B) ownership.
C) recall.
D) forbearance.
The two key factors that trigger speculative attacks on emerging market currencies are
A) deterioration in bank balance sheets and severe fiscal imbalances.
B) deterioration in bank balance sheets and low interest rates abroad.
C) low interest rates abroad and severe fiscal imbalances.
D) low interest rates abroad and rising asset prices.
If people expect nominal interest rates to be higher in the future, the expected return to
bonds ________, and the demand for money ________.
A) rises; increases
B) rises; decreases
C) falls; increases
D) falls; decreases
The reduction in transactions costs per dollar of investment as the size of transactions
increases is
A) discounting.
B) economies of scale.
C) economies of trade.
D) diversification.
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.
A person’s house is part of her
A) money.
B) income.
C) liabilities.
D) wealth.
In the Keynesian framework, as long as output is ________ the equilibrium level,
unplanned inventory investment will remain ________ and firms will continue to raise
production.
A) below; negative
B) above; negative
C) below; positive
D) above; positive
The chaebols encouraged the Korean government to open up Korean financial markets
to foreign capital. The Korean government responded by
A) allowing unlimited short-term foreign borrowing but maintained quantity restrictions
on long-term foreign borrowing by financial institutions.
B) allowing unlimited short-term and long-term foreign borrowing by financial
institutions.
C) maintaining quantity restrictions on short-term foreign borrowing but allowing
unlimited long-term foreign borrowing by financial institutions.
D) not allowing any foreign borrowing by financial institutions.
If your nominal income in 2014 was $50,000, and prices doubled between 2014 and
2017, to have the same real income, your nominal income in 2017 must be
A) $50,000.
B) $75,000.
C) $90,000.
D) $100,000.
Although the National Bank Act of 1863 was designed to eliminate state-chartered
banks by imposing a prohibitive tax on banknotes, state banks were able to stay in
business by
A) issuing credit cards.
B) ignoring the regulations.
C) acquiring funds through deposits.
D) branching into other states.
Capital ________ are American purchases of foreign assets, and capital ________ are
foreign purchases of American assets.
A) inflows; outflows
B) inflows; inflows
C) outflows; outflows
D) outflows; inflows
The concept of adverse selection helps to explain all of the following EXCEPT
A) why firms are more likely to obtain funds from banks and other financial
intermediaries, rather than from the securities markets.
B) why indirect finance is more important than direct finance as a source of business
finance.
C) why direct finance is more important than indirect finance as a source of business
finance.
D) why the financial system is so heavily regulated.
A put option gives the seller 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.
In an agreement to exchange dollars for euros in three months at a price of $0.90 per
euro, the price is the
A) spot exchange rate.
B) money exchange rate.
C) forward exchange rate.
D) fixed exchange rate.