The most liquid securities traded in the capital market are
A) corporate bonds.
B) municipal bonds.
C) U.S. Treasury bonds.
D) mortgage-backed securities.
Answer:
Everything else held constant, a decrease in wealth
A) increases the demand for stocks.
B) increases the demand for bonds.
C) reduces the demand for silver.
D) increases the demand for gold.
Answer:
When the Federal Reserve purchases a government bond from a bank, reserves in the
banking system ________ and the monetary base ________, everything else held
constant.
A) increase; increases
B) increase; decreases
C) decrease; increases
D) decrease; decreases
Answer:
A decrease in the expected future domestic exchange rate causes the demand for
domestic assets to ________ and the domestic currency to ________, everything else
held constant.
A) increase; appreciate
B) increase; depreciate
C) decrease; appreciate
D) decrease; depreciate
Answer:
Everything else held constant, an increase in the money market fund 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
Answer:
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.
Answer:
If the price of bonds is set ________ the equilibrium price, the quantity of bonds
demanded exceeds the quantity of bonds supplied, a condition called excess ________.
A) above; demand
B) above; supply
C) below; demand
D) below; supply
Answer:
In the Keynesian cross diagram, an increase in investment spending because companies
become more optimistic about investment profitability causes the aggregate demand
function to shift ________ and the equilibrium level of aggregate output to ________,
everything else held constant.
A) up; rise
B) up; fall
C) down; rise
D) down; fall
Answer:
Under a fixed exchange rate regime, if a country has an overvalued exchange rate, then
its central bank’s attempt to keep its currency from ________ will result in a ________
of international reserves.
A) depreciating; gain
B) depreciating; loss
C) appreciating; gain
D) appreciating; loss
Answer:
Using the Gordon growth formula, if D1 is $1.00, ke is 10% or 0.10, and g is 5% or
0.05, then the current stock price is
A) $10.
B) $20.
C) $30.
D) $40.
Answer:
Financial innovations that grew out of the bank branching restrictions were
A) bank holding companies and automatic teller machines.
B) bank holding companies and securitization.
C) automatic teller machines and sweep accounts.
D) automatic teller machines and bank credit cards.
Answer:
The decline in traditional banking internationally can be attributed to
A) increased regulation.
B) improved information technology.
C) increasing monopoly power of banks over depositors.
D) increased protection from competition.
Answer:
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
Answer:
Because the quantity theory of money tells us how much money is held for a given
amount of aggregate income, it is also a theory of
A) interest-rate determination.
B) the demand for money.
C) exchange-rate determination.
D) the demand for assets.
Answer:
Everything else held constant, when output is ________ the natural rate level, wages
will begin to ________, increasing short-run aggregate supply.
A) above; fall
B) above; rise
C) below; fall
D) below; rise
Answer:
Under the Bretton Woods system, the organization assigned the task of making loans to
countries that were experiencing balance of payments difficulties is known as the
A) World Bank.
B) International Development Association.
C) International Monetary Fund.
D) Federal Reserve System.
Answer:
________ institutions are financial intermediaries that acquire funds at periodic
intervals on a contractual basis.
A) Investment
B) Contractual savings
C) Thrift
D) Depository
Answer:
Bank reserves include
A) deposits at the Fed and short-term treasury securities.
B) vault cash and short-term Treasury securities.
C) vault cash and deposits at the Fed.
D) deposits at other banks and deposits at the Fed.
Answer:
If policymakers set a target for unemployment that is too low because it is less than the
natural rate of unemployment, this can set the stage for a higher rate of money growth
and
A) cost-push inflation.
B) demand-pull inflation.
C) cost-pull inflation.
D) demand-push inflation.
Answer:
In the absence of regulation, banks would probably hold
A) too much capital, reducing the efficiency of the payments system.
B) too much capital, reducing the profitability of banks.
C) too little capital.
D) too much capital, making it more difficult to obtain loans.
Answer:
Before 1863,
A) federally-chartered banks had regulatory advantages not granted to state-chartered
banks.
B) the number of federally-chartered banks grew at a much faster rate than at any other
time since the end of the Civil War.
C) banks acquired funds by issuing bank notes.
D) banks were required to maintain 100% of their deposits as reserves.
Answer:
Under a fixed exchange rate regime, if the domestic currency is initially ________, that
is, ________ par, the central bank must intervene to sell the domestic currency by
purchasing foreign assets.
A) overvalued; below
B) overvalued; above
C) undervalued; below
D) undervalued; above
Answer:
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
Answer:
A goal of the Securities and Exchange Commission is to reduce problems arising from
A) competition.
B) banking panics.
C) risk.
D) asymmetric information.
Answer:
In the Baumol-Tobin analysis of transactions demand for money, either an increase in
________ or a decrease in ________ increases money demand.
A) income; interest rate
B) interest rates; brokerage fees
C) brokerage fees; income
D) interest rate; income
Answer:
Which of the following are reported as liabilities on a bank’s balance sheet?
A) Reserves
B) Checkable deposits
C) Loans
D) Deposits with other banks
Answer:
A change in perceived risk of a stock changes
A) the expected dividend growth rate.
B) the expected sales price.
C) the required rate of return.
D) the current dividend.
Answer:
Conventional money demand functions tended to ________ money demand in the
middle and late 1970s, and ________ velocity beginning in
A) overpredict; overpredict
B) overpredict; underpredict
C) underpredict; overpredict
D) underpredict; underpredict
Answer:
According to the Taylor Principle, when the inflation rate rises, the nominal interest rate
should be ________ by ________ than the inflation rate increase.
A) increased; more
B) increased; less
C) decreased; more
D) decreased; less
Answer:
Everything else held constant, in the market for reserves, increases in the discount rate
affect the federal funds rate
A) when the funds rate is below the discount rate.
B) when the funds rate equals the discount rate.
C) when the demand for federal funds intersects the vertical section of the reserve
supply curve.
D) when the demand for federal funds equals zero.
Answer: