On the commercial bank balance sheet, which of the following is an asset?
a. real estate loans
b. capital accounts
c. borrowings
d. all of the above
Answer:
Suppose that society has the loss function L = 0.5(%DP – 2%)2 + 0.5(U – 5%)2, where U
represents the unemployment rate. Choose the combination of output and
unemployment that this country would most prefer.
a. inflation = 2 percent; unemployment = 8 percent
b. inflation = 4 percent; unemployment = 6 percent
c. inflation = 5 percent; unemployment = 5 percent
d. inflation = 6 percent; unemployment = 4 percent
Answer:
The predominant factor driving the behavior of long-term interest rates has been:
a. expected inflation
b. exchange rate behavior
c. budget deficits
d. business cycles
Answer:
Of the three lags of policy, the shortest lag for monetary policymakers is probably the
a. recognition lag
b. implementation lag
c. impact lag
d. none of the above
Answer:
In the short-run model of exchange rate determination, if we consider the U.S.-German
exchange rate (euros per dollar), announcement of an unexpected U.S. trade deficit will
a. shift iD rightward and cause the dollar to appreciate
b. shift RF leftward and cause the dollar to depreciate
c. shift RF rightward and cause the dollar to depreciate
d. do none of the above
Answer:
Credit unions:
a. are “mutuals,” owned and run by their depositors
b. suffer from high overhead expenses
c. can be chartered only by the federal government
d. all of the above
Answer:
Suppose, with other factors held constant, U.S. interest rates rise because of an increase
in expected U.S. inflation. In our short-run model of exchange rate determination,
which of the following will occur?
a. iD shifts right, RF shifts left, and the dollar appreciates
b. iD shifts right and the dollar appreciates
c. iD shifts right, RF shifts right, and the net effect on the dollar is ambiguous
d. iD shifts right, RF shifts left, and the dollar depreciates
Answer:
Choose the response that best ranks the following targets from most important (strongly
linked to ultimate goals) to least important.
a. portfolio of securities; monetary base; M2 money supply
b. short-term interest rate; M1 money supply; monetary base
c. long-term corporate bond rate; total bank reserves; portfolio of securities
d. M1 money supply; M2 money supply; M3 money supply
Answer:
Because New Keynesians believe wages and other input prices are sticky,
a. they believe the self-correcting mechanism can be trusted to keep the economy near
equilibrium
b. they believe the self-correcting mechanism is slow and ineffective
c. they have no opinion about the viability of the self-correcting mechanism
d. not enough information is given to answer the question
Answer:
Whenever commercial banks are expanding loans
a. aggregate commercial bank excess reserves expand
b. aggregate commercial bank required reserves expand
c. aggregate commercial bank reserves expand
d. all of the above occur
Answer:
Which of the following factors does not positively impact the base?
a. A
b. Ff
c. P
d. all of the above positively impact the base
Answer:
Suppose that news is announced suggesting a likely sharp decrease in oil prices
worldwide. The impact on the U.S.-Japan exchange rate is likely to be the following:
a. the dollar will appreciate against the yen
b. the yen will appreciate against the dollar
c. since inflation will be reduced worldwide, there is likely to be no effect on the
U.S.-Japan exchange rate
d. none of the above is correct
Answer:
In the long run,
a. the aggregate demand curve is vertical
b. the aggregate demand curve is horizontal
c. the aggregate supply curve is vertical
d. the aggregate supply curve is upward sloping
Answer:
Inflation is most often caused by:
a. unnecessary contraction of the availability of credit
b. demand side forces which depress the level of consumer spending
c. supply side forces such as oil prices, which increase costs to producers
d. rapid expansion of the money supply
Answer:
Which of the following expressions is correct?
a. B = Fb + Cp
b. B = R + Cp
c. B = Fb + Cb
d. R = B + Cp
Answer:
Adoption of an inflation targeting regime
a. increases the central bank’s flexibility to respond to crises
b. reduces the instability of output caused by supply shocks
c. does both of the above
d. does neither of the above
Answer:
Restrictions on branch banking ultimately led to
a. stimulus for the development of electronic banking
b. creation of nonbank banks
c. creation of bank holding companies
d. all of the above
Answer:
During 2001 and 2002, in response to the U.S. economic downturn in the spring of
2001, the Fed ____ its interest rate target ____ time(s).
a. reduced; twelve
b. reduced; only one
c. increased; twelve
d. increased; only one
Answer:
An increase in which of the following produces an increase in the monetary base?
a. A
b. Cp
c. Ft
d. TCa
Answer:
More than 50 percent of commercial bank assets are in the form of
a. time and savings deposits
b. securities
c. loans
d. capital accounts
Answer:
Which of the following is false? Loan loss reserve accounts:
a. are debited before a loss is actually realized
b. allow banks to realize losses at a time when they are most capable of dealing with
them
c. are a subcategory of “required reserves”
d. are a portion of capital accounts
Answer:
To be effective, an inflation targeting regime should specify
a. a credible strategy to achieve the target
b. a numerical inflation target or band
c. a time frame within which the target should be achieved
d. all of the above
Answer:
Which of the following is potentially an intermediate target variable for monetary
policy?
a. the federal funds rate
b. the nonborrowed monetary base
c. M1
d. all of the above
Answer:
If the dollar is expected to appreciate relative to the Polish zloty, and the interest parity
condition holds, then
a. interest rates must be higher in the U.S. than in Poland
b. interest rates must be equal in the U.S. and Poland
c. interest rates must be lower in the U.S. than in Poland
d. we can reach no conclusion about interest rates in the U.S. and Poland
Answer:
One difference between central banks and private banks is that central banks, unlike
private banks,
a. do not have assets and liabilities
b. do not have capital accounts
c. do not make loans of any type
d. do not operate for the purpose of earning a profit
Answer:
The stock market crash that occurred in the United States in the late 1920s resulted in
a. impaired business and consumer confidence, but increased wealth
b. decreased wealth and impaired business confidence, but roughly constant levels of
consumer confidence
c. reduced wealth and impaired business and consumer confidence
d. none of the above
Answer:
The interest rate that large banks use as a benchmark rate to set their various loan rates
is known as:
a. the bank rate
b. the standard loan rate
c. the prime loan rate
d. the discount rate
Answer:
Money is created
a. when a bank makes a loan
b. when a bank buys a security from a member of the public
c. when either of the above occurs
d. when neither of the above occurs
Answer:
From 1929 to 1933, a series of negative shocks resulted in a ____ movement of the
____.
a. leftward; AS curve
b. leftward; AD curve
c. rightward; AS curve
d. rightward; AD curve
Answer:
If output is above the natural rate of output,
a. the unemployment rate must be above the natural rate of unemployment
b. the unemployment rate must be at the natural rate of unemployment
c. the unemployment rate must be below the natural rate of unemployment
d. not enough information is given to answer the question
Answer:
You are comparing two stock market indices, one of which contains a large number of
infrequently traded stocks. Which of the following is most likely to be true about this
index?
a. the index is more likely to reflect market performance, especially over long time
intervals
b. the index is more likely to reflect market performance, especially over short time
intervals
c. the index is less likely to reflect market performance, especially over long time
intervals
d. the index is less likely to reflect market performance, especially over short time
intervals
Answer:
Objective evidence on the discount window during the Great Depression indicates that
the discount window policy was
a. stimulative
b. neutral
c. contractionary
d. accommodative
Answer:
Which 18th century Americans held a great distrust of the centralization and
concentration of financial power in a few hands in urban areas?
a. Thomas Jefferson and the Antifederalists
b. Thomas Jefferson and the Federalists
c. Andrew Jackson and the Antifederalists
d. Andrew Jackson and the Federalists
Answer: