Due to the nature of their business, savings and loan associations and mutual savings
banks experience problems when:
a. short-term interest rates rise sharply
b. long-term yields rise sharply relative to short-term yields
c. deposits increase rapidly
d. financial intermediation occurs
Answer:
During a recovery, if productivity grows faster than output,
a. the recovery will be jobless
b. the recovery will be job-creating
c. the Phillips curve will shift rightward
d. productivity has nothing to do with the job-generating power of the economy
Answer:
The institution responsible for implementing monetary policy in the United States is
a. the Department of the Treasury
b. the Federal Reserve
c. the Bank of the United States
d. the Congress
Answer:
A look at the GDP growth data over the past century reveals that
a. output was more unstable in the first half of the century
b. output was less unstable in the first half of the century
c. output was equally unstable in both halves of the century
d. GDP growth data tells us nothing about the stability of output growth
Answer:
Using purchasing power parity as the criterion, then during 1997-2003
a. the U.S. dollar was overvalued vis a vis the Australian dollar
b. the U.S. dollar was valued correctly vis a vis the Australian dollar
c. the U.S. dollar was undervalued vis a vis the Australian dollar
d. none of the above occurred
Answer:
When firms lack “pricing power,”
a. they cannot increase profits by increasing the prices of the products they sell
b. they must reduce costs to increase profits
c. both of the above are true
d. neither of the above is true
Answer:
An increase in re is most likely to be induced by
a. increased stability of the currency ratio
b. a sharp decrease in the Federal Reserve discount rate
c. a sharp decrease in Treasury bill yields
d. none of the above
Answer:
Of the following, the last country to implement an inflation targeting regime was
a. New Zealand
b. Canada
c. Australia
d. Poland
Answer:
Which of the following expressions is correct?
a. B = m x M
b. m = B x M
c. M = B/m
d. none of the above
Answer:
As originally structured, the U.S. savings and loan association industry has been
inherently vulnerable in periods in which
a. real interest rates are negative
b. interest rates rise sharply
c. the yield curve is strongly upward sloping
d. loan demand declines
Answer:
Inflation targeting regimes have been implemented
a. in all of the major industrialized nations
b. in only about a dozen nations
c. in more than twenty nations
d. in the United States
Answer:
The Federal Reserve has practiced inflation targeting since
a. the Treasury Accord in the 1950s
b. the Volker Fed committed to reducing inflation in 1979
c. Alan Greenspan’s appointment in 1987
d. none of the above–the Fed does not practice inflation targeting
Answer:
The stagflation of the 1970s must have been caused by
a. positive demand shocks
b. positive supply shocks
c. adverse demand shocks
d. adverse supply shocks
Answer:
Whenever an individual bank expands loans, it should expect to experience
a. a decrease in reserves
b. a decrease in the U.S. money supply
c. an increase in excess reserves
d. an increase in reserves
Answer:
The legislation which phased out deposit interest rate ceilings was
a. DIDMCA
b. FIRREA
c. FDICIA
d. Garn-St. Germain
Answer:
In the long run, exchange rates are primarily driven by ____; in the short run, exchange
rates are primarily driven by ____.
a. inflation; interest rates
b. inflation; productivity growth
c. interest rates; inflation
d. tariffs and quotas; interest rates
Answer:
The withdrawal of funds from depository institutions to be invested in direct markets is
known as
a. counterintermediation
b. financial intermediation
c. disintermediation
d. nonintermediation
Answer:
Suppose that you know the following: DDO = $1,000, Cp = $2,000, R = $240. The
money supply multiplier must then equal
a. 3.141
b. 2.791
c. 1.339
d. none of the above
Answer:
Prior to 2003, the discount rate was almost always ____ than the federal funds rate;
changes in 2003 established that it should be set ____ the federal funds rate.
a. lower; above
b. higher; below
c. lower; below
d. higher; above
Answer:
Net free reserves
a. are defined as total reserves less discount loans
b. tend to move procyclically (rising during economic expansions)
c. were used as an intermediate target of policy during the 1950s and 1960s
d. are represented by all of the above
Answer:
The Fed is owned by ____; the ECB is owned by ____.
a. its district banks; European commercial banks
b. member commercial banks; the central banks of EMU member nations
c. the Department of the Treasury; the European Parliament
d. none of the above
Answer:
Suppose the pure expectations theory of term structure is correct. If the yield curve is
downward sloping, then it must be true that short-term interest rates
a. are expected to rise in the future
b. are expected to fall in the future
c. are expected to remain steady in the future
d. we can reach no conclusion about what short-term interest rates are expected to do in
the future
Answer:
Non-monetarists credit ____ for the long-run behavior of velocity.
a. changes in income
b. differences in permanent income and actual income
c. institutional factors
d. all of the above
Answer:
Theories that attempt to explain the Keynesian view of wage ‘stickiness” cite
a. institutional forces such as unions that are resistant to pay cuts
b. psychological resistance to pay cuts
c. employers’ fear of alienating their most productive workers by giving pay cuts
d. all of the above
Answer:
Suppose the sacrifice ratio is 3, and the central bank desires a permanent decrease in the
inflation rate of 3 percentage points. In the short run, the nation will have to sustain a
____ loss of output.
a. 1 percent
b. 3 percent
c. 6 percent
d. 9 percent
Answer:
If the dollar is rapidly depreciating in foreign exchange markets, the Fed can counter
this depreciation by
a. rapidly selling bonds in the open market
b. using its stock of foreign currencies to buy existing dollars
c. raising interest rates
d. all of the above
Answer:
During the 1930s, prices fell rapidly. During this time, money served its store of value
function:
a. well, as the rapid fall in prices lowered exchange rates
b. well, as each dollar could purchase more goods
c. poorly, because the standard of value function broke down
d. poorly, because the medium of exchange function broke down
Answer:
Choose the only true statement among the following:
a. A Treasury bond with less than 2 months to maturity is a money market instrument.
b. All money market instruments are debt instruments.
c. All debt instruments are money market instruments.
d. None of the above is true.
Answer:
Variables over which the Fed has total control and which are used in the process of
attempting to achieve policy goals are termed
a. final goals of policy
b. intermediate targets of policy
c. operating targets of policy
d. tools or instruments of policy
Answer:
An illustration in the text indicates that the narrow money supply multiplier (m1) has
been powerfully influenced by
a. rr
b. re
c. k
d. B
Answer:
All other things equal, an increase in inflation in Mexico shifts the supply of dollars to
the ____, the demand for dollars to the ____, and causes a(n) ____ in the peso relative
to the dollar.
a. right; left; depreciation
b. right; left; appreciation
c. left; right; depreciation
d. left; right; appreciation
Answer:
The first state to allow full interstate branching was
a. New York
b. Maine
c. Kansas
d. Illinois
Answer:
During the 1980s, banks reduced excess reserve holdings to extremely low levels.
Given other factors, this action served to
a. increase the money supply multiplier
b. increase the monetary base
c. reduce the money supply multiplier
d. do none of the above
Answer:
The near-destruction of the banking system during the Great Depression of the 1930s
can be blamed on
a. banking panics
b. inept Federal Reserve policy
c. both of the above
d. neither of the above
Answer:
Factors that contributed to falling inflation throughout the world in the last few decades
include
a. lessons learned from the high inflation of the 1970s
b. lessons learned from the adverse supply shocks of the 1970s
c. developments stemming from 1991’s Maastricht Treaty
d. all of the above
Answer: