Most of the wartime stimulus to aggregate demand comes from
a. increases in consumption
b. increases in investment
c. increases in government spending
d. increases in net exports
Answer:
Households that are surplus units must transfer their surplus funds to society’s
deficit-spending units either through:
a. banks or life insurance companies
b. lending or investing
c. purchasing stocks or bonds
d. direct credit markets or financial intermediaries
Answer:
One technique banks have used to deal with the risk inherent in commercial lending is
a. reinsurance
b. requiring compensating balances
c. securitization
d. all of the above
Answer:
Over the last 75 years or so, the average annual rate of return on equities has been
a. about 22 percent
b. about 10 percent
c. about 4 percent
d. negative
Answer:
During William Jefferson Clinton’s two terms in office,
a. the United States experienced the longest economic expansion in its history
b. high unemployment rates warned of recession on the horizon
c. the inflation rate was consistently high
d. all of the above are true
Answer:
Which of the following is not counted among the uses of the monetary base?
a. Cb
b. Cp
c. Fb
d. Ft
Answer:
An examination of the data reveals that the recession of 2001 was caused by
a. rapidly falling consumption due to a declining stock market
b. unusually rapidly falling investment spending
c. rapidly falling government expenditures
d. none of the above
Answer:
An increase in which of the following produces a decrease in the monetary base?
a. Ft
b. OLC
c. TCa
d. all of the above
Answer:
When a commercial bank makes a new loan
a. the U.S. money supply falls
b. the U.S. banking system will lose reserves
c. that bank will lose reserves
d. none of the above occurs
Answer:
The largest Federal Reserve liability is
a. deposits of the U.S. Treasury
b. Federal Reserve notes outstanding
c. reserve deposits of depository institutions
d. U.S. government securities
Answer:
States’ rights to govern both interstate and intrastate branching of national banks were
granted by the ____, but taken away by the ____.
a. McFadden Act; Riegle-Neal Act
b. Glass-Steagall Act; Competitive Equality Banking Act
c. National Banking Act of 1863; DIDMCA
d. National Banking Act of 1863; McFadden Act
Answer:
In the text, a graph depicting money growth rates and inflation rates for a cross-section
of nations indicates that:
a. countries with high money growth tend to have low inflation
b. countries with high money growth tend to have high inflation
c. the United States had the lowest inflation rate of any country
d. there is no clear correlation between money growth rates and inflation rates across
countries
Answer:
Concerning monetary variables in the Great Depression of 1929-1933, it is correct to
state that
a. B, M1, and M2 all decreased
b. B, M1, and M2 all increased
c. the chief cause of the contraction in M was the increase in re and rr
d. none of the above is true
Answer:
How many banks failed in the United States in the 1920s and in the 1930s,
respectively?
a. 400 and 5,800
b. 400 and 9,000
c. 5,800 and 9,000
d. none of the above are even approximately correct
Answer:
According to the pure expectations theory of term structure, if current yields are higher
than normal and are expected to decline in the future, what type of term structure will
prevail?
a. flat
b. humped
c. descending
d. ascending
Answer:
Which of the following is an important determinant of the currency ratio (k)?
a. the size of the U.S. underground economy
b. the level of income and wealth
c. development of substitutes for DDO
d. all of the above
Answer:
From peak to trough of the Great Depression (1929-1933), U.S. stock prices lost about
what percent of their value in nominal terms?
a. 99 percent
b. 85 percent
c. 50 percent
d. 33 percent
Answer:
Deregulation
a. worsened the moral hazard problem by broadening the range of permissible activities
b. effectively enabled S&Ls to deal with the problems caused by disintermediation
c. reduced the investment risk that thrifts were subjected to in the 1970s
d. did all of the above
Answer:
Conceptually, the term structure of interest rates or yield curve seeks to hold constant
which of the following?
a. default risk
b. marketability
c. tax treatment of interest
d. all of the above
Answer:
In the monetarist viewpoint, the demand curve for excess reserves
a. was relatively flat and shifted rightward in the 1930s
b. was relatively steep and shifted rightward in the 1930s
c. was relatively flat and shifted leftward in the 1930s
d. was relatively steep and shifted leftward in the 1930s
Answer:
The text makes clear that the long-term movements in the money supply multiplier are
dominated by movements in
a. the time deposit ratio
b. the currency ratio
c. the required reserve ratio
d. the excess reserve ratio
Answer:
The simultaneous observation of rising prices and falling output may be caused by
a. a decrease in aggregate demand
b. a decrease in aggregate supply
c. a decrease in aggregate demand or an increase in aggregate supply
d. an increase in aggregate demand or a decrease in aggregate supply
Answer:
The monetary base is sometimes called “high-powered money,” because
a. each dollar of base money supports several dollars of money
b. there is no difference between the monetary base and a bank’s legal reserves
c. the monetary base is 100% under the control of the Federal Reserve
d. all of the above are correct
Answer:
Approximately what portion of the Federal Reserve’s annual net income is paid out to
the Fed’s owners?
a. 50 percent
b. 25 percent
c. 2 percent
d. none–the Fed does not pay dividends to its owners
Answer:
The U.S. economy was apparently engaged in a virtuous cycle of rising investment
spending, productivity, and stock prices during
a. 1929-1933
b. 1995-1999
c. 2000-2004
d. none of the above periods
Answer:
Deferred availability cash items
a. are equal to cash items in the process of collection minus the volume of float
b. are a liability to the Fed
c. are a product of the check collection process
d. are all of the above
Answer:
A bank becomes insolvent when its
a. assets exceed its capital accounts
b. liabilities exceed its capital accounts
c. capital accounts become negative
d. all of the above
Answer:
If interest rates are expected to rise sharply, wise investors will prefer to hold:
a. perpetual bonds
b. Treasury bonds
c. Treasury notes
d. Treasury bills
Answer:
Over the past thirty years, the money supply multiplier has trended
a. horizontally
b. upward
c. downward
d. none of the above–it has displayed no distinct trend
Answer:
Which of the following is not an advantage of inflation targeting?
a. It increases the accountability of the central bank.
b. It increases the credibility of the central bank.
c. It increases the transparency of the central bank.
d. All of the above are advantages of inflation targeting.
Answer:
The increases in real interest rates during the Great Depression came as a result of
a. nominal interest rate increases resulting from high inflation and the Fisher effect
b. severe price deflation caused by declining aggregate demand and the money supply
collapse
c. nominal interest rate increases resulting from an easy Fed discount window policy
d. none of the above
Answer:
The fact that a potential borrower has more knowledge about the likely risks associated
with the use of funds than a potential lender is known as the problem of:
a. adverse selection
b. moral hazard
c. default risk
d. asymmetric information
Answer: