The expectations theory of term structure assumes that:
a. ascending yield curves prevail the most frequently
b. investors attempt to maximize returns over some horizon
c. investors have preferences for long-term securities
d. borrowers have preferences for long-term securities
Answer:
Which of the following events would tend to reduce real interest rates?
a. regulatory restrictions are imposed on businesses
b. energy prices rise sharply
c. federal budget deficits are eliminated
d. all of the above
Answer:
Stocks tend to have higher ____ risk than bonds.
a. default
b. market
c. both of the above
d. neither of the above
Answer:
Deposit insurance reform has centered primarily around
a. adjusting deposit insurance premiums to incorporate the degree of risk embodied in
the bank’s assets
b. adjustments to make certain that brokered deposits are not insurable
c. adjusting the threshold level of coverage
d. all of the above
Answer:
Contractionary monetary policy
a. raises Tobin’s q and increases investment
b. reduces Tobin’s q and increases investment
c. raises Tobin’s q and reduces investment
d. reduces Tobin’s q and reduces investment
Answer:
Which of the following statements is always true?
a. Rich people have more money than poor people.
b. All money is wealth, but not all wealth is money.
c. Money is a flow variable; wealth is a stock variable.
d. All of the above are true.
Answer:
The sum of currency held by the public and checking accounts held in depository
institutions by individuals and firms is commonly known as the:
a. budget deficit
b. national debt
c. money supply
d. monetary base
Answer:
Monetarists tend to emphasize ____ as a major source of the Great Depression.
a. poor monetary policy choices by the Fed
b. the collapse of the money supply
c. both of the above
d. neither of the above
Answer:
Which of the following can serve as a store of value?
a. money
b. gold
c. a valuable painting
d. all of the above
Answer:
The advent of airmail most likely caused float to
a. decrease
b. increase
c. remain unchanged
d. not enough information is given to answer the question
Answer:
Factors responsible for ATM growth include
a. the elimination of surcharging
b. the decreased costs of installing and maintaining ATMs
c. the decline in network provider consolidation
d. all of the above are true
Answer:
The rising inflation rates of the late 1960s were caused principally by
a. a massive tax cut
b. a leftward shifting AD curve
c. a leftward shifting AS curve
d. a rightward shifting AD curve
Answer:
The use of open market operations to steer the thrust of monetary policy in a specific
direction is termed
a. countercyclical monetary policy
b. defensive open market operations
c. dynamic open market operations
d. the real bills doctrine
Answer:
If money is a “luxury good,” as suggested by Friedman, then the velocity of money
should
a. fall as income falls
b. remain constant when income rises
c. rise over the long run
d. do none of the above
Answer:
Which of the following events would be likely to cause an increase in a nation’s
aggregate demand for goods and services?
a. depreciation of the dollar in foreign exchange markets
b. a decrease in business confidence
c. a decrease in consumer confidence
d. discovery of new production technologies
Answer:
The increase in mortgage lending relative to commercial lending in the past twenty
years by U.S. banks can be attributed primarily to
a. the decline of adjustable rate mortgages
b. the economic recession which reduced the demand for commercial loans
c. the California real estate boom
d. the securitization of mortgages
Answer:
The investment schedule presented by early Keynesian economists shows that the
expected rate of return ____ as investment increases.
a. declines
b. increases
c. stays constant
d. not enough information is given to answer the question
Answer:
The inflation neutrality case presumes that beta, the coefficient that relates the level of
interest rates to the expected rate of inflation, is:
a. less than one
b. greater than one
c. one
d. zero
Answer:
The foreign exchange market is
a. a foreign market where goods and services are exchanged
b. a market for gold located in London
c. a place in New York where U.S. dollars are bought and sold
d. an over-the-counter market where national currencies are traded
Answer:
If the only criterion on which to judge the validity of an intermediate target variable
were controllability by the Fed, the best target would be
a. B-A
b. B
c. M1
d. M2
Answer:
The two recessions of the 1970s can be attributed to
a. adverse demand shocks
b. adverse supply shocks
c. positive demand shocks
d. positive supply shocks
Answer:
Bank branching restrictions were put in place
a. to help stabilize the financial sector by minimizing competition
b. to limit the excesses of the Bank of the United States
c. to prevent excesses of monopoly power
d. for all of the above reasons
Answer:
The chief source of bank financial impairment stems from
a. derivatives
b. exchange rate fluctuations
c. interest rate fluctuations
d. loan defaults
Answer:
Over the past 25 years, the most rapid growth has been seen in which type of
intermediary?
a. contractual savings institutions
b. investment intermediaries
c. commercial banks
d. depository institutions
Answer:
Which of the following potential intermediate monetary policy target variables scores
lowest on the criterion of measurability?
a. real short-term interest rates
b. real long-term interest rates
c. the nonborrowed base
d. monetary aggregates
Answer:
While depositing your paycheck in the Shiner State Bank of Shiner, Texas, you notice
several bank examiners from the bank’s supervising body. Given that the bank is
insured by the FDIC, and is a Federal Reserve member, from what agency are these
examiners?
a. Comptroller of the Currency
b. Federal Reserve System
c. FDIC
d. state banking commission
Answer:
In comparing the wealth effect stemming from higher stock prices versus the wealth
effect stemming from higher house prices, it is important to note that
a. stock market wealth is more concentrated (in fewer hands) than is housing wealth
b. gains in housing wealth are perceived as more “permanent” than gains in stock
market wealth
c. since the year 2000, more of the gains in wealth have come from houses than from
stocks
d. all of the above are true
Answer:
A particular type of financial intermediary issues deposits and uses the funds principally
to grant mortgages and purchase government securities. This institution is:
a. a savings and loan association
b. a commercial bank
c. a money market mutual fund
d. a life insurance company
Answer:
If the demand for money is highly stable and predictable
a. fiscal policy will be a relatively weak policy tool
b. monetary policy will be an effective stabilization tool
c. velocity will be stable and predictable
d. all of the above are true
Answer:
Which of the following contractual intermediaries has the greatest need for liquidity?
a. a life insurance company
b. a private pension fund
c. a fire and casualty insurance company
d. a government pension fund
Answer: