The most fundamental cause of the first S&L industry crisis in the early 1980s was
a. the deposit insurance system
b. fraud and dishonesty in the S&L industry
c. government policies and regulations
d. the policy of forbearance
Answer:
Keynesians tend to emphasize ____ as a major cause of the Great Depression.
a. a series of adverse real aggregate demand shocks
b. the collapse of the money supply
c. fiscal policy
d. poor policymaking by the Fed
Answer:
Which of the following events would shift the aggregate supply curve leftward in the
United States?
a. the U.S. dollar appreciates in foreign exchange markets
b. consumer confidence improves
c. the U.S. capital stock increases
d. Congress boosts the minimum wage
Answer:
An economy’s total dollar expenditures on final goods and services can be expressed as
a. P x Y
b. M x V
c. both of the above
d. neither of the above
Answer:
If real income is $2,000 and the price level is 3.0 while the money supply is $1,200,
then income velocity is
a. 0.2
b. 0.5
c. 1.66
d. 5
Answer:
The decline in the money supply multiplier during 1929-1933 can be attributed
principally to the behavior of
a. the required reserve ratio
b. the currency ratio
c. the monetary base
d. the excess reserve ratio
Answer:
The rapid reduction in inflation during the first few years of the Reagan administration
in the early 1980s can be attributed to
a. contractionary monetary policy
b. positive supply shocks
c. supply side economics
d. none of the above
Answer:
Whenever the Federal Reserve purchases securities in the open market, the money
supply immediately ____; whenever a member of the public purchases securities with
cash, the money supply immediately ____.
a. falls; falls
b. falls; is unchanged
c. rises; rises
d. rises; is unchanged
Answer:
When two banks merge and the average cost per unit of banking services rises, the
banks are said to be experiencing
a. diseconomies of scope
b. diseconomies of scale
c. economies of scope
d. economies of scale
Answer:
Which of the following events might cause the dollar to appreciate today, relative to the
South African rand?
a. an upward revision of the dollar’s expected future strength
b. an increase in interest rates in the U.S.
c. a decline in interest rates in South Africa
d. all of the above
Answer:
The money supply multiplier varies directly with
a. k
b. re
c. rr
d. none of the above
Answer:
Issuance of money market deposit accounts was authorized by
a. DIDMCA
b. FDICIA
c. Garn-St. Germain
d. FIRREA
Answer:
While reading the annual report of the Olathe State Bank (of which you are an owner),
you notice that the bank’s return on equity is given as 7 percent, and the return on assets
is given as 2 percent. However, you have spilled your double decaf latte on the capital
accounts portion of the balance sheet. It would be safe to say that
a. your bank’s capital accounts ratio is 29 percent
b. your bank’s capital accounts ratio is 14 percent
c. your bank’s capital accounts ratio is 3.5 percent
d. it is impossible to determine the capital accounts ratio from the given information
Answer:
Everything else being held constant, as a consumer of domestic goods and imported
goods, you are better off if the U.S.-Japan exchange rate is
a. 100 yen/$
b. 200 yen/$
c. 300 yen/$
d. 400 yen/$
Answer:
Mr. Smith applies to his bank for a loan for his tulip bulb business, but instead he takes
the money for a weekend of gambling in Las Vegas. This is an example of:
a. adverse selection
b. moral hazard
c. both of the above
d. neither of the above
Answer:
Currently, ____ sets the level of reserve requirements; ____ sets the range within which
reserve requirements may be altered.
a. the Federal Reserve System; the Federal Reserve System
b. the FOMC; the Board of Governors
c. the Board of Governors; Congress
d. the Board of Governors; the FOMC
Answer:
During the recovery of 2002-2004
a. job growth was unusually strong
b. job growth was typical of most recoveries
c. job growth was unusually weak
d. job growth was described by none of the above
Answer:
If the Fed wishes to accelerate money growth and loosen credit, it may
a. sell securities in the open market
b. raise the discount rate
c. reduce the reserve requirement
d. do all of the above
Answer:
An International Perspectives box in the text shows that:
a. interest rates in the U.S. and Germany are highly correlated, with U.S. rates typically
being higher.
b. interest rates in the U.S. and Germany are highly correlated, with U.S. rates typically
being lower.
c. interest rates in the U.S. and Germany are uncorrelated.
d. none of the above is true.
Answer:
In the credit crunch of the early 1990s, concerning the growth rate of bank loans and the
growth rate of bank security holdings:
a. Growth rates of both loans and securities increased.
b. Growth rates of both loans and securities decreased.
c. Growth of loans increased and growth of security holdings decreased.
d. Growth of security holdings increased and growth of loans decreased.
Answer:
Which of the following statements is true?
a. the Bretton Woods system collapsed in the early 1970s
b. the Bretton Woods system collapsed in the early 1980s
c. the Bretton Woods system is still in operation today
d. the Bretton Woods system was a system of floating exchange rates
Answer:
The magnitude of the S&L problem was first made public
a. in the early 1980s as thrifts began to become insolvent
b. in the 1970s as market interest rates began causing an exodus of depositors from
thrifts
c. after the election of 1988
d. after passage of the FDICIA
Answer:
Due to a Treasury/Fed agreement following World War II, intermediate targeting
procedures generally revolved around
a. targeting bank reserves at low growth rates
b. targeting government bond rates at abnormally low levels
c. targeting money growth at above average levels
d. targeting nominal GDP directly due to provisions of the Employment Act of 1946
Answer:
The “monetarist experiment” of the early 1980s
a. may have been a ploy to wring inflation out of the economy
b. resulted in a rather severe economic downturn
c. was never actually implemented, as money growth generally failed to stay within
target ranges
d. is correctly characterized by all of the above
Answer:
The Bank Holding Company Act of 1956 ____ expansion by bank holding companies;
the Competitive Equality Banking Act of 1987 outlawed further ____.
a. prohibited further; expansion of nonbank banks
b. prohibited further; restrictions on electronic banking
c. permitted; expansion of nonbank banks
d. permitted; restrictions on electronic banking
Answer:
Which of the following theories of term structure can explain all of the empirical
regularities of the yield curve?
a. preferred habitat
b. pure expectations
c. segmented markets
d. none of the above can explain all of the regularities of the yield curve
Answer:
If the Phillips curve shifts outward (farther from the origin) while a country is fighting
inflation
a. the sacrifice ratio decreases
b. the sacrifice ratio increases
c. there is no effect on the sacrifice ratio
d. not enough information is given to answer the question
Answer:
Which of the following events would shift the aggregate supply curve rightward in the
United States?
a. consumer confidence in the U.S. increases
b. the U.S. capital stock increases
c. the U.S. dollar depreciates on foreign exchange markets
d. wages of U.S. workers increase
Answer:
If the public comes to fear major bank failures and a breakdown of the deposit
insurance system, then
a. B would fall
b. B would rise
c. re would fall
d. none of the above would occur
Answer:
Real interest rates on U.S. Treasury bills were generally:
a. negative in the 1960s, and positive in the 1970s and 1980s
b. positive in the 1960s and 1980s, and negative in the 1970s
c. positive in the 1960s, and negative in the 1970s
d. positive in all three decades
Answer: