If the Federal Reserve bank buys securities from dealers
a. B and M increase, while R remains unchanged
b. R and B increase, while M remains unchanged
c. R and M increase, while B remains unchanged
d. R, B, and M all increase
Answer:
When the Federal Reserve purchases $10,000 of securities from a securities dealer,
assuming a 10 percent reserve requirement,
a. the money supply ultimately rises by $100,000
b. the money supply initially rises by $10,000
c. aggregate bank reserves rise by $10,000
d. all of the above occur
Answer:
In the early monetarist channel, expansionary monetary policy
a. creates imbalances in people’s asset portfolios that induce purchases of stocks, bonds,
and durable goods
b. encourages new stock issues by raising stock prices
c. raises interest rates, making more investment projects profitable to firms
d. does none of the above
Answer:
Which of the following characterized the Continental Illinois Bank in 1984?
a. its capital/total assets ratio was approximately 10 percent
b. it had a ratio of uninsured deposits/total deposits above 50 percent
c. its ratio of loans/total assets was around 50 percent
d. all of the above
Answer:
During the first four business cycles after World War II, the monetary base
a. increased in both recessions and expansions
b. decreased in both recessions and expansions
c. decreased in recessions and increased in expansions
d. increased in recessions and decreased in expansions
Answer:
Some economists question labeling the 1979-1982 experience in the United States as a
“monetarist experiment” because
a. average money growth in this period was similar to that witnessed in the previous
five years
b. the Fed broadened its federal funds rate target in this period
c. the Fed was not targeting the money supply in this period
d. Paul Volcker, famous for his Keynesian views, was head of the Board of Governors
at the time
Answer:
The “L” in the CAMELS system, which is used to evaluate banks’ financial condition,
stands for
a. legal reserves
b. liabilities
c. liquidity
d. loan portfolio
Answer:
Japanese banks had difficulty in the 1990s due to
a. the collapse of the real estate market
b. policies of regulatory forbearance
c. both of the above
d. neither of the above
Answer:
If the dollar appreciates against the euro, then, ceteris paribus,
a. U.S. products become less expensive in Germany
b. German products become less expensive in the U.S.
c. both of the above are true
d. neither of the above is true
Answer:
In retrospect, a clear error made by the Fed during the 1930s was
a. the tightening of discount window policy in the early 1930s
b. permitting reserves to fall significantly during 1929-1933
c. the increase in reserve requirements in 1936 and 1937
d. all of the above
Answer:
Suppose that the Fed buys $450 million of U.S. government securities from dealers.
The ultimate effect of this transaction is to
a. reduce the monetary base by $450 million
b. reduce the monetary base by a multiple of $450 million
c. increase the monetary base by $450 million
d. increase the monetary base by a multiple of $450 million
Answer:
The Kennedy tax plan of the early 1960s was designed to
a. stimulate aggregate demand through the consumption channel
b. stimulate aggregate supply by encouraging investment
c. do both of the above
d. do neither of the above
Answer:
Given other factors, the rapid development of the federal funds market should have
caused
a. an increase in re and an increase in the money supply multiplier
b. a decrease in re and an increase in the money supply multiplier
c. an increase in re and a decrease in the money supply multiplier
d. a decrease in re and a decrease in the money supply multiplier
Answer:
State banks that are members of the Federal Reserve are chartered and supervised,
respectively, by
a. the Comptroller of the Currency and the Federal Reserve
b. the Comptroller of the Currency and the FDIC
c. state banking authorities and the FDIC
d. state banking authorities and the Federal Reserve
Answer:
The more liquid a bank’s asset structure
a. the bigger its capital accounts need to be
b. the riskier its assets are likely to be
c. the lower its earnings are likely to be
d. all of the above
Answer:
As soon as Reagan Savings and Loan makes a loan to a customer
a. Reagan S&L’s excess reserves immediately fall
b. Reagan S&L’s excess reserves immediately rise
c. Reagan S&L’s required reserves immediately fall
d. Reagan S&L’s reserves immediately rise
Answer:
It is true that k
a. decreased sharply during WWI, WWII, and the late 1930s
b. has trended downward since 1960, on balance
c. increased sharply during 1933-1940 and immediately after WWI and WWII
d. increased sharply during the early 1930s, 1940-1945, and the last decade
Answer:
Regarding the facts about the Great Depression in the United States in the period
1929-1933, which of the following occurred?
a. unemployment increased from around 3 percent to 25 percent
b. stocks lost more than two-thirds of their value
c. deflation prevailed–the general price level fell
d. all of the above
Answer:
The interest rate is:
a. strongly influenced by monetary policy actions
b. the cost of using borrowed funds
c. a key variable that influences investment in capital goods
d. all of the above
Answer:
Which of the following explains the existence of a recognition lag with monetary
policy?
a. the delay in the publishing of key economic data
b. a desire for politicians to cover up negative economic indicators
c. both of the above
d. neither of the above
Answer:
A decrease in the level of taxes levied on returns from financial assets should:
a. reduce pretax real interest rates
b. raise pretax real interest rates
c. reduce after-tax real interest rates
d. have no effect on pretax real interest rates, as that would imply tax illusion
Answer:
An open market purchase by the Fed will immediately increase the money supply if that
purchase is from
a. a securities dealer
b. a commercial bank
c. both of the above
d. neither of the above–an open market purchase will cause the money supply to
decrease, not increase
Answer:
Historically, the best decade for stock market performance was the
a. 1990s
b. 1980s
c. 1970s
d. 1960s
Answer:
The real interest rate is the actual interest rate that would prevail in a hypothetical world
of:
a. constant interest rates
b. constant inflation
c. constant GDP
d. zero inflation
Answer:
The aggregate supply curve is
a. the relationship between a nation’s inflation rate and that nation’s production of goods
and services
b. the relationship between the inflation rate and the unemployment rate
c. the long-run relationship between the price level and the quantity of real goods
demanded
d. described by none of the above
Answer:
Regarding the uses of the monetary base, the greatest portion consists of
a. bank deposits at the Fed
b. currency held in banks
c. currency in circulation (Cp)
d. the Federal Reserve portfolio of securities
Answer:
Which of the following will cause the money supply multiplier to decrease?
a. an increase in re
b. a decrease in rr
c. a decrease in k
d. none of the above
Answer:
After decades of implicit interest rate targeting, the Fed abandoned interest rates and
moved to targeting monetary aggregates during
a. the late 1990s
b. the early 1980s
c. the early 1970s
d. the late 1960s
Answer:
The monetary base serves as the foundation that supports
a. bank reserves
b. the monetary aggregates
c. the money supply multiplier
d. the nation’s GDP
Answer:
A bond rated below Baa in Moody’s rating system:
a. is considered an investment-grade bond
b. is considered a junk bond
c. tends to have a lower yield than those bonds rated higher
d. is never worth investing in
Answer:
The disintermediation that S&Ls experienced in the late 1970s and early 1980s was
caused by
a. deposit interest rate ceilings
b. high market rates of interest
c. both of the above
d. neither of the above
Answer: