An increase in the monetary base that goes into currency is ________, while an increase
that goes into deposits is ________.
a. multiplied; multiplied
b. not multiplied; multiplied
c. multiplied; not multiplied
d. not multiplied; not multiplied
Answer:
A debit card differs from a credit card in that
A. a debit card is a loan while for a credit card purchase, payment is made immediately.
B. a debit card is a long-term loan while a credit card is a short-term loan.
C. a credit card is a loan while for a debit card purchase, payment is made immediately.
D. a credit card is a long-term loan while a debit card is a short-term loan.
Answer:
Assume that disposable income equals $1000 and the mpc equals 0.6. If total
consumption equal $800, then autonomous consumption is equal to
A. $0.
B. $200.
C. $800.
D. $1000.
Answer:
Under the Bretton Woods system, the organization assigned the task of making loans to
countries that were experiencing balance of payments difficulties is known as the
A) World Bank.
B) International Development Association.
C) International Monetary Fund.
D) Federal Reserve System.
Answer:
Everything else held constant, an expansionary ________ policy will cause the interest
rate to rise, while an expansionary ________ policy will cause the interest rate to fall.
A. monetary; monetary
B. monetary; fiscal
C. fiscal; monetary
D. fiscal; fiscal
Answer:
A smart card is the equivalent of
A. cash.
B. savings bonds.
C. savings deposits.
D. certificates of deposit.
Answer:
A decrease in ________ leads to an equal ________ in the monetary base in the short
run.
A. float; increase
B. float; decrease
C. Treasury deposits at the Fed; decrease
D. discount loans; increase
Answer:
Banks may borrow from or lend to another bank in the Federal Funds market. A loan of
excess reserves from one bank to another bank is recorded as a(n) ________ for the
borrowing bank and a(n) ________ for the lending bank.
A. asset; asset
B. asset; liability
C. liability; liability
D. liability; asset
Answer:
Members of the Board of Governors are
A. chosen by the Federal Reserve Bank presidents.
B. appointed by the newly elected president of the United States, as are cabinet
positions.
C. appointed by the president of the United States and confirmed by the Senate.
D. never allowed to serve more than 7-year terms.
Answer:
If the money supply is $20 trillion and velocity is 2, then nominal GDP is
A. $2 trillion.
B. $10 trillion.
C. $20 trillion.
D. $40 trillion.
Answer:
Contractual savings institutions include
A. mutual savings banks.
B. money market mutual funds.
C. commercial banks.
D. life insurance companies.
Answer:
Financial institutions that accept deposits and make loans are called
A. exchanges.
B. banks.
C. over-the-counter markets.
D. finance companies.
Answer:
All other things held constant, premiums on call options will increase when the
A. exercise price falls.
B. volatility of the underlying asset falls.
C. term to maturity decreases.
D. futures price increases.
Answer:
When prices are measured in terms of fixed (base-year) prices they are called ________
prices.
A) nominal
A. B) real
B. C) inflated
C. D) aggregate
Answer:
Under a gold standard in which one dollar could be turned in to the U.S. Treasury and
exchanged for 1/20th of an ounce of gold and one German mark could be exchanged for
1/100th of an ounce of gold, an exchange rate of ________ marks to the dollar would
stimulate a flow of gold from the United States to Germany.
A) 7
B) 6
C) 5
D) 4
Answer:
Which investment bank filed for bankruptcy on September 15, 2008 making it the
largest bankruptcy filing in U.S. history?
A. Lehman Brothers
B. Merrill Lynch
C. Bear Stearns
D. Goldman Sachs
Answer:
One reason for the extraordinary growth of foreign financial markets is
A. decreased trade.
B. increases in the pool of savings in foreign countries.
C. the recent introduction of the foreign bond.
D. slower technological innovation in foreign markets.
Answer:
The primary assets of credit unions are
A. municipal bonds.
B. business loans.
C. consumer loans.
D. mortgages.
Answer:
With direct finance, funds are channeled through the financial market from the
________ directly to the ________.
A. savers, spenders
B. spenders, investors
C. borrowers, savers
D. investors, savers
Answer:
In the simple deposit expansion model, a decline in checkable deposits of $1,000 when
the required reserve ratio is equal to 20 percent implies that the Fed
A. sold $200 in government bonds.
B. sold $500 in government bonds.
C. purchased $200 in government bonds.
D. purchased $500 in government bonds.
Answer:
Financial markets promote greater economic efficiency by channeling funds from
________ to ________.
A. investors; savers
B. borrowers; savers
C. savers; borrowers
D. savers; lenders
Answer:
Everything else held constant, if the expected return on ABC stock rises from 5 to 10
percent and the expected return on CBS stock is unchanged, then the expected return of
holding CBS stock ________ relative to ABC stock and the demand for CBS stock
________.
A. rises; rises
B. rises; falls
C. falls; rises
D. falls; falls
Answer:
Everything else held constant, in the market for reserves, increases in the discount rate
affect the federal funds rate
A. when the funds rate is below the discount rate.
B. when the funds rate equals the discount rate.
C. when the demand for federal funds intersects the vertical section of the reserve
supply curve.
D. when the demand for federal funds equals zero.
Answer:
The Depository Institutions Deregulation and Monetary Control Act of 1980
A. separated investment banks and commercial banks.
B. restricted the use of ATS accounts.
C. imposed restrictive usury ceilings on large agricultural loans.
D. increased deposit insurance from $40,000 to $100,000.
Answer:
If a bank has excess reserves of $4,000 and demand deposit liabilities of $100,000, and
if the reserve requirement is 15 percent, then the bank has actual reserves of
A. $17,000.
B. $19,000.
C. $24,000.
D. $29,000.
Answer:
When those most likely to produce the outcome insured against are the ones who
purchase insurance, insurance companies are said to face the problem of
A. fraudulent claims.
B. moral hazard.
C. adverse selection.
D. pecuniary purchases.
Answer:
Which of the following is NOT a source of borrowings for a bank?
A. federal funds
B. Eurodollars
C. transaction deposits
D. discount loans
Answer:
Another name for a consol is a ________ because it is a bond with no maturity date.
The owner receives fixed coupon payments forever.
A. perpetuity
B. discount bond
C. municipality
D. high-yield bond
Answer:
Savings and loan regulators allowed S&Ls to include in their capital calculations a high
value for intangible capital called
A. goodwill.
B. salvation.
C. kindness.
D. retribution.
Answer:
According to PPP, the real exchange rate between two countries will always equal
A. 0.0.
B. 0.5.
C. 1.0.
D. 1.5.
Answer:
If in an efficient market all prices are correct and reflect market fundamentals, which of
the following is a FALSE statement?
A. A stock that has done poorly in the past is more likely to do well in the future.
B. One investment is as good as any other because the securities’ prices are correct.
C. A security’s price reflects all available information about the intrinsic value of the
security.
D. Security prices can be used by managers to assess their cost of capital accurately.
Answer:
Everything else held constant, if aggregate output is to the ________ of the LM curve,
then there is an excess ________ of money which will cause the interest rate to rise.
A. right; supply
B. right; demand
C. left; supply
D. left; demand
Answer:
When asset prices increase above their fundamental values it is called an
A. asset-price bubble.
B. irrational bubble.
C. asset-price spike.
D. irrational spike.
Answer: