Adoption of an inflation targeting regime tends to
a. reduce the central bank’s flexibility
b. reduce the instability of output caused by supply shocks
c. reduce the transparency of the central bank
d. do all of the above
Answer:
The aggregate supply curve
a. becomes more flat as we lengthen the time span under consideration
b. slopes upward because of substitution between goods on the part of producers
c. slopes upward because of input price stickiness
d. is represented by all of the above
Answer:
The ECB can act more independently than the Federal Reserve because the ECB
a. does not report to any government
b. is more transparent
c. is less accountable
d. does all of the above
Answer:
The behavior of investment spending in the 2001 recession was
a. typical of most recessions
b. stronger than in most recessions
c. weaker than in most recessions
d. impossible to determine with the data given
Answer:
Countries whose inflation rates are consistently very low generally
a. have strong currencies in international markets
b. must intervene in foreign exchange markets to support the value of their currencies
c. see their currency depreciate relative to other, high-inflation countries
d. all of the above
Answer:
In recessions, which of the following happens to the demand and/or supply curves for
loanable funds, and to interest rates?
a. demand rises and interest rates rise
b. demand falls and interest rates fall
c. demand falls and interest rates rise
d. supply falls and interest rates rise
Answer:
Suppose the next two years witness a remarkable reduction in the use of illegal drugs in
America. Given other factors, this development would
a. increase both the currency ratio and the money supply multiplier
b. reduce both the currency ratio and the money supply multiplier
c. increase the currency ratio and reduce the money supply multiplier
d. reduce the currency ratio and increase the money supply multiplier
Answer:
In some inflation-targeting countries, the central bank is subject to
a. sanctions if it fails to achieve its target
b. an escape clause in case of supply shocks
c. both of the above
d. neither of the above
Answer:
Suppose that in a given week, discounts and advances fall by $400, float rises by $600,
and Treasury deposits at the Fed fall by $1,000. The net effect of these changes is to
cause the base to
a. rise by $2,000
b. rise by $1,200
c. fall by $2,000
d. fall by $800
Answer:
The legislation eliminating most of the restrictions on branch banking across state lines
is
a. the Depository Institutions Deregulation and Monetary Control Act
b. the Glass-Steagall Act
c. the McFadden Act
d. The Riegle-Neal Act
Answer:
Which of the following is true about money market mutual funds (MMMFs)?
a. MMMF shares carry FDIC insurance.
b. MMMFs invest in instruments of very low default risk.
c. MMMF shares are relatively illiquid.
d. Total assets of MMMFs declined over the 1970s and 1980s.
Answer:
Which country’s stock market has performed the worst in the past 15 years?
a. France
b. Germany
c. Italy
d. Japan
Answer:
The reductions in investment demand early in the new millennium generally sprang
from cutbacks in the ____ sector of the economy.
a. auto
b. service
c. steel
d. technology
Answer:
Suppose that on the first of February, the Treasury pays its government employees
wages totaling $450 million, with checks drawn on its account at the Fed. To minimize
the impact of this fiscal action on the monetary base, the Treasury will
a. decrease its Treasury holdings of cash by $450 million
b. transfer $450 million from its account at the Fed to its tax and loan accounts
c. transfer $450 million from its tax and loan accounts to its account at the Fed
d. do none of the above
Answer:
Which of the following empirical regularities cannot be explained by the liquidity
premium theory?
a. the tendency for movements in the yield curve to be upward or downward shifts,
rather than isolated blips
b. the tendency for the yield curve to slope upward at the beginning of expansions and
downward at the beginning of recessions
c. the tendency for yield curves to slope upward
d. all of the above can be explained by the liquidity premium theory
Answer:
The largest portion of the Federal Reserve’s net income is
a. used to cover the Fed’s operating expenses
b. turned over to the U.S. Treasury
c. transferred into the Fed’s capital account
d. paid out as dividends to the Fed’s owners
Answer:
From the 1973-1982 period to the 1983-1992 period, U.S. commercial bank failures
a. increased from 5 per year to 130 per year
b. decreased from 130 per year to 5 per year
c. increased from 50 per year to almost 300 per year
d. decreased from almost 300 per year to 50 per year
Answer:
When the Fed buys $400 million in government securities from a dealer, the monetary
base
a. falls $400 million
b. falls $400 million times the appropriate money multiplier
c. rises $400 million
d. rises $400 million times the appropriate money multiplier
Answer:
Suppose that in a given week, the Fed finds that the base has, due to non-policy factors,
risen by $550 million. To neutralize these changes in the base, the Fed should
a. buy $550 million of securities
b. print $550 million in new Federal Reserve Notes
c. sell $550 million of securities
d. do none of the above
Answer:
When English goldsmiths realized the IOUs they issued for gold deposits didn’t need to
be fully backed in gold:
a. this led to a transition from fiat money to representative full-bodied money
b. this led to a transition from fiat money to commodity money
c. this led to a transition from commodity money to representative full-bodied money
d. this led to a situation in which goldsmiths could create money
Answer:
Regarding the international effects of the Great Depression, evidence suggests that
a. the Great Depression began abroad and spread to the United States
b. U.S. demand for foreign goods increased during the Great Depression
c. the gold standard played an important role in transmitting the Great Depression’s
effects throughout the world
d. none of the above is correct
Answer:
In discussing the relative degree of political independence of the Federal Reserve
System versus that of the European Central Bank (ECB), it is fair to say that
a. the ECB is more independent because it is harder to amend its charter
b. the ECB is more independent because its key policymakers have longer terms of
office
c. the Federal Reserve is more independent because of its unique financial structure
d. the Federal Reserve is more independent because its existence is mandated by the
Constitution
Answer:
During the first half of a business cycle expansion, ____ and ____ tend to keep interest
rates low; ____ and ____ tend to exert upward pressure on interest rates.
a. business confidence, Fed policy; budget deficits, inflation expectations
b. inflation expectations, consumer confidence; Fed policy, budget deficits
c. Fed policy, budget deficits; consumer confidence, business confidence
d. none of the above is correct
Answer:
How many of the U.S. economic downturns since 1929 have been characterized by
stagflation?
a. none
b. one
c. two
d. many
Answer:
The funds raised by depository institutions are used primarily to
a. buy common stock issued by corporations
b. make loans to households and businesses
c. purchase municipal bonds
d. buy bonds from corporations and the government
Answer:
Which factor has not contributed to the increasing popularity of pension funds?
a. an advantage in achieving diversification
b. employer matching contributions
c. favorable tax treatment
d. all of the above have contributed to their popularity
Answer:
In the past half century, compared to the sixty years before it,
a. fluctuations in output have been greater
b. recessions have been milder
c. both of the above are correct
d. neither of the above is correct
Answer:
The Federal Reserve pays to the U.S. Treasury approximately what portion of its gross
income?
a. 90 percent
b. 75 percent
c. 50 percent
d. 10 percent
Answer:
The policy of allowing insolvent institutions to continue operations is called
a. disintermediation
b. forbearance
c. GAAP
d. moral hazard
Answer:
When an output gap exists
a. actual GDP is above potential GDP
b. the unemployment rate exceeds the NAIRU
c. both of the above are true
d. neither of the above is true
Answer:
Compared to pure expectations theory, the liquidity premium theory predicts a yield
curve that is ____.
a. more steeply upward sloping
b. less steeply downward sloping
c. both of the above
d. neither of the above
Answer:
In the S&L fiasco, the principal-agent problem stems from the fact that
a. Congress tried to protect the taxpayers rather than the S&L industry
b. the regulatory authorities tried to protect their own careers rather than the taxpayers’
interests
c. the S&L industry tried to protect their own profits rather than the taxpayers’ interests
d. taxpayers acted as agents rather than principals
Answer:
The Federal Reserve
a. operates under a dual mandate covering inflation and unemployment
b. operates under a triple mandate covering inflation, interest rates, and unemployment
c. operates under an inflation targeting regime
d. operates under no mandate whatsoever
Answer:
Which of the following was the earliest country to implement deposit insurance?
a. France
b. Japan
c. the United States
d. Germany
Answer:
Assuming a 10% reserve requirement, the direct effect of a bank deposit of $100 in cash
is to increase the money supply by ____; the eventual induced effect is to increase the
money supply by ____.
a. $100; $1,000
b. $90; $900
c. $0; $900
d. none of the above
Answer: