Monetarists believe that, in the early 1930s,
a. the accumulation of excess reserves resulted from an increase in bank demand for
excess reserves
b. the link between B and M1 was broken by a liquidity trap
c. monetary policy was stimulative on balance
d. none of the above was true
Answer:
An increase in federal budget deficits is likely to boost interest rates unless:
a. the demand curve for loanable funds is downward sloping
b. the supply curve of loanable funds is vertical
c. the supply curve of loanable funds is horizontal
d. the demand curve for loanable funds is vertical
Answer:
In an inflation targeting regime, the target is set by
a. the government
b. the central bank
c. either or both of the above
d. neither of the above
Answer:
When the Fed purchases securities in the open market
a. the money supply expands
b. the monetary base expands
c. aggregate bank reserves rise
d. all of the above occur
Answer:
The invention of the money market mutual fund is likely to cause k to ____ and the
multiplier to ____.
a. increase; increase
b. decrease; decrease
c. increase; decrease
d. decrease; increase
Answer:
The Keynesian interpretation of the 1930s suggests that
a. bankers deliberately increased re as a defense against Fed policies
b. the link between B and M was severed by a liquidity trap
c. monetary policy was highly restrictive
d. all of the above were true
Answer:
If inflation is typically higher in India than it is in the United States, it is likely that we
will eventually see
a. the rupee depreciate relative to the dollar
b. the dollar depreciate relative to the rupee
c. no fundamental change in the dollar/rupee exchange rate
d. not enough information is given to answer the question
Answer:
During the S&L and banking crises of the 1980s,
a. about half of the nation’s banks failed
b. bank failures were concentrated in oil-producing states
c. over three-fourths of the nation’s S&Ls failed
d. all of the above are true
Answer:
Which of the following items are not included in our definition of the money supply
(M1)?
a. the currency (coins and bills) held in your pocket
b. demand deposits in savings and loan associations
c. demand deposits in commercial banks
d. none of the above–all of the above are included in our measure of the money supply
Answer:
When equilibrium output is greater than full-employment output
a. an inflationary gap exists
b. unemployment will be below its natural state
c. contractionary monetary policy actions are called for
d. all of the above are true
Answer:
Adoption of a constant money growth rule will be an effective policy if
a. velocity is stable and predictable
b. money demand fluctuates randomly
c. velocity is unstable
d. a constant money growth rule is always a good idea
Answer:
When we move along a given aggregate supply curve, we hold constant which of the
following?
a. the cost of materials such as steel and lumber
b. technology
c. wage rates
d. all of the above
Answer:
When the U.S. dollar appreciates on foreign exchange markets, which of the following
tends to occur?
a. prices in the U.S. tend to increase
b. the U.S. trade deficit tends to decrease
c. foreign products become cheaper in the United States
d. U.S. products become cheaper abroad
Answer:
Which asset carries the greatest default risk?
a. corporate stock
b. corporate bonds
c. money market mutual fund shares
d. long-term Treasury bonds
Answer:
The behavior of excess reserves and re is often invoked by ____ to support the claim
that monetary policy was ____ in the early 1930s.
a. monetarists; impotent
b. monetarists; tight
c. Keynesians; impotent
d. Keynesians; tight
Answer:
Loans made from the Federal Reserve to commercial banks are referred to as
a. commercial paper
b. corresponding balances
c. discount loans
d. federal funds sold
Answer:
Which of the following factors contributed to the savings and loan crisis of the early
1980s?
a. untimely deregulation
b. rising short term interest rates and high inflation
c. disintermediation
d. all of the above
Answer:
Which of the following tends to boost banks’ desired excess reserve ratio?
a. expectations of easier Federal Reserve policies
b. higher interest rates
c. increased uncertainty about future economic conditions
d. all of the above
Answer:
You purchase 100 shares of Netscape stock by calling your broker. This is an example
of a purchase in the:
a. debt market
b. capital market
c. money market
d. primary market
Answer:
The policy of allowing insolvent banks and thrifts to continue operations
a. is an example of the principal-agent problem
b. greatly contributed to the moral hazard problem
c. is called “forbearance”
d. is represented by all of the above
Answer:
A major disadvantage of a commodity money system is that:
a. it is less expensive to produce commodity money than fiat money
b. its money is more costly to produce than fiat money
c. authorities can change the money supply at their discretion
d. all of the above are disadvantages of a commodity money system
Answer:
Executive Board members of the ECB are appointed to
a. 4 year renewable terms
b. 8 year nonrenewable terms
c. 14 year nonrenewable terms
d. lifetime terms
Answer:
Rapid inflation
a. is an essential ingredient in encouraging investment
b. is an ultimate goal of Fed policy
c. distorts the role of prices in allocating resources to where they are most needed
d. redistributes income from debtors to creditors
Answer:
Assume that the income elasticity of demand for money is 0.7. In this case, an increase
in income works to
a. reduce money demand and reduce velocity
b. reduce money demand and increase velocity
c. increase money demand and increase velocity
d. increase money demand and reduce velocity
Answer:
Adoption of a constant money growth rule will be a poor policy choice if
a. money demand fluctuates substantially
b. velocity is stable and predictable
c. a constant money growth rule is a good idea under no circumstances
d. a constant money growth rule is always a good idea
Answer:
If the Fed wishes to slow money growth and tighten credit, it may
a. buy securities in the open market
b. raise the discount rate
c. reduce the reserve requirement
d. do all of the above
Answer:
An increase in which of the following produces an increase in the monetary base?
a. TCu
b. Ft
c. TCa
d. none of the above
Answer:
In the loanable funds model, which of the following would shift the supply curve of
loanable funds rightward?
a. an increase in consumer confidence
b. an increase in expected inflation
c. an increase in the federal budget deficit
d. an increase in household thriftiness
Answer:
In Bretton Woods, New Hampshire, in 1944, representatives of major industrial nations
met and established:
a. the Federal Reserve System
b. the International Monetary Fund
c. a system of floating exchange rates
d. all of the above
Answer:
One disadvantage of money market mutual fund shares relative to traditional savings
accounts is that:
a. MMMF shares are not insured
b. one cannot write checks against MMMF accounts
c. interest income earned from MMMF accounts is taxable
d. all of the above are true
Answer:
Which of the following tools of policy has no obvious announcement effect?
a. changes in the discount rate
b. changes in reserve requirements
c. open market operations
d. none of the above have any obvious announcement effect
Answer: