Which stock market index do most economists believe best represents the performance
of the typical American’s stock market portfolio?
a. the Dow-Jones Industrial Average
b. the NASDAQ index
c. the Russell 2000
d. the S&P 500 Index
Answer:
On U.S. Treasury bills, the relationship between the discount rate and the yield is as
follows:
a. the discount rate exceeds the yield
b. the discount rate and the yield are identical
c. the yield exceeds the discount rate
d. insufficient information is given to answer the question
Answer:
Policy non-activists believe which of the following statements is true?
a. attempts to stabilize the economy may actually destabilize it
b. the economy is inherently unstable
c. self-correcting mechanisms work slowly, if at all
d. none of the above
Answer:
Most open market transactions are ____ in nature.
a. defensive
b. dynamic
c. outright
d. none of the above
Answer:
Expansionary monetary policy can induce new investment expenditures by
a. decreasing the level of interest rates
b. inducing relaxed lending standards in the banking sector
c. raising firms’ stock prices
d. doing all of the above
Answer:
If the Fed wishes to slow down a rapidly overheating economy, it could potentially
a. buy U.S. securities in the open market and raise the discount rate
b. increase reserve requirements
c. reduce reserve requirements
d. do any or all of the above
Answer:
The central bank’s desire to provide a nominal anchor for monetary policy stems from a
desire to
a. reduce money growth
b. reduce unemployment
c. reduce inflation expectations
d. do none of the above
Answer:
The greatest portion of the monetary base is composed of
a. vault cash
b. currency held by the public
c. bank reserves
d. bank deposits at the Federal Reserve
Answer:
Persistent budget deficits may cause:
a. an acceleration in the rate of inflation
b. a reduction in the level of investment in plant and equipment
c. increases in both nominal and real interest rates
d. all of the above
Answer:
Which of the following is not included in M2?
a. demand deposits
b. corporate bonds held by firms and individuals
c. money market mutual fund shares
d. currency and coins
Answer:
When a nation’s aggregate supply of goods and services increases, the price level ____
and output ____.
a. increases; increases
b. decreases; decreases
c. decreases; increases
d. increases; decreases
Answer:
Which of the following is counted among the sources of the monetary base?
a. Cp
b. Fb
c. Ft
d. none of the above
Answer:
Monetary policy affects consumption through its ability to affect
a. interest rates
b. stock prices and wealth
c. liquidity
d. all of the above
Answer:
If a bank makes large provisions for loan loss reserves in 2007, then
a. its reported profits in subsequent years will be larger
b. its 2007 reported profits will decline
c. both of the above will occur
d. neither of the above will occur
Answer:
The treaty that lay the groundwork for a monetary union among EU nations was the
a. Maastricht Treaty
b. Treaty of Ghent
c. Treaty of Rome
d. Treaty of Versailles
Answer:
A pastry chef earns $36,000 per year and is paid on the first of each month. If she
spends all of her income evenly throughout the year, then on average she holds enough
cash to finance ____ worth of expenditures.
a. 1/2 month’s
b. 1 month’s
c. 2 months’
d. 12 months’
Answer:
Alan Greenspan
a. is the current president of the New York Federal Reserve bank
b. served more than 15 years on the Board of Governors
c. is not a particularly powerful person in the world of economics
d. none of the above
Answer:
The current Chairman of the Board of Governors of the Federal Reserve System is
a. Alan Greenspan
b. Robert Rubin
c. Laura Taylor
d. Paul Volcker
Answer:
The predominant source of the net income of the Federal Reserve derives from
a. its portfolio of U.S. government securities
b. profits earned in the foreign exchange market
c. priced services it makes available to depository institutions
d. loans to depository institutions
Answer:
Conceptually, in drawing a yield curve, which of the following is not held constant?
a. default risk
b. length of time to maturity
c. marketability
d. tax treatment
Answer:
Money market instruments:
a. always have less than one year to maturity
b. bear no specified interest payment
c. never sell at a premium to face value
d. all of the above are true
Answer:
Since bid prices on Treasury bills must always be below ask prices, it is safe to say that:
a. bid discount rates must be the same as ask discount rates
b. bid discount rates must be greater than ask discount rates
c. bid discount rates must be less than ask discount rates
d. insufficient information is given to answer the question
Answer:
In October 1979, the Fed increased the priority which it placed upon the
a. M3 and M4 targets
b. M1 and M2 targets
c. net free reserves target
d. federal funds rate target
Answer:
Which of the following actions related to the S&L fiasco, if implemented, would likely
have resulted in much less damage to U.S. taxpayers than actually occurred?
a. the S&Ls being deregulated a decade earlier
b. the interest rate ceilings being taken off sooner
c. the interest rate ceilings being maintained indefinitely
d. the Fed fighting inflation more rigorously in the early 1980s
Answer:
All of the following factors will necessarily work to boost velocity except
a. an increase in economic uncertainty
b. an increase in interest rates
c. an increase in the frequency of paydays
d. an increase in the use of credit cards
Answer:
In most of the nations that have adopted inflation targeting,
a. inflation has fallen faster than it has in non-inflation-targeting nations
b. inflation has declined substantially
c. both of the above have occurred
d. neither of the above has occurred
Answer:
The Glass-Steagall Act did the following:
a. abolished statutory interest rate ceilings on deposits
b. provided for separation of investment and commercial banking
c. repealed the Banking Act of 1863
d. did all of the above
Answer:
The underlying axiom of the purchasing power parity theory is
a. covered interest arbitrage
b. the interest parity condition
c. the law of one price
d. the principle of comparative advantage
Answer:
Suppose that two of America’s largest banks–Whole Hog Bank and Piggy
Bank–merge, and the next day an index of other major bank stocks rises by 20 percent.
We can hypothesize, then, that the true motive behind the merger is
a. cost cutting considerations
b. exploitation of monopoly power
c. exploitation of economies of scope
d. we cannot hypothesize anything about the merger given these facts
Answer:
Which of the following is considered a form of nondeposit borrowing by banks?
a. repurchase agreements
b. borrowing from holding company via commercial paper
c. borrowing federal funds
d. all of the above
Answer: