Relative to 30 years ago, the most rapid growth in exchange market activities has been
in response to growth in
a. capital flows
b. merchandise trade flows
c. nontradable goods
d. services flows
Answer:
Which of the following may be considered a form of commercial bank lending?
a. discounts and advances
b. federal funds sold
c. issuance of MMDAs
d. issuance of negotiable CDs
Answer:
While reading your bank’s annual report, you notice that the bank was forced to write
off several million dollars of bad loans it made to finance Jennifer Lopez’s bomb Gigli.
On the asset side of the bank’s balance sheet, you would see a decline in ____, and on
the liability side of the balance sheet, you would notice a corresponding decrease in
____.
a. capital accounts, deposits
b. loans, capital accounts
c. loans, deposits
d. reserves, capital accounts
Answer:
The Fed decides to adopt the following scheme for implementing monetary policy:
Money growth rate = 3% + 2 ´ (unemployment rate – 6%). This is an example of
a. discretionary monetary policy
b. an active monetary rule
c. a passive monetary rule
d. none of the above
Answer:
The presidents of the individual district Federal Reserve banks are
a. appointed by the president of the United States
b. elected by the board of directors of the district Federal Reserve banks
c. elected by Congress
d. appointed or elected in none of the above ways
Answer:
Which theory of term structure predicts that long-term yields will exceed short-term
yields on average?
a. segmented markets theory
b. liquidity premium theory
c. pure expectations theory
d. all of the above
Answer:
The public perception that a “too big to fail” policy was in place tended to increase
a. the moral hazard problem
b. risk-taking in banks
c. both of the above
d. neither of the above
Answer:
If market interest rates rise:
a. Treasury bill holders lose; bondholders do not
b. long-term bondholders will experience capital losses
c. long-term bondholders will experience capital gains
d. none of the above occurs
Answer:
Money market mutual funds grew in popularity:
a. as interest rates reached all-time highs
b. in the late 1970s and early 1980s
c. due to statutory interest rate ceilings on bank deposits
d. all of the above
Answer:
Regarding ownership of the European central bank,
a. the ECB belongs to the member nations’ central banks, which pay in capital
proportionate to the nation’s gross domestic product
b. the ECB belongs to the member nations’ central banks, which pay in capital
proportionate to the nation’s population
c. both of the above are true
d. neither of the above is true
Answer:
Which of the following is listed on the liabilities side of the Federal Reserve balance
sheet?
a. deferred availability cash items
b. deposits of depository institutions
c. Federal Reserve notes
d. all of the above
Answer:
Suppose that economic activity is strongly increasing during the expansion phase of the
business cycle. Then endogenous forces tend to cause
a. discount loans to fall
b. interest rates to rise
c. the nonborrowed base to rise
d. all of the above
Answer:
Assume a small bank has $5 million of demand deposits, and a 3 percent reserve
requirement applies. If the bank currently retains $170,000 in reserves, then its required
reserves and excess reserves, respectively, are
a. $170,000 and 0
b. $160,000 and $10,000
c. $150,000 and $20,000
d. none of the above
Answer:
The ____ is probably shorter for monetary policy than for fiscal policy.
a. impact lag
b. recognition lag
c. implementation lag
d. none of the above
Answer:
The income velocity of money is defined as
a. PT/M
b. PY/M
c. PY/V
d. MV/T
Answer:
Federal Reserve monetary policy
a. is intended primarily to affect the position of the AS curve
b. is intended primarily to affect the position of the AD curve
c. has little effect on either the AS or AD curve
d. has approximately equal effects on the AS and AD curves
Answer:
The following count among the uses of the monetary base:
a. Cb
b. Cp
c. Fb
d. all of the above
Answer:
The long-run behavior of the money supply over the past thirty years has been caused
primarily by changes in
a. the currency ratio
b. the monetary base
c. the money multiplier
d. none of the above
Answer:
When the Fed buys $500 of securities from a dealer, ____ immediately increase by
$500.
a. bank reserves and the monetary base, but not the money supply
b. bank reserves, the monetary base, and the money supply
c. bank reserves, but not the monetary base or the money supply
d. none of the above
Answer:
The total magnitude of the U.S. government debt outstanding at the end of 2003 was
approximately:
a. 9.1 billion
b. 9.1 trillion
c. 6.7 billion
d. 6.7 trillion
Answer:
The ability of banks to create money derives from
a. the ability of government to issue currency
b. the absence of explicit reserve requirements
c. fractional reserve banking
d. the banks’ authority to issue banknotes
Answer:
According to the purchasing power parity theory, in a system of floating exchange rates,
if prices rise 10 percent in the U.S. and remain constant in Germany, then
a. the dollar exchange rate remains constant against the euro
b. the dollar appreciates 10 percent against the euro
c. the dollar depreciates 10 percent against the euro
d. none of the above will occur
Answer:
Given a 15 percent reserve requirement, Federal Reserve purchases of $1,000 million of
U.S. Treasury securities from dealers results in
a. an eventual increase in the money supply of $1 million
b. an increase in reserves of $1,000 million
c. an initial increase in excess reserves of $150 million
d. an initial increase in the money supply of $6,666.7 million
Answer:
For firms planning to expand production, a Tobin’s q greater than 1.0 implies that it will
be
a. cheaper to buy an existing firm than to build a new plant
b. cheaper to build a new plant than to buy an existing firm
c. Tobin’s q says nothing about the costs of building versus buying
d. the critical value of Tobin’s q is 0.0, not 1.0
Answer:
Suppose that society has the loss function L = 0.7(%DP – 2%)2 + 0.3(Y – Y*)2. This
society clearly
a. dislikes unemployment more than it dislikes inflation
b. dislikes inflation more than it dislikes unemployment
c. has equal dislike for inflation and unemployment
d. not enough information is given to answer the question
Answer:
Which of the following can result in an increase in the money multiplier?
a. an increase in k
b. a decrease in re
c. an increase in rr
d. none of the above
Answer:
Which of the following events would decrease (shift leftward) the aggregate demand
curve in the United States?
a. the Fed reduces interest rates
b. income in Europe rises
c. consumer confidence in Japan rises
d. the U.S. dollar appreciates in foreign exchange markets
Answer:
The text indicates, for a cross section of nations, that countries that:
a. save more tend to invest less
b. save more tend to have higher growth rates
c. save more tend to have lower inflation rates
d. invest more tend to consume more
Answer:
Which of the following explanations for the recent wave of mergers among America’s
biggest banks has not received statistical support?
a. that managers’ salaries are linked to size, not profitability
b. a desire to exploit economies of scale in banking services
c. a desire to exploit the increase in monopoly power realized when banks competing in
the same geographic market merge
d. all of the above have received statistical support
Answer:
The two most volatile and unpredictable sources of the monetary base are
a. G and TCu
b. OA and float
c. Ff and A
d. Ft and float
Answer:
Given other factors, an increase in income tax rates serves to
a. reduce both the currency ratio and the money supply multiplier
b. reduce the currency ratio and increase the money supply multiplier
c. increase both the currency ratio and the money supply multiplier
d. increase the currency ratio and reduce the money supply multiplier
Answer:
The twelve Federal Reserve district banks are
a. owned and controlled by member commercial banks
b. owned and controlled by the U.S. government
c. owned but not controlled by member commercial banks
d. none of the above
Answer:
The relationship between money growth and inflation across countries is:
a. negative and fairly strong
b. negative and fairly weak
c. positive and fairly strong
d. positive and fairly weak
Answer:
If the stock market booms over the next few years, it seems reasonable to assume that
a. returns will eventually crash, and the market will collapse
b. returns will continue to be high indefinitely
c. returns will eventually revert to their historical average
d. we can reach no conclusion about stock market returns
Answer:
“i-shares,” or “exchange traded funds,”
a. exist to track most major stock indices
b. give small investors access to broad market performance and diversification
c. may offer investors some tax-timing advantages relative to similar mutual funds
d. do all of the above
Answer: