Adoption of a credible anti-inflation policy by the central bank is likely to result in
a. an upward movement along the Phillips curve
b. an upward shift in the Phillips curve
c. a downward movement along the Phillips curve
d. a downward shift in the Phillips curve
Answer:
Which of the following assets has exhibited the highest average annual rates of return
over the past 75 years?
a. common stocks
b. corporate bonds
c. gold
d. real estate
Answer:
Regarding U.S. currency held outside the confines of the United States
a. its growth has loosened the link between the U.S. money supply and U.S. GDP
b. it is included in the U.S. money supply measures
c. it now constitutes more than 50 percent of Cp in the U.S.
d. all of the above are true
Answer:
If velocity is unstable, adoption of a constant money growth rule will result in
a. stable output and inflation rates
b. stable output and unstable inflation
c. unstable output and inflation rates
d. unstable output and stable inflation
Answer:
If the purchasing power parity theory of exchange rates were strictly true in the short
run and in the long run, then, if other factors were held constant,
a. higher prices in the U.S. would reduce the U.S. trade deficit
b. higher prices in the U.S. would increase the U.S. trade deficit
c. lower prices in the U.S. would increase the U.S. trade deficit
d. none of the above would occur–changes in the exchange rate would negate any
potential effect of inflation on a nation’s competitiveness in world markets
Answer:
A sale of $400 of securities by the Fed will eventually, if the reserve requirement is
10%,
a. cause bank deposits to fall by $4,000
b. cause bank reserves to fall by $400
c. cause the money supply to fall by $4,000
d. cause all of the above
Answer:
The Treasury bill market is an example of:
a. a capital market
b. a primary market
c. an over-the-counter market
d. all of the above
Answer:
Shares of common stock provided the highest average annual rates of return over which
period?
a. 1900-1945
b. 1965-1982
c. 1982-1999
d. 2000-2004
Answer:
Which of the following is not a financial intermediary?
a. finance companies
b. money market mutual funds
c. life insurance companies
d. all of the above are financial intermediaries
Answer:
Over the last 25 years, the consumption share of GDP expenditures
a. has trended upward
b. has trended downward
c. has remained roughly constant
d. there is no obvious trend in the consumption share of GDP
Answer:
Of the various forms of marketable U.S. government securities, the type with the largest
amount outstanding is:
a. Government account series
b. Treasury bills
c. Treasury bonds
d. Treasury notes
Answer:
Assuming a 10 percent reserve requirement, a deposit of $4,000 cash in a local bank
will
a. immediately lead to expansion of the narrow money stock by $4,000
b. ultimately cause aggregate bank required reserves to increase by $400
c. ultimately lead to expansion of the money supply by $36,000
d. do all of the above
Answer:
U.S. government securities constitute approximately what percentage of total Federal
Reserve assets?
a. 92 percent
b. 61 percent
c. 39 percent
d. 10 percent
Answer:
Over the period 1994-2004, on average, U.S. commercial banks earned a rate of return
on
a. total assets of approximately 1.1 percent, a relatively high figure
b. total assets of approximately 0.4 percent, a relatively high figure
c. total assets of approximately 1.1 percent, a relatively low figure
d. total assets of approximately 0.4 percent, a relatively low figure
Answer:
Which of the following concerning inflation and deflation is a common belief among
economists?
a. Monetary policy tends to be effective at combating both inflation and deflation.
b. Monetary policy tends to be ineffective at combating both inflation and deflation.
c. Monetary policy tends to be better at combating deflation than inflation.
d. Monetary policy tends to be better at combating inflation than deflation.
Answer:
The risk premium tends to ____ in expansions and ____ in recessions.
a. fall; fall
b. fall; rise
c. rise; rise
d. rise; fall
Answer:
When a bank makes a loan in the amount of $800
a. the money supply rises by $800
b. aggregate demand deposits in the banking system rise by $800
c. both of the above occur
d. neither of the above occurs
Answer:
Conventional estimates suggest that if stock market wealth increases $1,000 billion,
ceteris paribus, consumption spending rises approximately
a. $400 billion
b. $300 billion
c. $80 billion
d. $20 billion
Answer:
In the early Keynesian view, investment expenditures are determined by
a. the interest rate
b. the expected rate of return from an additional unit of investment spending
c. both of the above
d. neither of the above
Answer:
Suppose the Fed aggressively buys government securities in the open market. The
impact on the federal funds market is as follows:
a. The supply curve shifts right, the demand curve shifts left, and the federal funds rate
falls.
b. The supply curve shifts right, the demand curve shifts left, and the federal funds rate
rises.
c. The supply curve shifts left, the demand curve shifts right, and the federal funds rate
rises.
d. None of the above is correct.
Answer:
If velocity is constant and the money supply increases by 10 percent, then
a. nominal GDP must increase by 10 percent
b. the price level must increase by 10 percent
c. real GDP must increase by 10 percent
d. all of the above are true
Answer:
A trip to the local hardware store reveals 5,000 different items on the shelves. If the
economy has recently introduced a money system (as opposed to a barter system), how
many different exchange rates must the store owner keep track of?
a. 25,000
b. 2,500
c. 5,000
d. 12,497,500
Answer:
The behavior of nominal interest rates during the Great Depression is often used to
support the ____ interpretation that money was ____.
a. monetarist; loose
b. monetarist; tight
c. Keynesian; loose
d. Keynesian; tight
Answer:
If output is above potential output, the self-correcting mechanism will work by
a. decreasing aggregate supply
b. decreasing aggregate demand
c. increasing aggregate supply
d. increasing aggregate demand
Answer:
During the period of World War II (1942-1945), which of the following occurred?
a. the monetary aggregates accelerated strongly
b. interest rates primarily remained above target levels
c. interest rates primarily remained below target levels
d. none of the above
Answer:
The level of re will rise when
a. the Fed reduces the discount rate
b. interest rates fall
c. the variability of k falls
d. none of the above occurs
Answer:
For an inflation targeting regime to be successful, it should specify
a. a credible plan to reach the goal
b. a specific goal or range of acceptable goals
c. a time frame within which the goal is to be achieved
d. all of the above
Answer:
When the Fed increases reserve requirements
a. interest rates rise
b. the monetary base falls
c. the monetary base rises
d. none of the above occurs
Answer:
There were no national banks during
a. the Great Depression
b. the Free Banking Era
c. the post-Civil War era
d. none of the above–there were national banks during all of these time periods
Answer:
If the pure expectations theory of term structure is correct, and we observe an
upward-sloping yield curve, then short-term forward interest rates must be ____ than
current short-term rates.
a. equal to
b. greater than
c. less than
d. cannot determine answer without first knowing the magnitude of the term premium
Answer:
In its early years, the Euro
a. fluctuated substantially
b. was consistently worth more than the U.S. dollar
c. was consistently worth less than the U.S. dollar
d. did none of the above
Answer:
To reduce the influence of supply shocks, many inflation-targeting nations choose to
target
a. the wholesale price index
b. the CPI, which accounts for all goods and services consumed by the average citizen
c. the “core” CPI, which excludes volatile energy and agriculture prices
d. none of the above
Answer: