Concerning Keynesian and monetarist views on appropriate monetary policy targets, we
can state that
a. Keynesians prefer to focus on monetary aggregates
b. monetarists prefer to focus on bond yields
c. both of the above are true
d. neither of the above is true
Answer:
If income velocity of money were constant, then
a. fiscal policy would have no impact on GDP
b. monetary policy would have no impact on GDP
c. real GDP would move in exact proportion to M
d. the price level would move in exact proportion to M
Answer:
As a condition for membership in the monetary union, nations would have to achieve
certain macroeconomic goals, called
a. balance growth objectives
b. convergence criteria
c. inflation targets
d. stabilization objectives
Answer:
As a recession worsens, investors are likely to
a. divert funds from corporate bonds to government bonds
b. divert funds from government bonds to corporate bonds
c. both of the above are possible
d. neither of the above is likely
Answer:
The credit crunch that existed from 1990 to 1992
a. resulted from restrictive Fed policy
b. resulted from increased cautiousness by banks, unrelated to Fed policy
c. involved a narrowed spread between bank lending rates and the banks’ costs of funds
d. is accurately represented by none of the above
Answer:
With regard to depository institutions in the 1980s and early 1990s
a. both S&Ls and commercial banking suffered enormous failures; commercial banks
were hit harder
b. both S&Ls and commercial banking suffered enormous failures; S&Ls were hit
harder
c. the commercial banking industry suffered large numbers of failures; S&Ls did not
d. the S&L industry suffered large numbers of failures; commercial banks did not
Answer:
Anxious for the upcoming theatre season, you purchase a $200 season ticket by writing
a check on your local bank. Assuming a 10 percent reserve requirement, this action
a. will cause deposits to expand by an additional $1,800
b. ultimately causes bank required reserves to rise by $200
c. initially causes aggregate bank required reserves to rise by $20
d. does none of the above
Answer:
What is the present value of a $1,000 bond with a coupon payment of $65 annually if
the bond matures in 5 years and the yield on comparable securities is 8 percent?
a. $940.11
b. $943.40
c. $1052.18
d. none of the above
Answer:
Regarding FDIC deposit insurance, which of the following is true?
a. the limits of coverage have increased more slowly than the U.S. price level
b. the maximum coverage per depositor per bank is now $100,000
c. the percentage of bank deposits insured has declined over the past 30 years
d. all of the above are true
Answer:
An increase in which of the following will work to reduce the level of velocity?
a. economic uncertainty
b. expected inflation
c. financial innovations
d. interest rates
Answer:
In the Keynesian view,
a. monetary policy is a more powerful tool than fiscal policy
b. fiscal policy is a more powerful tool than monetary policy
c. monetary and fiscal policy are both equally powerful
d. Keynesians have no opinion on the relative efficacy of fiscal and monetary policy
Answer:
Which of the following actions would tend to reduce the moral hazard problem in
banking?
a. implementation of coinsurance
b. reduction of the insurance ceiling to $30,000
c. elimination of deposit insurance
d. all of the above
Answer:
Which of the following directly increases the money supply?
a. the public deposits cash into banks
b. banks sell securities to dealers
c. the public withdraws cash from banks
d. none of the above
Answer:
Which of the following is not a type of savings bond offered through the U.S. Treasury?
a. AA bonds
b. EE bonds
c. HH bonds
d. All of the above are types of savings bonds offered through the U.S. Treasury.
Answer:
Members of the Board of Governors of the Federal Reserve System obtain their
positions through
a. appointment by the U.S. Senate
b. appointment by the U.S. president
c. appointment by the directors of the Federal Reserve Banks
d. appointment by the Chairman of the Board of Governors
Answer:
If, in a period in which a set of rigid wage-price controls is in place, the Fed sharply
boosts the money supply and reduces interest rates
a. unemployment rises
b. shortages appear in various product and resource markets
c. the reported inflation rate rises
d. all of the above occur
Answer:
One way in which Federal Reserve open market securities purchases influence
economic activity is by
a. reducing M1 and M2
b. reducing wealth
c. raising interest rates
d. raising securities prices
Answer:
If today’s exchange rate is $1.32/euro, then it must also be true that today’s exchange
rate is
a. .66 euro/$
b. .7575 euro/$
c. 1.32 euro/$
d. we can reach no conclusion about the euro/$ exchange rate
Answer:
Other things being equal, a cut in income tax rates will
a. reduce aggregate supply, raise output, and reduce the price level
b. boost aggregate supply, reduce output, and reduce the price level
c. boost aggregate demand, raise output, and increase the price level
d. reduce aggregate demand, raise output, and increase the price level
Answer:
According to the early Keynesian monetary transmission mechanism, an increase in the
money supply
a. lowers interest rates and stimulates investment spending
b. lowers interest rates and depresses investment spending
c. raises interest rates and stimulates investment spending
d. raises interest rates and depresses investment spending
Answer:
The behavior of the money supply multiplier is dominated by changes in
a. re
b. rr
c. k
d. none of the above
Answer:
In theory, adoption of a credible inflation targeting regime should
a. shift that country’s Phillips curve downward
b. shift that country’s Phillips curve upward
c. have no effect on that country’s Phillips curve
d. not enough information is given to answer the question
Answer:
Which of the following contributes negatively to the monetary base?
a. discounts and advances
b. float
c. gold stock
d. none of the above
Answer:
During periods of high market interest rates
a. the reserve requirement tax decreases
b. the reserve requirement tax increases
c. the reserve requirement tax is unaffected by the level of interest rates
d. not enough information is given to answer the question
Answer:
The legislation that prohibited banks from owning corporate equities was the
a. Competitive Equality Banking Act
b. Depository Institutions Deregulation and Monetary Control Act
c. Financial Institutions Reform, Recovery, and Enforcement Act
d. none of the above
Answer:
The salaries of the presidents of the district Federal Reserve banks
a. vary widely, and the highest is that of the president of the San Francisco bank
b. don’t vary much, and the highest is that of the president of the San Francisco bank
c. vary widely, and the highest is that of the president of the Kansas City bank
d. are described by none of the above
Answer:
All other things being equal, an increase in inflation in the U.S. shifts the supply of
dollars to the ____, the demand for dollars to the ____, and causes a(n) ____ of the
dollar relative to other currencies.
a. right; right; depreciation
b. right; left; depreciation
c. left; right; appreciation
d. left; right; depreciation
Answer:
The text examines stock market performance in the United States, Europe, and Japan
from 1987 to 2004. Which of the following is a valid statement?
a. The United States, Europe, and Japan tended to have similar stock market
performance.
b. The United States, Europe, and Japan tended to have dissimilar stock market
performance.
c. Stock market performance in the United States tended to be similar to that of Europe
but relatively dissimilar to that of Japan.
d. Stock market performance in the United States tended to be similar to that of Japan
but relatively dissimilar to that of Europe.
Answer:
A good stock market index:
a. always weights the shares of different firms equally
b. represents a true cross section of the market by including both heavily and lightly
traded shares
c. contains a large enough number of stocks to be representative of the market as a
whole
d. does all of the above
Answer:
The present value of a stream of cash flows decreases when:
a. the length of time before you will receive the cash flows increases
b. the nominal value of the cash flows increases
c. the interest rate decreases
d. none of the above
Answer:
In the loanable funds model, which of the following would shift the demand curve for
loanable funds rightward?
a. an increase in business confidence
b. an increase in the private saving rate
c. an increase in the money supply
d. a reduction in the federal budget deficit
Answer: