Interest rates typically display a ____ pattern.
a. countercyclical
b. cyclically neutral
c. procyclical
d. none of the above
Answer:
Which of the following would increase real interest rates?
a. an increase in the rate of time preference
b. an increase in the expected productivity of capital
c. both of the above
d. neither of the above
Answer:
If real output is fixed at a capacity level and if velocity is constant, then a 6 percent
jump in the money supply must
a. boost real output by 6 percent
b. boost the price level by 6 percent
c. leave nominal GDP unchanged
d. not necessarily do any of the above
Answer:
There are about 7,500 commercial banks in the United States. Approximately how
many of these banks are members of the Federal Reserve System?
a. all of them
b. 75% of them
c. 40% of them
d. less than 10% of them
Answer:
The people most likely to be willing to borrow money at high interest rates are also
likely to be the people most likely to default on loans. This principle is known as:
a. asymmetric information
b. rational expectations
c. adverse selection
d. moral hazard
Answer:
When a nation’s money supply persistently increases at a faster rate than the nation can
increase its output of goods and services, which of the following happens?
a. living standards rise
b. inflation occurs
c. budget deficits increase
d. real output falls
Answer:
If your pocket is full of gold coins, you are holding:
a. full-bodied money
b. fiat money
c. representative full-bodied money
d. the oldest form of money on record
Answer:
Suppose that interest rates remain constant in the next 90 days and that a 90-day
Treasury bill issued today sells at a discount rate of 4 percent. Its price 45 days from
now will be:
a. $985
b. $990
c. $995
d. insufficient information is given to answer the question
Answer:
Tools of bank liability management include
a. issuing repurchase agreements
b. issuing negotiable CDs
c. buying federal funds
d. all of the above
Answer:
A change in expectations by bankers which leads to an increase in re is likely to lead to
a. an increase in B
b. an increase in the money supply
c. an increase in interest rates
d. a reduction in k
Answer:
In the money view,
a. bank loans have a greater impact on economic activity than securities purchases do
b. bank loans have a smaller impact on economic activity than securities purchases do
c. bank loans have the same impact on economic activity than securities purchases do
d. none of the above is true
Answer:
The largest type of financial intermediary (total assets) is the:
a. life insurance company
b. credit union
c. commercial bank
d. savings and loan association
Answer:
The economy is at full employment when
a. there is neither an inflationary nor a recessionary gap
b. the unemployment rate equals the natural unemployment rate
c. actual GDP equals potential GDP
d. any or all of the above occur
Answer:
A decrease in oil prices is likely to cause ____ to increase and ____ to fall.
a. AD; prices
b. AS; prices
c. AD; output
d. AS; output
Answer:
Which of the following is potentially a short-range target or operating target of Fed
policy?
a. M2
b. the nonborrowed monetary base
c. the mortgage rate
d. the unemployment rate
Answer:
Which measure of money most fully reflects the store of value function?
a. M3
b. M2
c. M1
d. M0
Answer:
The foreign exchange rate for the euro hit its lowest point thus far in
a. November 1999
b. October 2000
c. September 2001
d. March 2003
Answer:
Interest rate changes caused by monetary policy actions are capable of affecting all of
the following except
a. inventory investment
b. residential investment
c. nonresidential investment
d. interest rate changes affect all of the above types of investment
Answer:
A passive monetary policy rule is
a. inflexible
b. also known as a feedback rule
c. described by both of the above
d. described by neither of the above
Answer:
Which is true about inflation in the United States?
a. It is often associated with high levels of output and employment.
b. The U.S. inflation rate is roughly comparable to Japan’s.
c. Its levels have been kept in check by the U.S. inflation-targeting regime.
d. It was relatively low in the 1970s.
Answer:
A decrease in payday frequency will ____ the demand for money and ____ velocity.
a. reduce; reduce
b. increase; increase
c. reduce; increase
d. increase; reduce
Answer:
Since the mid-1980s
a. there have been more bank mergers than new bank charters
b. there have been more new bank charters than bank mergers
c. the number of bank mergers and new bank charters has remained about equal
d. none of the above is correct
Answer:
If the price of a share of stock decreases, ceteris paribus, that company’s
a. price-to-book ratio will increase
b. dividend yield will increase
c. price-earnings ratio will increase
d. none of the above will occur
Answer:
Which of the following is true concerning the composition of M1 today?
a. Traveler’s checks make up about 10% of M1.
b. Demand deposits make up about half of M1.
c. Demand deposits and other checkable deposits make up more than half of M1.
d. Currency makes up about half of M1.
Answer:
Suppose the reserve requirement is 20 percent and the Federal Reserve purchases $5
billion of U.S. government securities from commercial banks. The effect on the
monetary base is to
a. reduce it by $25 billion
b. increase it by $5 billion
c. increase it by $25 billion
d. leave it unchanged
Answer:
As the money supply increases, firms’ net worth tends to ____ and adverse selection
and moral hazard problems tend to ____.
a. increase; increase
b. decrease; decrease
c. increase; decrease
d. decrease; increase
Answer:
Which of the following stock market indices performed the worst over the 2000-2003
period?
a. DJIA
b. S&P 500
c. NASDAQ
d. Russell 1000
Answer:
In the post-WWII era, fluctuations in real output have displayed
a. about the same volatility as in the prewar era
b. reduced volatility
c. increased volatility
d. we can make no generalizations about fluctuations in real output
Answer:
Which of the following was not initiated by the Glass-Steagall Act?
a. deposit interest rate ceilings
b. division of banking and industry
c. restrictions on interstate branch banking
d. separation of ownership of commercial and investment banks
Answer:
The chief function of forward exchange markets is
a. to provide facilities that allow hedging of exchange-rate risk
b. to provide an outlet for speculative activity
c. to ensure that rates remain fixed over time
d. none of the above
Answer:
As a general rule, financial innovations tend to result in
a. temporary increases in velocity
b. temporary decreases in velocity
c. permanent increases in velocity
d. permanent decreases in velocity
Answer:
The Federal Reserve was created in response to
a. the banking panic of 1907
b. the Great Depression
c. persistent stagflation in the 1970s
d. the financing needs of the Civil War
Answer:
Suppose that in a given week, Treasury currency outstanding rises by $300, float rises
by $100, foreign deposits at the Fed rise by $700, and discount lending rises by $100. If
the Fed desires to neutralize the impact of these events on the monetary base, the Fed
should
a. buy $200 of securities
b. buy $1,000 of securities
c. sell $200 of securities
d. sell $800 of securities
Answer:
The financial episode which prompted the creation of the Federal Reserve System was
a. the call for free minting of silver in 1896
b. the panic of 1907
c. the economic bust period immediately following WWI
d. the Great Depression
Answer:
The primary asset of private pension funds is:
a. corporate bonds
b. corporate stocks
c. government bonds
d. mortgages
Answer: