It is clear that the long-run movement in the monetary base is dominated by
a. bank reserves
b. discounts and advances
c. Treasury deposits at the Federal Reserve
d. the Fed portfolio of securities
Answer:
Which of the following has not served as money in some culture at some time?
a. tobacco
b. credit cards
c. gold
d. all of the above have served as money
Answer:
Velocity is the economic variable that links the money supply to ____.
a. inflation
b. nominal GDP
c. real GDP
d. the monetary base
Answer:
According to the text, which of the following trends in the shares of the financial
intermediation market have occurred since 1960?
a. the private pension fund and mutual fund shares have increased
b. the money market mutual fund and credit union shares have decreased
c. the commercial bank and mutual fund shares have decreased
d. none of the above is true
Answer:
Increases in the money supply
a. reduce interest rates
b. raise stock and bond prices
c. increase portfolio liquidity
d. do all of the above
Answer:
Of the ten sources of the base, the Fed has accurate control over ____ of the factors.
a. none
b. five
c. two
d. all ten
Answer:
The moral hazard problem increases
a. the more fully a certain event is insured against
b. the greater the amount of equity at stake
c. the more closely the regulator’s information resembles the regulated’s information
d. none of the above–all of the above reduce the moral hazard problem
Answer:
When the Federal Reserve purchases $15,000 of securities directly from a local bank,
assuming reserve requirements are 10 percent,
a. bank excess reserves initially rise by $13,500
b. the money supply will ultimately expand by $150,000
c. bank required reserves initially rise by $1,500
d. all of the above occur
Answer:
The IMF’s measure of “world inflation”
a. fell from more than 25 percent in 1990 to less than 4 percent in 2003
b. fell from more than 35 percent in 1990 to less than 2 percent in 2003
c. rose from less than 4 percent in 1990 to more than 25 percent in 2003
d. rose from less than 2 percent in 1990 to more than 35 percent in 2003
Answer:
Over time, transactions deposits have become
a. a more important source of bank funds
b. a less important source of bank funds
c. a more important use of bank funds
d. a less important use of bank funds
Answer:
If interest rates are expected to fall sharply in the future, which would you prefer to
hold–a 30-year deep discount bond or a Treasury bill?
a. Treasury bill
b. 30-year bond
c. you should be indifferent between the two
d. cannot determine answer without knowing their relative yields
Answer:
The independence of the ESCB stems from which of the following factors?
a. the ESCB is not accountable to any government
b. the ESCB is self-funded
c. it is incredibly difficult to make changes in the ESCB
d. all of the above
Answer:
Which of the following will cause the money supply multiplier to increase?
a. an increase in rr
b. an increase in re
c. an increase in k
d. none of the above will cause m to increase
Answer:
A decrease in a nation’s real output can be caused by a(n) ____ in aggregate demand or
a(n) ____ in aggregate supply.
a. decrease; decrease
b. increase; increase
c. decrease; increase
d. increase; decrease
Answer:
The three largest components of the narrow measure of money, M1, include:
a. demand deposits, other checkable deposits, and time deposits
b. currency, demand deposits, and traveler’s checks
c. currency, demand deposits, and other checkable deposits
d. currency, demand deposits, and time deposits
Answer:
The capital accounts ratio equals
a. 1/(equity multiplier)
b. capital accounts/(liabilities + capital accounts)
c. capital accounts/total assets
d. all of the above
Answer:
Assuming a 10% reserve requirement, when a bank customer deposits $500 into her
checking account
a. bank reserves rise by $500
b. excess reserves rise by $500
c. the money supply rises by $500
d. all of the above occur
Answer:
Signs of the “New Economy” after 1994 include the fact that
a. the average inflation rate declined
b. the average productivity growth rate increased
c. the investment spending share of GDP increased
d. all of the above occurred
Answer:
Restrictive action by the Federal Reserve shifts the ____ schedule to the ____ and
causes a(n) ____ of the dollar.
a. RF; left; appreciation
b. RF; right; depreciation
c. iD; right; deprecation
d. iD; right; appreciation
Answer:
The problem with the government’s deregulation of S&Ls in the early 1980s was that
a. the policy resulted in obscene profits in the industry
b. the policy was implemented when hundreds of S&Ls were insolvent
c. the S&L industry was not a competitive industry
d. all of the above were true
Answer:
Assuming a 10% reserve requirement, a bank deposit of $1,000 in cash made by a
member of the public will immediately cause
a. total reserves to rise by $1,000
b. required reserves to rise by $900
c. excess reserves to rise by $100
d. all of the above
Answer:
In the liquidity premium theory of term structure, a flat yield curve is interpreted to
mean that:
a. interest rates are expected to remain constant
b. interest rates are expected to fall
c. interest rates are expected to rise
d. none of the above
Answer:
The financial intermediary that invests the largest portion of its total assets in mortgages
is:
a. the savings and loan association
b. the money market mutual fund
c. the credit union
d. the commercial bank
Answer:
The self-correcting mechanism depends on the ability of
a. input prices to adjust to equilibrium levels
b. aggregate supply to shift upward and downward
c. wages to adjust to equilibrium levels
d. all of the above
Answer:
Which of the following expressions is correct?
a. B = R + Cb
b. B = R – Cp
c. R = B + Cb
d. none of the above
Answer:
The number of internet banking users in 2005
a. is projected to double from the number of internet banking users in 2002
b. is projected to triple from the number of internet banking users in 2002
c. is projected to be half of the number of internet banking users in 2002
d. is projected to be almost zero
Answer:
Which of the following bank assets have increased as a percentage of total bank assets
in the past 30 years?
a. business loans
b. consumer loans
c. real estate loans
d. securities
Answer:
A stated goal of the Federal Reserve System at the time of its creation was
a. to conduct monetary policy in order to smooth business cycle fluctuations
b. to eliminate the need for the cumbersome dual banking system
c. to serve as a lender of last resort
d. all of the above
Answer:
Deposits are maintained at the Federal Reserve by
a. the U.S. Treasury
b. foreign central banks
c. commercial banks
d. all of the above
Answer:
The money supply collapsed during the Great Depression primarily because of
a. poor fiscal policy choices by the Fed
b. a rapid decline in the monetary base
c. a rapid decline in the money supply multiplier
d. none of the above
Answer:
When inflation expectations decrease:
a. the supply of loanable funds increases and interest rates rise
b. the supply of loanable funds increases and interest rates fall
c. the supply of loanable funds decreases and interest rates rise
d. the supply of loanable funds decreases and interest rates fall
Answer:
The interest rate available on today’s 1-year bond is 5%. The interest rate available on
today’s 2-year bond is 10%. Assuming that the pure expectations theory is correct, the
market expects the 1-year bond rate to be ____ at this time next year.
a. 10%
b. 7.5%
c. 5%
d. 15%
Answer: