As of October 2012, the amount of money as measured by M2 was about
A) $880 billion.
B) $1700 billion.
C) $10.2 trillion.
D) $14 trillion.
Answer:
The period over which a call or put option exists is
A) determined by its delivery date.
B) determined by its expiration date.
C) determined by whether the contract is written for a commodity or for a financial
instrument.
D) indeterminate; options contracts continue in existence until either the buyer or the
seller desires to discontinue it.
Answer:
Which of the following is NOT a significant cost that a barter system imposes on an
economy?
A) Many prices must be maintained for each good.
B) Only agricultural goods may be traded.
C) Specialization of labor is hindered.
D) The costs arising from the problem of finding two people who each want what the
other produces.
Answer:
In 2012, Ben Bernanke expressed which concern about persistently high
unemployment?
A) It would result in high inflation.
B) It would result in structural damage to the economy that would last for years.
C) It would never decline to desired levels.
D) It would cost him his job.
Answer:
Forward contracts
A) are highly liquid.
B) entail small information costs.
C) provide little risk sharing.
D) are subject to default risk.
Answer:
Which of the following will NOT result from an unsterilized intervention in which the
central bank sells foreign assets to purchase domestic currency?
A) Domestic interest rates will rise.
B) The foreign-exchange value of the domestic currency will rise.
C) The central bank will experience a decrease in international reserves.
D) The domestic money supply will rise.
Answer:
During the financial crisis of 2007-2009,
A) mortgage-backed securities became more liquid.
B) information costs of mortgage-backed securities rose.
C) information costs of mortgage-backed securities declined.
D) the tax treatment of mortgage-backed securities was changed.
Answer:
In 1971 money market mutual funds were introduced as an alternative to
A) commercial paper.
B) Treasury bills.
C) repurchase agreements.
D) bank deposits.
Answer:
In recent decades, the United States
A) was essentially a closed economy.
B) was generally a net borrower of foreign funds.
C) was generally a net lender abroad.
D) experienced a net outflow of savings.
Answer:
In comparing futures contracts with options contracts, we can say that
A) in a futures contract, the buyer and seller have symmetric rights, whereas in an
options contract, the buyer and seller have asymmetric rights.
B) in a futures contract, the buyer and seller have asymmetric rights, whereas in an
options contract, the buyer and seller have symmetric rights.
C) in both futures and options contracts, the buyer and seller have symmetric rights.
D) in both futures and options contracts, the buyer and seller have asymmetric rights.
Answer:
If money is declared to be legal tender, it must be
A) minted from a precious metal.
B) acceptable to citizens of foreign countries.
C) possible to exchange it for an equivalent amount of precious metal.
D) accepted to settle private transactions and it must be used in paying taxes.
Answer:
If you deposit a $50 check in the bank, the immediate impact on your bank’s balance
sheet will be a
A) $50 increase in reserves and a $50 increase in checkable deposits.
B) $50 decrease in reserves and a $50 increase in checkable deposits.
C) $50 increase in reserves and a $50 decrease in checkable deposits.
D) $50 decrease in liabilities and a $50 increase in checkable deposits.
Answer:
All of the following are possible consequences of noise traders EXCEPT
A) increased volatility in the financial market.
B) asset prices differing from fundamental values.
C) herd behavior contributing to speculative bubbles.
D) reduced volatility of asset prices.
Answer:
Moral hazard arises from
A) the difficulty of distinguishing good-risk borrowers from bad-risk borrowers.
B) the likelihood that bad-risk borrowers are more likely to accept a loan than are
good-risk borrowers.
C) savers’ difficulties in monitoring borrowers.
D) borrowers’ difficulties in locating savers.
Answer:
About what percentage of bank assets is made up of cash items in 2012?
A) 8%
B) 20%
C) 37%
D) 50%
Answer:
The gap between the current unemployment rate and the natural rate of unemployment
is called:
A) frictional unemployment
B) structural unemployment
C) cyclical unemployment
D) full employment
Answer:
Economies of scale are
A) charges to savers and borrowers imposed by banks in exchange for reducing
transactions costs.
B) the reduction in costs per unit that accompanies an increase in volume.
C) decreases in transactions costs that occur as information costs increase.
D) decreases in information costs that occur as transactions costs increase.
Answer:
The gold standard probably made the Great Depression more severe in the United
States because
A) the value of gold declined sharply during those years.
B) the existence of the gold standard kept prices from falling.
C) the money supply in the United States increased rapidly as gold flowed into the
country.
D) the Fed attempted to reduce gold outflows by raising the discount rate.
Answer:
Although open market operations and discount loans both change the monetary base,
the Fed has
A) greater control over open market operations than over discount loans.
B) greater control over discount loans than over open market operations.
C) very little control over either discount loans or open market operations.
D) complete control over both discount loans and open market operations.
Answer:
Since capital gains are only taxed when an investor sells an asset and realizes the gain, a
possible result is:
A) the locked-in effect
B) double taxation
C) an increase in capital losses
D) limited liability
Answer:
An increase in oil prices will
A) shift the short-run aggregate supply curve up and to the left.
B) shift the short-run aggregate supply curve down and to the right.
C) cause a movement along the short-run aggregate supply curve.
D) not affect the short-run aggregate supply curve.
Answer:
A one-year bond currently pays 5% interest. It’s expected that it will pay 4.5% next year
and 4% the following year. The two-year term premium is 0.2% while the three-year
term premium is 0.35%. What is the interest rate on a three-year bond according to the
liquidity premium theory?
A) 4.5%
B) 4.68%
C) 4.85%
D) 5.05%
Answer:
The narrowest money measure is
A) currency plus non-interest bearing checking accounts.
B) currency plus all checking accounts.
C) currency plus all deposits at financial institutions.
D) definitive money.
Answer:
The United States has a dual banking system in the sense that
A) the public may deposit money in either commercial banks or savings-and-loan
associations.
B) banks offer both demand deposits and time deposits to savers.
C) banks are chartered by the federal government and by state governments.
D) banks both take in deposits and make loans.
Answer:
The monetary base is equal to
A) all currency in circulation plus all deposits in financial institutions.
B) all currency in circulation plus checkable deposits in financial institutions.
C) all currency in circulation plus reserves held by banks.
D) checkable deposits in depository institutions plus reserves held by banks.
Answer:
Most economists believe that changes in the price level have
A) no effect on the quantity of output supplied in either the short run or the long run.
B) an effect on the quantity of output supplied in the short run, but not in the long run.
C) an effect on the quantity of output supplied in the long run, but not in the short run.
D) an effect on the quantity of output supplied in both the short run and the long run.
Answer:
Why are many economists skeptical of the Fed’s ability to fine tune the economy?
A) Monetary policy only affects output in the long run.
B) Lags in policy make it difficult to properly time policy.
C) Fiscal policy can be implemented more quickly than monetary policy.
D) Monetary policy does not have any effect on output.
Answer:
If, while you are holding a coupon bond, its market price falls, you can be sure that
A) the coupon payment you are receiving must have been reduced.
B) the interest rate on other similar bonds must have fallen.
C) the interest rate on other similar bonds must have risen.
D) the par value of the bond must have declined.
Answer:
The Fed’s portfolio of securities consists principally of
A) municipal bonds.
B) corporate bonds.
C) U.S. Treasury obligations.
D) obligations of foreign governments.
Answer:
A stress test of banks, such as that undertaken in the Spring of 2009, is designed to:
A) ensure that banks have followed proper accounting standards
B) make sure that banks are properly managed
C) gauge how well banks would fare if the economy worsens
D) estimate the impact of a bank panic on the overall economy
Answer:
In 2011, the net financial account balance was approximately
A) $790 billion.
B) -$790 billion.
C) $394 billion.
D) -$394 billion.
Answer:
In a barter system individuals
A) find it impossible to specialize.
B) must be entirely self-sufficient.
C) find it difficult to specialize, but may be able to do so.
D) will almost invariably specialize.
Answer: