The FDICIA requires
a. extremely undercapitalized banks to close their doors before they become insolvent
b. banks with riskier asset structures to pay higher deposit insurance premiums
c. banks with less capital to pay higher deposit insurance premiums
d. all of the above
Answer:
Which of the following describes the typical pattern of the yield curve over the course
of the business cycle?
a. the curve typically becomes either flat or inverted at the trough (low point) of the
recession
b. the curve flattens during economic expansion and becomes inverted at the peak of the
business cycle
c. the curve steepens during economic expansion and becomes inverted at the peak of
the business cycle
d. the curve steepens during economic expansion and reaches its steepest slope at the
peak of the business cycle
Answer:
An exhibit in the text shows that features contributing to the success of Chile’s inflation
targeting regime include
a. Chile’s low levels of inflation prior to the implementation of the inflation targeting
regime
b. an absence of escape clauses
c. setting relatively long horizons to hit inflation targets
d. all of the above
Answer:
Suppose that the expectation of inflation turns out to be precisely correct. Then:
a. the real interest rate will be zero
b. the ex post and ex ante real interest rates will be identical
c. the nominal and real interest rate will be identical
d. all of the above will occur
Answer:
Regarding the two most severe post-1950 recessions in the United States (1973-1975
and 1981-1982),
a. the output gap was low compared to other recessions
b. both were preceded by severe inflation
c. the unemployment rate was low compared to other recessions
d. all of the above are true
Answer:
When the money supply increases,
a. interest rates and consumer spending both tend to decrease
b. interest rates and consumer spending both tend to increase
c. interest rates tend to decrease, and consumer spending tends to increase
d. interest rates tend to increase, and consumer spending tends to decrease
Answer:
The simple deposit expansion multiplier is equal to
a. 1 divided by the reserve requirement percentage
b. 1 minus the reserve requirement percentage
c. 1 times the reserve requirement percentage
d. none of the above
Answer:
When the economy is in the depths of recession, countercyclical open market
operations would imply
a. defensive operations to keep the monetary base constant
b. open market purchases of securities
c. open market sales of securities
d. no open market action
Answer:
The pure expectations theory of term structure assumes that:
a. investors have preferences for short-term securities
b. investors have preferences for long-term securities
c. there are no transactions costs
d. ascending yield curves prevail most frequently
Answer:
The central bank governors of the ten additional nations that joined the EU in May of
2004
a. may join the Governing Council now
b. may join the Governing Council when their inflation is low by EU standards for four
years
c. may join the Governing Council when they meet convergence requirements and
adopt the euro
d. none of the above
Answer:
Holding other factors constant, a decrease in the money supply tends to ____ stock and
bond prices.
a. increase
b. decrease
c. have no effect on
d. any or all of the above may be true
Answer:
Suppose, in a given week, that float increases $400 million, foreign deposits increase
$300 million, and discounts and advances fall $100 million. To keep the monetary base
constant, the Fed must
a. buy $600 million of government securities
b. buy $800 million of government securities
c. sell $600 million from its portfolio of securities
d. neither buy nor sell securities
Answer:
If m is stable and predictable,
a. changes in the base can be used to effectively control the money supply
b. changes in the base will not lead to predictable changes in the money stock
c. the money supply will rise and fall even if the base is unchanged
d. none of the above is true
Answer:
Which of the following checkable accounts is forbidden to pay interest to depositors?
a. automatic transfer service (ATS) accounts
b. money market deposit accounts (MMDAs)
c. negotiable order of withdrawal (NOW) accounts
d. all of the above are allowed to pay interest to depositors
Answer:
A U.S. Treasury bill sells at $980 (face value = $1,000) and returns a discount rate of 4
percent. How much time does it have until maturity?
a. 180 days
b. 360 days
c. 30 days
d. 90 days
Answer:
The cyclical pattern of velocity suggests that, on average,
a. velocity increases in both expansions and recessions
b. velocity increases in recessions and falls in expansions
c. velocity increases in expansions and falls in recessions
d. velocity falls in both expansions and recessions
Answer:
In the short run, a restrictive monetary policy results in ____ in nominal interest rates,
____ in expected inflation, and ____ in real interest rates.
a. increases; decreases; increases
b. increases; increases; increases
c. decreases; increases; decreases
d. decreases; decreases; cannot determine effect
Answer:
Mutual savings banks:
a. are similar to savings and loan associations
b. are primarily located on the East Coast
c. have about only one-fourth the assets of savings and loan associations
d. all of the above
Answer:
A recovery will be jobless if productivity growth is faster than
a. inflation
b. nominal GDP growth
c. real GDP growth
d. none of the above
Answer:
Which of the variables underlying the money supply multiplier is the Federal Reserve
most capable of influencing?
a. rr
b. re
c. k
d. the Fed has no influence over any of the above
Answer:
All national banks are chartered and supervised by
a. the Comptroller of the Currency
b. the Federal Reserve
c. the FDIC
d. state banking agencies
Answer:
In general, in terms of liquidity,
a. financial assets tend to be more liquid than real assets
b. real assets tend to be more liquid than financial assets
c. financial assets and real assets tend to be approximately equally liquid
d. more information is needed to answer the question
Answer:
The ____ is probably shorter for fiscal policy than for monetary policy.
a. impact lag
b. recognition lag
c. implementation lag
d. none of the above
Answer:
The impetus for aggressive liability management in the 1970s stemmed from
a. high market interest rates
b. limited local deposit bases
c. statutory interest rate ceilings
d. all of the above
Answer:
Economists take the time to develop different measures of the money stock because:
a. they want to find a money measure that is strongly linked to ultimate economic
activity
b. they want to create meaningless tasks which will perpetuate their own jobs
c. they need measures such as M1 to emphasize the medium of exchange function
d. they need measures such as M3 to emphasize the store of value function
Answer:
Today’s yield curve is upward sloping. If pure expectations theory is correct,
a. short term interest rates are expected to rise in the future
b. short term interest rates are expected to fall in the future
c. short term interest rates are expected to remain steady in the future
d. we can reach no conclusion about the future behavior of short term interest rates
Answer:
Which of the following is likely to reduce the cost of capital to a firm?
a. a decline in interest rates
b. an increase in stock prices
c. both of the above
d. neither of the above
Answer:
Inflation is disliked because it
a. creates incentives for firms to over-invest in plant and equipment
b. distorts relative prices, impairing the signaling function of the price system
c. redistributes wealth from debtors to creditors
d. does none of the above
Answer:
Standard benchmarks suggest the U.S. stock market was overvalued in the
a. 1970s
b. 1980s
c. 1990s
d. 2000s
Answer:
A reduction in transactions costs in the government securities markets should cause the
desired excess reserve ratio to ____ and the money supply multiplier to ____.
a. fall; fall
b. rise; rise
c. rise; fall
d. fall; rise
Answer:
Suppose the liquidity premium theory is correct. If short-term rates are expected to
remain constant into the future, then the yield curve will be
a. downward sloping
b. upward sloping
c. flat
d. cannot determine answer with the information given
Answer:
In connection with the S&L debacle, the principal-agent analysis helps to account for
the behavior of:
a. the S&L industry and Congress
b. Congress and the regulatory authorities
c. the S&L industry and taxpayers
d. the public and the S&L industry
Answer:
In the inflation targeting regimes that have been adopted thus far, the inflation target is
a. always chosen by mutual agreement of the government and the central bank
b. always chosen by the central bank
c. always chosen by the government
d. one cannot generalize–in various places the target may be set by either the
government or the central bank
Answer:
Private pension funds and government pension funds:
a. hold nearly 100% of publicly-traded corporate equities and bonds outstanding
b. hold nearly 25% of publicly-traded corporate equities and bonds outstanding
c. hold less than 10% of publicly-traded corporate equities and bonds outstanding
d. none of the above
Answer:
The profitability of the S&L industry depends critically on
a. uniform reserve requirements
b. the shape of the yield curve and stability of interest rates
c. the continued existence of deposit interest rate ceilings
d. the authorization to make commercial loans
Answer: