The ECB is generally regarded to be ____ independent than the Federal Reserve.
a. approximately equally
b. less
c. more
d. we cannot generalize about the independence of the ECB
Answer:
A particular type of financial intermediary obtains funds through premiums and uses the
funds predominantly to purchase stocks and bonds. This institution is:
a. a finance company
b. a mutual fund
c. a life insurance company
d. a fire and casualty insurance company
Answer:
Bank holding companies
a. were designed to circumvent state branching restrictions
b. were first permitted by the Bank Holding Company Act of 1956
c. were primarily developed due to favorable tax treatment of earnings
d. all of the above
Answer:
Today, the discount rate is
a. adjusted semiannually by the FOMC
b. set every 8 weeks by the Fed
c. tied to the fed funds rate
d. tied to the prime rate
Answer:
The behavior of consumption in the 2001 recession was
a. typical of most recessions
b. stronger than in most recessions
c. weaker than in most recessions
d. impossible to determine with the data given
Answer:
Labor productivity increases with
a. better technology
b. a larger labor force
c. both of the above
d. neither of the above
Answer:
Over long periods of time, equities (stocks) tend to outperform which of the following?
a. bonds
b. real estate
c. both of the above
d. neither of the above
Answer:
The least commonly used tool of Fed policy is
a. open market operations
b. discount policy
c. reserve requirement changes
d. all are used equally frequently
Answer:
Large increases in the value of equities are likely to cause households to
a. increase both saving and consumption
b. reduce both saving and consumption
c. increase saving and reduce consumption
d. reduce saving and increase consumption
Answer:
Due to the procyclical movements of interest rates over the course of the business cycle,
in the absence of active Fed policies one might expect to observe ____ movement of the
money supply multiplier and ____ movement of the money supply.
a. countercyclical; countercyclical
b. procyclical; procyclical
c. countercyclical; procyclical
d. procyclical; countercyclical
Answer:
Which of the following is not a proposed reform for deposit insurance in the United
States?
a. reducing coverage limits
b. extending the coverage of the “too big to fail” policy
c. eliminating deposit insurance entirely
d. moving to private deposit insurance
Answer:
When we divide the money supply (M1) by the U.S. population, the number seems
high. Which of the following is a good explanation for this?
a. The U.S. has a prominent underground economy.
b. A large part of the money supply is held by business firms.
c. A great deal of U.S. currency resides outside U.S. borders.
d. All of the above are correct.
Answer:
Which theory of term structure assumes that bonds of different maturity are poor
substitutes for one another, but that investors can be induced to accept an inferior
substitute if the yield is high enough?
a. segmented markets
b. pure expectations
c. preferred habitat
d. liquidity premium
Answer:
Which of the following is true about inflation targeting?
a. It is used in Canada, Mexico, and the United States.
b. It involves an explicitly-stated range of inflation rates.
c. It is the only way to keep inflation within acceptable levels.
d. It is used in less than ten of the world’s richest nations.
Answer:
Which of the following characteristics is not generally improved by the adoption of
inflation targeting?
a. the transparency of the central bank
b. the credibility of the central bank
c. the accountability of the central bank
d. all of the above are improved by adoption of an inflation targeting regime
Answer:
The European Central Bank was formed in
a. 1907
b. 1913
c. 1987
d. 1998
Answer:
Which stock market index is most heavily weighted with technology stocks?
a. the NASDAQ index
b. the Dow Jones Industrial Average
c. the Russell 3000
d. the Russell 2000
Answer:
Which legislation phased out the ceiling interest rates payable on deposits in depository
institutions?
a. DIDMCA
b. FDICIA
c. FIRREA
d. Garn-St. Germain
Answer:
If interest rates are lower in England than in the United States, the interest parity
condition tells us
a. the dollar is expected to appreciate against the pound
b. the dollar is expected to depreciate against the pound
c. nothing about the appreciation or depreciation of the dollar relative to the pound
d. any of the above may be possible
Answer:
Which of the following reinforces the independence of the Fed?
a. the fact that it is owned by member banks and is not a department of the government
b. the fact that the Fed is not dependent on Congressional appropriations
c. nonrenewable fourteen-year terms of governors
d. all of the above
Answer:
Given the size of the variables underlying the money supply multiplier, which variable
currently is likely to introduce the least variability in the size of the multiplier?
a. rr
b. re
c. k
d. B
Answer:
Monetary policy influences net exports (NX) primarily by
a. altering interest rates and consumption spending
b. altering the exchange rate
c. altering interest rates and homebuilding activity
d. altering balance sheets and wealth of individuals and firms
Answer:
To a bank, the right-hand side of the balance sheet represents
a. uses of funds
b. sources of funds
c. both of the above
d. neither of the above
Answer:
An advantage of real interest rates over nominal interest rates as intermediate targets of
monetary policy is that real rates
a. are easier to obtain reliable data for
b. are more controllable by the Fed
c. are more important in influencing economic activity
d. exhibit all of the above characteristics
Answer:
When interest rates escalate rapidly, as in the late 1970s,
a. the return on the S&L mortgage portfolio rises more slowly
b. S&L profits tend to rise
c. the yield curve tends to become steeply ascending
d. none of the above occurs
Answer:
Monetarists prefer that the Fed employ which of the following as an intermediate
monetary policy target?
a. M2
b. net free reserves
c. nominal short-term interest rates
d. real short-term interest rates
Answer:
Expansionary monetary policy is capable of inducing increased consumption
expenditures through its power to
a. reduce the likelihood of financial distress by adding liquidity to consumers’ asset
portfolios
b. raise consumer wealth by increasing stock and bond prices
c. make consumer durables more affordable by reducing interest rates
d. do all of the above
Answer:
Of the following capital market instruments in the United States, which is largest in
magnitude?
a. corporate bonds
b. municipal bonds
c. mortgages
d. U.S. Treasury bills
Answer:
Those who believe the Fed should use its tools of policy to “lean against the wind” are
called
a. laissez faire economists
b. monetarists
c. policy activists
d. policy non-activists
Answer:
If market interest rates rise:
a. bond prices must fall
b. bond prices must rise
c. bond prices cannot fall
d. bond prices will either rise or fall depending on whether the bond sells at a premium
or discount to face value
Answer: