Other things being equal, the present value of a bond increases with:
a. higher annual coupons (dollar returns promised from the bond)
b. lower market yields
c. both of the above
d. none of the above
Answer:
Which type of depository institution has grown most rapidly in the past 15 years?
a. mutual savings banks
b. credit unions
c. commercial banks
d. savings and loan associations
Answer:
Benefits to deficit-spending units in society stemming from the existence of financial
intermediaries include:
a. benefiting from higher interest rates that such institutions make possible
b. broadening the range of maturities of debt instruments that can be issued
c. both of the above
d. none of the above
Answer:
When the Fed reduces the reserve requirement
a. bank reserves rise
b. the monetary base rises
c. interest rates fall
d. all of the above occur
Answer:
The long-run trend in the money supply is primarily determined by
a. the central bank
b. the public
c. banks
d. the Department of the Treasury
Answer:
The Garn-St. Germain Act
a. broadened the permissible range of activities for thrift institutions
b. triggered an increase in risk taking by thrifts
c. led to enactment of FIRREA
d. did all of the above
Answer:
By eliminating the necessity of a double coincidence of wants, money
a. reduces the time people spend searching for a suitable trading partner
b. reduces the opportunity for specialization and division of labor
c. increases the transactions cost of exchange
d. does all of the above
Answer:
Which of the following events is likely to increase stock prices?
a. Congress reduces the corporate income tax rate
b. crude oil prices rise to an unprecedented $50/bbl
c. expected inflation rises by 0.5%
d. the Fed increases interest rates by 1%
Answer:
Over short time horizons, such as 2-3 years,
a. stocks have never had positive returns
b. stocks have never had negative returns
c. stocks have seldom had negative returns
d. stocks have often had negative returns
Answer:
Most wars can be characterized by rapid increases in ____ and corresponding ____.
a. aggregate demand; deflation
b. aggregate demand; inflation
c. aggregate supply; deflation
d. aggregate supply; inflation
Answer:
Discount loans are
a. borrowings of the Federal Reserve from the Treasury
b. loans to depository institutions from the Federal Reserve
c. sales of government securities below face value
d. typically of long-term duration
Answer:
Suppose the hypothetical PPP exchange rate is $1.32/pound, but the actual exchange
rate is $1.21/pound. In this case, we can say that the dollar is artificially ____, or that
the dollar is ____.
a. strong; overvalued
b. strong; undervalued
c. weak; overvalued
d. weak; undervalued
Answer:
The dominant form of the demand for money is
a. pecuniary demand
b. precautionary demand
c. speculative demand
d. transactions demand
Answer:
In general, a boost in productivity growth results in
a. a rightward shift of the AS curve
b. a reduction in inflation
c. both of the above
d. neither of the above
Answer:
Which of the following is excluded from M2?
a. small time deposits
b. money market mutual fund shares
c. demand deposits
d. none of the above
Answer:
In the loanable funds model, which of the following would shift the supply curve of
loanable funds leftward?
a. a worsening of political conditions abroad
b. a tightening of bank lending standards
c. a decline in expected inflation
d. none of the above
Answer:
A purchase of $300 of securities by the Fed will eventually cause the money supply to
increase by ____ if the reserve requirement is 10%, and by ____ if the reserve
requirement is 20%.
a. $3,000; $6,000
b. $3,000; $1,500
c. $2,700; $1,350
d. $300; $300
Answer:
Which of the following is not one of Keynes’s motives for holding money?
a. the liquidity motive
b. the precautionary motive
c. the speculative motive
d. the transactions motive
Answer:
The primary opponent of a central bank in the early years of the United States was
a. Aaron Burr
b. Alexander Hamilton
c. George Washington
d. Thomas Jefferson
Answer:
The text states that brokerage fees were extremely regressive until recent years. We can
infer that
a. the fee as a percentage of the value of a transaction tended to be relatively low until
recent years
b. brokerage fees operated on a sliding scale, giving small investors a “break” on
brokerage fees until recent years
c. brokerage fees were often prohibitive for small transactions until recent years
d. none of the above is correct
Answer:
Of the ten sources of the monetary base, the Federal Reserve really only controls which
two?
a. G and P
b. P and A
c. P and Cp
d. P and OA
Answer:
One state contains two of the twelve Federal Reserve district banks. That state is
a. Texas
b. New York
c. Missouri
d. California
Answer:
The most diversified of all the depository institutions is the:
a. savings and loan association
b. money market mutual fund
c. credit union
d. commercial bank
Answer:
When you make a car payment to your bank
a. money is created
b. money is destroyed
c. money is neither created nor destroyed
d. not enough information is given to answer the question
Answer:
A table in the text shows the largest U.S. bank (as of 2003) to be
a. Citibank
b. Chemical Bank-Chase Manhattan
c. Wells Fargo
d. Bank of the United States
Answer:
A trip to the local hardware store reveals 5,000 different items on the shelves. In the
absence of money, how many different exchange rates must the store owner keep track
of (assuming this store stocks every type of good in the economy)?
a. 12,497,500
b. 24,995,000
c. 25,000
d. 5,000
Answer:
Investment spending in the United States:
a. is both smaller in total and less variable than consumption spending
b. is smaller in total but more variable than consumption spending
c. is both larger in total and more variable than consumption spending
d. is larger in total but less variable than consumption spending
Answer:
The reserve requirement tool is seldom used because
a. it is extremely powerful and blunt
b. it is too flexible
c. it is very weak and ineffective at influencing credit conditions
d. the initiative for its use does not lie with the Fed
Answer:
Which of the following central banks is the oldest?
a. the Bank of Israel
b. the Bank of France
c. the Bank of England
d. the Federal Reserve System
Answer:
Increasing inventories are evidence that
a. aggregate demand is less than aggregate supply
b. aggregate demand exceeds aggregate supply
c. exports exceed imports
d. the price level is below the equilibrium level
Answer: