The portfolio theories of money demand state that the demand for real money balances
is ________ related to income and ________ related to the nominal interest rate.
A. positively; negatively
B. positively; positively
C. negatively; negatively
D. negatively; positively
Answer:
When the Fed supplies the banking system with an extra dollar of reserves, deposits
increase by more than one dollara process called
A. extra deposit creation.
B. multiple deposit creation.
C. expansionary deposit creation.
D. stimulative deposit creation.
Answer:
The bond supply curve is ________ sloping, indicating a(n) ________ relationship
between the price and quantity supplied of bonds, everything else equal.
A. downward; inverse
B. downward; direct
C. upward; inverse
D. upward; direct
Answer:
When the growth rate of the money supply is increased, interest rates will fall
immediately if the liquidity effect is ________ than the other money supply effects and
there is ________ adjustment of expected inflation.
A. larger; fast
B. larger; slow
C. smaller; slow
D. smaller; fast
Answer:
An expansionary monetary policy shifts the LM curve to the ________, reducing
________, everything else held constant.
A. left; output and increasing interest rates
B. left; both real output and interest rates
C. right; both interest rates and real output
D. right; interest rates and increasing real output
Answer:
Because the quantity theory of money tells us how much money is held for a given
amount of aggregate income, it is also a theory of
A) interest-rate determination.
B) the demand for money.
C) exchange-rate determination.
D) the demand for assets.
Answer:
Suppose the economy is producing at the natural rate of output. An open market sale of
bonds by the Fed will cause ________ in real GDP in the short run and ________ in
inflation in the short run, everything else held constant.
A. an increase; an increase
B. a decrease; a decrease
C. no change; an increase
D. no change; a decrease
Answer:
Which policy measure bans spinning?
A. Sarbanes-Oxley Act of 2002
B. Global Legal Settlement of 2002
C. Gramm-Leach-Bliley Act of 1999
D. Riegle-Neal Act of 1994
Answer:
The price of a consol equals the coupon payment
A. times the interest rate.
B. plus the interest rate.
C. minus the interest rate.
D. divided by the interest rate.
Answer:
By taking the long position on a futures contract of $100,000 at a price of 96 you are
agreeing to ________ a ________ face value security for ________.
A. sell; $100,000; $96,000.
B. sell; $96,000; $100,000.
C. buy; $100,000; $96,000.
D. buy; $96,000; $100,000.
Answer:
The measure of the aggregate price level that is most frequently reported in the media is
the
A. GDP deflator.
B. producer price index.
C. consumer price index.
D. household price index.
Answer:
If the money supply is $500 and nominal income is $3,000, the velocity of money is
A. 1/60.
B. 1/6.
C. 6.
D. 60.
Answer:
Which of the following statements about the characteristics of debt and equities is
TRUE?
A. They can both be long-term financial instruments.
B. Bond holders are residual claimants.
C. The income from bonds is typically more variable than that from equities.
D. Bonds pay dividends.
Answer:
People hold money even during inflationary episodes when other assets prove to be
better stores of value. This can be explained by the fact that money is
A. extremely liquid.
B. a unique good for which there are no substitutes.
C. the only thing accepted in economic exchange.
D. backed by gold.
Answer:
Arguments for adopting a policy rule include
A. the time-inconsistency problem can lead to poor economic outcomes.
B. discretionary policies pursue overly expansionary monetary policies to boost
employment in the short run but generate higher inflation in the long run.
C. policy makers and politicians cannot be trusted.
D. all of the above.
Answer:
Coinsurance reduces moral hazard in exactly the same way as
A. limits on insurance.
B. risk-based premiums.
C. deductibles.
D. restrictive provisions.
Answer:
Money is defined as
A. bills of exchange.
B. anything that is generally accepted in payment for goods and services or in the
repayment of debt.
C. a risk-free repository of spending power.
D. the unrecognized liability of governments.
Answer:
An increase in ________ leads to an equal ________ in the monetary base in the short
run.
A. float; decrease
B. float; increase
C. discount loans; decrease
D. Treasury deposits at the Fed; increase
Answer:
An increase in the interest rate
A. increases the demand for money.
B. increases the quantity of money demanded.
C. decreases the demand for money.
D. decreases the quantity of money demanded.
Answer:
________ is the relative ease and speed with which an asset can be converted into a
medium of exchange.
A. Efficiency
B. Liquidity
C. Deflation
D. Specialization
Answer:
The Pension Benefit Guarantee Corporation performs a role similar to that of
A. the Federal Reserve System.
B. the Comptroller of the Currency.
C. the FDIC.
D. the Office of Thrift Supervision.
Answer:
Everything else held constant, if the sum of the required reserve ratio and the excess
reserve ratio is less than one, a decrease in the currency-checkable deposit ratio will
mean
a. an increase in currency in circulation and an increase in the money supply.
b. an increase in money supply.
c. a decrease in the money supply.
d. an increase in currency in circulation but no change in the money supply.
Answer:
A shift in tastes toward foreign goods ________ net exports in the U.S. and causes the
IS curve to shift to the ________ in the U.S., everything else held constant.
A. decreases; right
B. decreases; left
C. increases; right
D. increases; left
Answer:
Evidence from the time period 1960-1980 indicates that inflation in the United States
resulted from
A. an employment target that was set too high.
B. the government’s inability to sell bonds to the Fed.
C. an expansion in the money supply to finance federal government expenditures.
D. the excessive sale of government bonds to the public.
Answer:
Options on individual stocks are referred to as
A. stock options.
B. futures options.
C. American options.
D. individual options.
Answer:
Which of the following bonds would have the highest default risk?
A. municipal bonds
B. investment-grade bonds
C. U.S. Treasury bonds
D. junk bonds
Answer:
During the Great Depression, real interest rates
A. rose to unprecedentedly high levels.
B. rose only slightly above the long-run trend.
C. fell to unprecedentedly low levels.
D. fell only slightly below the long-run trend.
Answer:
Under the European System of Central Banks, the National Central Banks have the
same role as the ________ of the Federal Reserve System.
A. Board of Governors
B. Federal Open Market Committee
C. Federal Reserve Banks
D. Federal Advisory Council
Answer:
If the price level doubles, the value of money
A. doubles.
B. more than doubles, due to scale economies.
C. rises but does not double, due to diminishing returns.
D. falls by 50 percent.
Answer:
A decrease in ________ increases the money supply since it causes the ________ to
rise.
A. reserve requirements; monetary base
B. reserve requirements; money multiplier
C. margin requirements; monetary base
D. margin requirements; money multiplier
Answer:
The two key factors that trigger speculative attacks on emerging market currencies are
A. deterioration in bank balance sheets and severe fiscal imbalances.
B. deterioration in bank balance sheets and low interest rates abroad.
C. low interest rates abroad and severe fiscal imbalances.
D. low interest rates abroad and rising asset prices.
Answer:
When the central bank allows the purchase or sale of domestic currency to have an
effect on the monetary base, it is called
A) an unsterilized foreign exchange intervention.
B) a sterilized foreign exchange intervention.
C) an exchange rate feedback rule.
D) a money neutral foreign exchange intervention.
Answer:
The fact that banks operate on a ‘sequential service constraint” means that
A. all depositors share equally in the bank’s funds during a crisis.
B. depositors arriving last are just as likely to receive their funds as those arriving first.
C. depositors arriving first have the best chance of withdrawing their funds.
D. banks randomly select the depositors who will receive all of their funds.
Answer:
The primary goal of the European Central Bank is
A. price stability.
B. exchange rate stability.
C. interest rate stability.
D. high employment.
Answer: