Reasons for holding Eurodollars include
A) the fact that Eurodollar deposits are insured by the FDIC.
B) the fact that dollars are widely used to conduct international transactions.
C) the fact that minimum transaction sizes are very low, making Eurodollars an
attractive savings instrument for consumers.
D) the fact that Eurodollar deposits are heavily regulated.
Answer:
Under a fixed exchange rate regime, a central bank that does not want to acquire
international reserves to keep its currency from ________ will decide to ________ its
currency.
A) depreciating; revalue
B) depreciating; devalue
C) appreciating; revalue
D) appreciating; devalue
Answer:
Early Keynesians concluded that changes in monetary policy had no impact on
aggregate output because early empirical studies found no linkage between movements
in ________ and ________.
A. nominal interest rates; investment spending
B. real interest rates; investment spending
C. money supply; aggregate output
D. investment spending; aggregate output
Answer:
When the interest rate rises
A. planned investment falls.
B. planned investment rises.
C. planned investment will be unaffected.
D. equilibrium income increases.
Answer:
Every financial market has the following characteristic.
A. It determines the level of interest rates.
B. It allows common stock to be traded.
C. It allows loans to be made.
D. It channels funds from lenders-savers to borrowers-spenders.
Answer:
When the value of loans begins to drop, the net worth of financial institutions falls
causing them to cut back on lending in a process called
A. deleveraging.
B. releveraging.
C. capitulation.
D. deflation.
Answer:
The quantity of reserves supplied equals
A. nonborrowed reserves minus borrowed reserves.
B. nonborrowed reserves plus borrowed reserves.
C. required reserves plus borrowed reserves.
D. total reserves minus required reserves.
Answer:
Holding the expected return on bonds constant, an increase in the expected return on
common stocks would ________ the demand for bonds, shifting the demand curve to
the ________.
A. decrease; left
B. decrease; right
C. increase; left
D. increase; right
Answer:
Compared to the United States, Japan’s experience with monetary targeting during the
19781987 period performed
A. better with regard to the inflation rate and output fluctuations.
B. worse with regard to the inflation rate and output fluctuations.
C. better with regard to the inflation rate, but worse with regard to output fluctuations.
D. worse with regard to the inflation rate, but better with regard to output fluctuations.
Answer:
In practice, the Fed’s policy of targeting money market conditions in the 1960s proved
to be
A. countercyclical, helping to stabilize the economy.
B. procyclical, destabilizing the economy.
C. procyclical, helping to stabilize the economy.
D. countercyclical, destabilizing the economy.
Answer:
When we describe stock prices as following a random walk, we mean that future
changes in stock prices are
A. unpredictable.
B. increasing.
C. decreasing.
D. constant.
Answer:
Nonactivists of policies contend that a policy of shifting the aggregate ________ curve
will be costly because it produces ________ volatility in both the price level and output.
A. supply; less
B. supply; more
C. demand; less
D. demand; more
Answer:
When the economy is hit by a temporary negative supply shock and the central bank
does not respond by changing the autonomous component of monetary policy, then in
the long run
A. inflation will be lower.
B. output will be at its potential.
C. output will be lower.
D. inflation will be unchanged.
E. both B and D.
Answer:
According to rational expectations theory, forecast errors of expectations
A. are more likely to be negative than positive.
B. are more likely to be positive than negative.
C. tend to be persistently high or low.
D. are unpredictable.
Answer:
The higher a security’s price in the secondary market the ________ funds a firm can
raise by selling securities in the ________ market.
A. more; primary
B. more; secondary
C. less; primary
D. less; secondary
Answer:
The economy recovers quickly from most recessions, but the increase in adverse
selection and moral hazard problems in the credit markets caused by ________ led to
the severe economic contraction known as The Great Depression.
A. debt deflation
B. illiquidity
C. an improvement in banks’ balance sheets
D. increases in bond prices
Answer:
Under Keynesian analysis, aggregate demand can be written as
A. Yad = C + I + G + NX.
B. Yad= C + I + G – NX.
C. Yad= C – I – G – NX.
D. Yad= C + I – G – NX.
Answer:
As a result of recent empirical research, there has been a convergence of Keynesian and
monetarist opinion to the view that
A. money is all that matters.
B. money does matter.
C. money does not matter.
D. fiscal policy is all that matters.
Answer:
Empirical evidence shows that the quantity theory of money is a good theory of
inflation
A. in the long run, but not in the short run.
B. in the short run, but not in the longrun.
C. in both the long run and the short run.
D. not in either the long run nor the short run.
Answer:
Futures differ from forwards because they are
A. used to hedge portfolios.
B. used to hedge individual securities.
C. used in both financial and foreign exchange markets.
D. a standardized contract.
Answer:
A $1000 face value coupon bond with a $60 coupon payment every year has a coupon
rate of
A. .6 percent.
B. 5 percent.
C. 6 percent.
D. 10 percent.
Answer:
Financial institutions search for ________ has resulted in many financial innovations.
A. higher profits
B. regulations
C. respect
D. higher risk
Answer:
The yield to maturity for a discount bond is ________ related to the current bond price.
A. negatively
B. positively
C. not
D. directly
Answer:
Budgets deficits can be a concern because they might
A. ultimately lead to higher inflation.
B. lead to lower interest rates.
C. lead to a slower rate of money growth.
D. lead to higher bond prices.
Answer:
State banking authorities have sole jurisdiction over state banks
A. without FDIC insurance.
B. that are not members of the Federal Reserve System.
C. operating as bank holding companies.
D. chartered in the 21st century.
Answer:
The Fed’s open market operations normally involve only the purchase of government
securities, particularly those that are short-term. However, during the crisis, the Fed
started new programs to purchase
A. mortgage-backed securities and long-term Treasuries.
B. mortgage-backed securities and Treasury bills.
C. commercial papers and short-term Treasuries.
D. Treasury bills and Treasury notes.
Answer:
Even economists have no single, precise definition of money because
A. money supply statistics are a state secret.
B. the Federal Reserve does not employ or report different measures of the money
supply.
C. the “moneyness” or liquidity of an asset is a matter of degree.
D. economists find disagreement interesting and refuse to agree for ideological reasons.
Answer:
In the Keynesian cross diagram, an increase in autonomous consumer expenditure
causes the aggregate demand function to shift ________, the equilibrium level of
aggregate output to rise, and the IS curve to shift to the ________, everything else held
constant.
A. up; left
B. up; right
C. down; left
D. down; right
Answer:
During the 2007-2009 financial crisis the excess reserve ratio
a. increased sharply.
b. decreased sharply.
c. increased slightly.
d. decreased slightly.
Answer:
A foreign exchange intervention with an offsetting open market operation that leaves
the monetary base unchanged 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: