The tendency for recessions to increase the level of the NAIRU is called
a. the self-correction mechanism
b. automatic stabilization
c. stagflation
d. hysteresis
Answer:
The distribution of stock ownership among households in the United States shows that
a. there is no relationship between stock ownership and household income
b. those with lower incomes hold many more stocks than do those with higher incomes
c. those with higher incomes hold many more stocks than do those with lower incomes
d. not enough information is given to answer the question
Answer:
During the Great Depression, 1929-1933, the unemployment rate peaked at around
a. 60 percent
b. 25 percent
c. 15 percent
d. 10 percent
Answer:
If the demand-for-money (as a function of interest rates) curve is steep, then
a. velocity will move countercyclically
b. velocity will exhibit wild procyclical swings
c. velocity will tend to be stable and predictable
d. none of the above is true
Answer:
The real interest rate is defined as:
a. the actual interest rate minus the rate of inflation
b. the actual interest rate plus the rate of inflation
c. the actual rate people pay rather than the advertised rate
d. none of the above
Answer:
Which of the following reduces aggregate bank reserves in the United States?
a. your bank reduces its loans
b. your bank grants new loans
c. the Federal Reserve buys U.S. Treasury securities from dealers
d. none of the above
Answer:
The Federal Reserve analogue to the ESCB’s Governors is (are) the
a. Board of Governors
b. FOMC
c. presidents of the individual district Federal Reserve banks
d. Shadow Open Market Committee
Answer:
When we move along a given aggregate supply curve, which of the following is not
held constant?
a. wage rates
b. technology
c. the nation’s price level
d. all of the above are being held constant
Answer:
When the Fed reduces the discount rate
a. bank reserves rise
b. the monetary base rises
c. interest rates fall
d. all of the above occur
Answer:
The Phillips curve predicts
a. an inverse relationship between a nation’s level of interest rates and its inflation rate
b. an inverse relationship between a nation’s unemployment rate and its inflation rate
c. a direct relationship between a nation’s level of interest rates and its inflation rate
d. a direct relationship between a nation’s unemployment rate and its inflation rate
Answer:
If the size of the underground economy increases, ____ and the money multiplier ____.
a. k falls; rises
b. re rises; falls
c. k rises; falls
d. re falls; rises
Answer:
The prime loan rate:
a. is a benchmark interest rate set by large banks
b. is set by the U.S. Treasury
c. exerts only a weak influence over bank loan rates
d. is the loan rate charged to small businesses and consumers
Answer:
Your bank has a capital accounts ratio of 10 percent and a rate of return on equity of 6
percent. Your bank must have a rate of return on assets of
a. less than 1 percent
b. between 1 and 2 percent
c. greater than 2 percent
d. cannot determine answer from given information
Answer:
The Great Depression was characterized by all of the following except
a. rising bank failures
b. rising government bond prices
c. inflation
d. rising unemployment
Answer:
Inflation
a. creates economic uncertainty, reducing investment
b. arbitrarily redistributes income between various segments of society
c. diverts individuals’ efforts from the production of goods and services
d. does all of the above
Answer:
During much of the 1970s
a. actual GDP was less than potential GDP
b. actual GDP was greater than potential GDP
c. actual GDP was equal to potential GDP
d. we cannot determine the answer to the question
Answer:
Suppose First Bank has $40 million of excess reserves, and the reserve requirement is
10 percent. Then First Bank can expand the money supply by a maximum of
a. $400 million
b. $40 million
c. $36 million
d. $4 million
Answer:
Which of the following is true about the nation’s full-employment output level?
a. It is always the actual output level determined by a nation’s AD and AS curves.
b. It occurs when the nation’s unemployment rate falls below the NAIRU.
c. Both of the above are true.
d. Neither of the above is true.
Answer:
In the short run, inflation can almost always be attributed to
a. government budget deficits
b. excessive money growth
c. supply shocks
d. none of the above–one cannot generalize
Answer:
From a public policy viewpoint, the most legitimate reason to espouse a laissez-faire
policy toward bank mergers is that they may be motivated by
a. desire for monopoly power
b. diseconomies of scale
c. higher executive compensation
d. economies of scale
Answer:
If current long-term government bonds are yielding 7 percent, the U.S. government 8s
of 2027 will exhibit:
a. a price above face value
b. an asked yield above the bid yield
c. a coupon rate of 7 percent
d. all of the above
Answer:
Which of the following events would shift the aggregate supply curve rightward in the
United States?
a. the labor force participation rate of females increases
b. energy prices increase sharply
c. Congress boosts the minimum wage
d. none of the above
Answer:
Which deregulatory provision did not contribute to the S&L crisis?
a. removal of interest rate ceilings (DIDMCA)
b. increases in deposit insurance (DIDMCA)
c. relaxation of restrictions on permissible investment activity (Garn-St. Germain)
d. all of the above contributed to the crisis
Answer:
Which of the following is the least likely choice of an intermediate target?
a. the corporate bond rate
b. aggregate bank reserves
c. the Treasury bill rate
d. the M3 money supply
Answer:
The McFadden Act
a. outlawed bank holding companies
b. restricted interstate bank branching
c. separated commercial and investment banking
d. authorized NOW and MMDA accounts
Answer:
The aging of the labor force in the U.S. over the last ten years is likely to cause the
natural rate of unemployment to
a. increase
b. decrease
c. do neither of the above–it should have no effect
d. not enough information is given to answer the question
Answer:
A “dual banking system”
a. existed in the United States only between 1836 to 1863
b. exists when commercial banks can also perform the duties of investment banks
c. exists when both the federal government and state governments can charter banks
d. none of the above is correct
Answer:
Suppose that interest rates remain constant in the next 90 days. A 90-day Treasury bill
issued today will experience:
a. appreciation in price during the next 90 days
b. depreciation in price during the next 90 days
c. a constant price during the next 90 days
d. insufficient information is given to answer the question
Answer:
An appreciation of the dollar:
a. reduces the cost of imports to U.S. consumers
b. means that one unit of foreign currency can buy fewer dollars
c. means that the dollar can buy more units of foreign currency
d. does all of the above
Answer:
Which of the following financial intermediaries lists corporate bonds as one of its chief
assets?
a. life insurance companies
b. commercial banks
c. money market mutual funds
d. all of the above
Answer: