Which was not a motive for establishing the Federal Reserve System?
a. to combat inflation and unemployment
b. to provide for the issue of currency
c. to provide a lender of last resort
d. to improve the system of check collection
Answer:
The central bank governors of the ten nations that joined the European Union in May
2004
a. are members of the General Council and the Governing Council
b. are not members of the General Council or the Governing Council
c. are members of the General Council but not the Governing Council
d. are members of the Governing Council but not the General Council
Answer:
Recently, Bill Gates’s net worth was estimated at $40 billion. That’s an awful lot of:
a. money
b. wealth
c. income
d. none of the above
Answer:
Most economists today feel that the experience with wage-price controls in the early
1970s had the result of
a. being counterproductive
b. creating shortages of many goods and services
c. postponing and exacerbating inflation
d. doing all of the above
Answer:
If prices are falling, that is, if we are experiencing deflation,
a. the nominal interest rate will be less than the real interest rate
b. the nominal interest rate will be equal to the real interest rate
c. the nominal interest rate will be greater than the real interest rate
d. we can reach no conclusion about nominal and real interest rates
Answer:
The central bank in the United States is:
a. the Federal Reserve System and conducts fiscal policy
b. the Federal Reserve System and conducts monetary policy
c. the Bank of America and conducts fiscal policy
d. the Bank of America and conducts monetary policy
Answer:
Which of the following is definitely a member of the Federal Reserve system?
a. Decatur State Bank
b. Postal Savings and Loan
c. First National Bank of Manhattan, Kansas
d. not enough information is given to answer the question
Answer:
Regarding the value of the U.S. dollar in foreign exchange markets, which of the
following is correct?
a. The dollar appreciated on balance from 1970 to the present.
b. The dollar depreciated in the 1970s, appreciated from 1980 to 1985, and depreciated
from 1985 to 1995.
c. The dollar depreciated steadily from 1970 to the present.
d. None of the above correctly describes the behavior of the dollar.
Answer:
Ceteris paribus, an increase in the discount rate
a. causes banks to increase borrowing at the Fed, thus increasing R, B, and M
b. causes banks to increase borrowing at the Fed, thus reducing R, B, and M
c. causes banks to reduce borrowing at the Fed, thus increasing R, B, and M
d. causes banks to reduce borrowing at the Fed, thus reducing R, B, and M
Answer:
Between 1984 and 2003, the total number of FDIC-insured commercial banks
a. nearly doubled
b. fell nearly in half
c. nearly tripled
d. fell by one-fourth
Answer:
Channels through which monetary policy influences consumption expenditures include
a. household liquidity on durable goods expenditures
b. interest rates on durable goods expenditures
c. wealth on all categories of consumption
d. all of the above
Answer:
One reason the purchasing power parity theory of exchange rates seems to be unreliable
in explaining short-term exchange rate movements is that
a. export and import activity has been rising over time
b. export and import activity is quite small relative to international capital flows
c. interest rates and inflation rates often move together
d. price elasticities of demand for foreign products are low
Answer:
Most of the volume of foreign exchange stems from
a. foreign aid payments from the United States to the rest of the world
b. international trade in goods and services
c. long-term international financial investment
d. short-term financial asset flows
Answer:
The best measure of money is the measure that is most closely associated with or best
a. predicts nominal GDP
b. predicts real output
c. predicts the price level
d. all of the above
Answer:
As a general rule, financial innovations tend to
a. have no effect on velocity
b. increase velocity
c. decrease velocity
d. there is no link between financial innovations and velocity
Answer:
The yield curve is most likely to be strongly upward sloping or ascending when:
a. the economy is at the trough of the cycle (bottom of recession)
b. the general level of interest rates is very low
c. either or both of the above are occurring
d. neither of the above is occurring
Answer:
The money market instrument used primarily to finance international trade is:
a. banker’s acceptances
b. commercial paper
c. repurchase agreements
d. none of the above
Answer:
Assuming a 10% reserve requirement, a deposit of $700 cash into a checking account
will directly cause deposits to ____, and indirectly cause deposits to ____.
a. increase by $700; increase by $7,000
b. increase by $700; increase by $6,300
c. remain the same; increase by $7,000
d. remain the same; increase by $6,300
Answer:
The price of a Treasury bill yielding 7 percent with 30 days to maturity will be ____ the
price of a Treasury bill yielding 8 percent with 42 days to maturity.
a. equal to
b. less than
c. greater than
d. insufficient information is given to answer the question
Answer:
The self-correcting mechanism for a recessionary gap fails to operative effectively if
a. equilibrium output is below full employment output
b. the unemployment rate exceeds the NAIRU
c. wages fail to fall when unemployment is high
d. wages and prices are perfectly flexible
Answer:
When the Federal Reserve was created in 1913,
a. maintenance of price stability was to be its primary goal
b. maintenance of price stability was not explicitly discussed as a goal for the Fed
c. maintenance of price stability was only one of its many explicit goals
d. none of the above is true
Answer:
Regarding the bank demand curve for excess reserves (as a function of the short-term
interest rate) in the 1930s:
a. monetarists believe it shifted rightward
b. monetarists believe it was quite flat
c. Keynesians believe it was quite steep
d. all of the above are true
Answer:
Three Federal Reserve assets are
a. U.S. government securities, coin, and capital accounts
b. U.S. government securities, discounts and advances, and items denominated in
foreign currencies
c. U.S. government securities, cash, and tax and loan accounts
d. U.S. government securities, gold certificates, and Federal Reserve notes
Answer:
Concerning monetary variables in the Great Depression of 1929-1933, it is correct to
state that
a. B decreased, but R increased
b. B, M1 and M2 all decreased
c. M1, M2, and R all decreased
d. B increased, but R decreased
Answer:
When the money supply increases,
a. both interest rates and the prices of stocks, bonds, and houses tend to increase
b. both interest rates and the prices of stocks, bonds, and houses tend to decrease
c. interest rates tend to increase, and the prices of stocks, bonds, and houses tend to
decrease
d. interest rates tend to decrease, and the prices of stocks, bonds, and houses tend to
increase
Answer:
The Federal Reserve System is owned
a. by the federal government
b. by the members of the FOMC
c. by a syndicate of large New York banks
d. by its member banks
Answer:
Approximately 80 percent of S&L and commercial bank failures in the United States
during the 1980s were located in
a. the southern part of the United States
b. the northern part of the United States
c. the eastern part of the United States
d. the western part of the United States
Answer:
Over the past 20 years, which industry has grown in size the fastest?
a. finance companies
b. money market mutual funds
c. life insurance
d. commercial banking
Answer:
During a recession,
a. industrial production contracts more sharply than GDP
b. profits drop sharply
c. both of the above are true
d. neither of the above is true
Answer:
Assume that the nominal interest rate is 10 percent, the expected inflation rate is 4
percent, and the marginal income tax rate is 30 percent. Then the after-tax real interest
rate is:
a. negative one percent
b. 3 percent
c. 6 percent
d. none of the above
Answer:
Which legislation of the 1980s most dramatically liberalized the activities that S&Ls
are allowed to engage in?
a. Competitive Equality in Banking Act (CEBA)
b. DIDMCA
c. Garn-St. Germain
d. FIRREA
Answer:
The Keynesian interpretation of the 1930s emphasizes the view that
a. the Fed was placing too much priority on interest rates instead of watching the money
supply figures
b. the Fed was incapable of increasing the money supply after approximately the middle
of 1932
c. the Fed put real interest rates at far too high a level
d. all of the above are true
Answer:
A high level of employment is an important economic goal because when
unemployment is too high, which of the following may increase?
a. national output losses
b. national income losses
c. social problems like crime and mental illness
d. all of the above may occur
Answer:
Which of the following components of aggregate expenditure is affected by stock
prices?
a. consumption spending
b. investment spending
c. both of the above
d. neither of the above
Answer: