Which of the following stock price indexes is a price-weighted index?
A. Dow Jones Industrial Average
B. Standard & Poor’s 500 Index
C. Nasdaq
D. Wilshire 5000
Answer:
Which of the following is not an example of bartering?
A. Sue trading candles with Tom for his bread.
B. Mary paying for her new shoes with her credit card.
C. John cutting his neighbor’s grass in return for his neighbor washing John’s car.
D. Mrs. Smith treating the neighbor children to pizza after they helped clean up her
yard.
Answer:
Gold is:
A. the most important asset on the Fed’s balance sheet.
B. extremely important as an asset for the Fed.
C. a small portion of the Fed’s assets.
D. very important for monetary policy in the U.S.
Answer:
A reduction in the central bank’s inflation target shifts the dynamic aggregate demand
curve to the left resulting in:
A. lower current output and higher inflation.
B. higher current output and higher inflation.
C. lower current output and lower inflation.
D. higher current output and lower inflation.
Answer:
Which of the following would not be considered a characteristic of money?
A. It is a store of value.
B. It is a means of payment.
C. It must have intrinsic value.
D. It is a unit of account.
Answer:
The Glass-Steagall Act of 1933:
A. required commercial banks to sell off their investment banking operations.
B. eliminated the FDIC.
C. required federally chartered banks to meet the branching restrictions of the states.
D. required all state banks to get federal charters.
Answer:
An inverted yield curve is a valuable forecasting tool because:
A. the yield curve usually is inverted so it reflects a growing economy.
B. the yield curve seldom is inverted and can signal an economic slowdown.
C. investors are expecting higher short-term rates in the future, and this usually signals
an economic slowdown.
D. inverted yield curves signal better economic times are expected.
Answer:
Monetary union, in comparison to dollarization, means that:
A. countries forgo revenues from seignorage.
B. countries share in monetary policy decisions.
C. the central bank no longer has the ability to be the lender of last resort.
D. all of the answers given are correct.
Answer:
Concrete likely does not follow the law of one price due to:
A. technical differences.
B. lack of information regarding prices.
C. tariffs.
D. high transportation costs.
Answer:
The central bank for the euro area tries to achieve accountability and transparency
through a:
A. standard numerical objective for inflation over the medium term.
B. specific target for unemployment and economic growth.
C. following the monetary policy guidance of the European Parliament.
D. specific target for the dollar euro exchange rate.
Answer:
Unexpected inflation can benefit some people/firms and harm others. This is an
example of:
A. systematic risk.
B. unmeasured risk.
C. idiosyncratic risk.
D. zero risk since the effects balance.
Answer:
For several years before the crisis of 2007-2009, people in U.S. business and
government called for China to move away from its fixed-exchange rate regime
because:
A. hindering its own growth.
B. building up inflation risks.
C. adding to its current account deficit.
D. exporting its inflation to the United States.
Answer:
One way that a bank could offer non-bank services across more than one state was to:
A. file for a foreign bank charter.
B. be a federally chartered bank rather than a state chartered bank.
C. create a bank holding company.
D. become a central bank.
Answer:
Municipal bonds are issued by:
A. cities only.
B. the U.S. Treasury, but the proceeds can only be used by cities.
C. states and cities, but their interest is taxable only at the federal level.
D. states and cities and their interest is exempt from U.S. government taxation.
Answer:
Interest-rate risk results from:
A. bond prices being fixed over the life of the bond.
B. a mismatch between an individual’s investment horizon and a bond’s maturity.
C. the fact that most people hold bonds until they mature.
D. inflation being uncertain.
Answer:
Specialization usually increases the output of a country; however effective
specialization requires:
A. everyone in the country producing the same thing.
B. that workers have very similar skills.
C. an effective low-cost means to exchange goods and services.
D. a large stock of capital.
Answer:
Which of the following statements is most true concerning economic policy in the
U.S.?
A. Monetary policymakers tend to have a long view while fiscal policymakers tend to
ignore the long-run inflationary ramifications of their actions.
B. Fiscal policymakers tend to focus on inflation and unemployment while monetary
policymakers focus most of their attention on the money supply and the exchange rate.
C. Fiscal policymakers tend to focus more on pleasing their constituents and so are
willing to sacrifice the short run for the long run.
D. Monetary policy independence is enshrined in the U.S. Constitution.
Answer:
Each of the following items would appear as assets on the central bank’s balance sheet,
except:
A. loans.
B. securities.
C. currency.
D. foreign exchange reserves.
Answer:
The tool the Fed uses to keep the federal funds rate close to the target is:
A. the required reserve rate.
B. discount lending.
C. open market operations.
D. they can set the rate by law.
Answer:
A country with a fixed exchange rate policy and free cross-border capital flows that is
experiencing an economic slowdown will find:
A. their central bank will reduce the domestic interest rate in order to fend off the
slowdown.
B. their currency will depreciate to stimulate exports.
C. their corporate equities will become more attractive to foreign investors.
D. monetary policy in not available as an economic stabilization tool.
Answer:
Which of the following is (are) not a permanent voting member(s) on the FOMC?
A. The seven Governors of the Fed
B. The Secretary of the Treasury
C. The President of the Federal Reserve Bank of New York
D. The chair of the Board of Governors
Answer:
A problem with currency boards is that the central bank loses:
A. control over the government budget.
B. a flexible exchange rate is always preferred to a pegged exchange rate.
C. influence over interest rates.
D. the ability to supervise banks.
Answer:
Changing short-term interest rates have a(n):
A. strong and immediate impact on household purchase decisions.
B. no impact on household purchasing decisions.
C. somewhat modest impact on household purchasing decisions.
D. none of the answers provided is correct.
Answer:
The price of a coupon bond is determined by taking the present value of:
A. the bond’s final payment and subtracting the coupon payments.
B. the coupon payments and adding this to the face value.
C. the bond’s final payment.
D. all of the bond’s payments.
Answer:
Given the equation of exchange, MV = PY, when central bankers control short-term
nominal interest rates by adjusting the level of reserves in the banking system, their
actions are expected to primarily affect:
A. the rate of growth of V.
B. the value of V.
C. potential Y as opposed to current Y.
D. the rate of growth of M.
Answer:
Which of the following is a problem of adverse selection?
A. The lender has a problem of distinguishing good risk from bad risk borrowers.
B. The lender has a problem determining that the proceeds from a loan are being used
as the borrower stated.
C. A person takes up the hobby of bungee jumping after purchasing health insurance.
D. Individuals use more medical services as a result of their purchase of a health
insurance plan.
Answer:
Which of the following would not shift the aggregate expenditures curve?
A. A change in the real interest rate
B. Changes in consumer or business confidence
C. Fiscal policy changes
D. Changes in net exports that result from exchange rate changes
Answer:
The CAMELS ratings are:
A. made public monthly to the financial markets so people can judge the relative
quality of banks.
B. published once a quarter in banking journals issued by the Federal Reserve.
C. included in the annual report of publicly owned banks.
D. not made public.
Answer:
The money aggregate M1 includes each of the following, except:
A. currency in the hands of the public.
B. travelers checks that have been issued.
C. currency in the vaults of commercial banks.
D. demand deposits at commercial banks.
Answer:
Often Eurodollar deposits earn higher returns than U.S. bank deposits for all of the
following reasons except:
A. Eurodollar deposits are not subject to U.S. reserve requirements.
B. the bank does not have to pay deposit insurance premiums on these deposits.
C. regulatory compliance may be more costly for a foreign bank than a U.S. bank.
D. taxes on the profits on banks outside the U.S. may be lower on banks inside the U.S.
Answer:
The period 1974-1975 is somewhat unique in U.S. economic history due to the fact
that:
A. the output was growing rapidly and the inflation rate was falling.
B. both the output and the inflation rate were falling.
C. output was falling yet the inflation rate rose dramatically.
D. output and the inflation rate were both rising.
Answer:
During the Great Depression, the monetary base in the U.S.:
A. decreased significantly.
B. increased.
C. remained constant.
D. was highly erratic.
Answer:
The strike price of an option is:
A. the market price at the time the option is written.
B. the market price at the time the option is exercised.
C. the price at which the option holder has the right to buy or sell.
D. always above the market price.
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