The Federal Reserve implements its open market operations tool by
a. making changes in the interest rate at which it lends funds to banks
b. changing the fraction of deposits that banks must hold as reserves
c. buying and selling government securities
d. issuing and recalling Federal Reserve Notes
Answer:
The invention of the ATM is likely to cause k to ____ and the money supply multiplier
to ____.
a. decrease; decrease
b. increase; increase
c. increase; decrease
d. decrease; increase
Answer:
The monetary base is sometimes defined as the “net monetary liabilities” of the
a. Federal Reserve and depository institutions
b. Federal Reserve
c. Federal Reserve and Treasury
d. Treasury and depository institutions
Answer:
The Fisher effect asserts that:
a. inflation is fully neutral
b. increases in expected inflation should cause nominal interest rates to fall, as the
returns from investing are eroded by price increases
c. decreases in expected inflation should cause decreases in nominal interest rates
d. none of the above will occur
Answer:
Stock market behavior is synchronized fairly strongly across countries. Which country’s
stock market behavior deviated from the norm during 1995-2000?
a. Italy
b. Japan
c. Germany
d. the United States
Answer:
You are given the following data: aggregate bank reserves = $122 billion, DDO =
$1,200 billion, Cp = $1,200 billion, rr = 0.10, re = 0.00167. In this case, the currency
ratio must be ____ and the money supply multiplier must be ____.
a. 0.5; 1.1815
b. 0.5; 2.493
c. 1.0; 2.493
d. 1.0; 1.815
Answer:
Financial intermediaries improve the efficiency of the saving process by reducing
problems of:
a. asymmetric information
b. adverse selection
c. moral hazard
d. all of the above
Answer:
The Federal Reserve Act was signed into law in
a. 1863
b. 1907
c. 1913
d. 1933
Answer:
Other things being equal, if the U.S.-Great Britain exchange rate moves from 0.55
pound/$ to 0.65 pound/$, then
a. the dollar appreciates and U.S. inflation will be boosted
b. the dollar depreciates and U.S. inflation will be reduced
c. the dollar appreciates and U.S. inflation will be reduced
d. the dollar depreciates and U.S. inflation will be boosted
Answer:
Which of the following statements is true about the United States?
a. Productivity fell between 1995 and 2001.
b. Stock prices fell between 1995 and 2000.
c. The number of commercial banks fell between 1980 and 2000.
d. The price of tech stocks rose after 2000.
Answer:
Modern views on the transmission mechanism generally agree that monetary policy is
capable of affecting
a. stock prices
b. bond prices
c. both stock and bond prices
d. neither stock nor bond prices
Answer:
The Federal Reserve System:
a. sets the foreign exchange rate of the U.S. dollar
b. issues government bonds and other forms of debt
c. conducts monetary policy in the United States
d. does all of the above
Answer:
Price level stability is an ultimate goal of policy because
a. inflation arbitrarily and capriciously redistributes income
b. inflation obscures the behavior of relative prices, thereby misallocating resources
c. inflation reduces investment horizons, thereby reducing capital formation
d. all of the above are true
Answer:
When we draw a yield curve or term structure curve, we are holding constant:
a. the real yield
b. the yield
c. the date from which the data are drawn
d. the length of time to maturity
Answer:
Which trend has been evident since World War II?
a. the securities/total assets ratio of banks has increased
b. the municipal bonds/total assets ratio of banks has increased
c. the loans/total assets ratio of banks has increased
d. all of the above
Answer:
Choose the answer that is not true. The great majority of claims issued by banks and
thrifts are:
a. devoid of default risk
b. devoid of market risk
c. secondary claims
d. all of the above
Answer:
Between 1952 and 1962, the United States experienced ____ recessions.
a. zero
b. one
c. two
d. three
Answer:
The FOMC
a. meets about eight times per year
b. always includes the president of the New York Fed
c. always includes the Board of Governors
d. all of the above are true
Answer:
Monetarists explain the behavior of bank excess reserves during the 1934-1935 period
as
a. a downward movement along the excess reserve demand curve
b. a leftward shift (decrease) in the demand for excess reserves
c. a rightward shift (increase) in the demand for excess reserves
d. an upward movement along the excess reserve demand curve
Answer:
The credit view emphasizes
a. the unimportance of examining the source of changes in the money supply
b. the high degree of substitutability between bank loans and securities issues as a
source of funds to borrowing firms
c. the limited alternatives to bank loans for the small business sector
d. all of the above
Answer:
Which of the following would trigger an increase in rr?
a. a check written on Citibank is deposited in Bank of America
b. a check written on Citibank is deposited in a small bank with $40 million of DDO
c. the Fed imposing reserve requirements on large negotiable CDs
d. none of the above
Answer:
In order to drain $10,000 of reserves from the banking system, the Fed should
a. buy $10,000 of securities
b. buy less than $10,000 of securities
c. sell $10,000 of securities
d. sell less than $10,000 of securities
Answer:
What is the present value of a 90-day Treasury bill (face value=$1,000) if the yields on
comparable securities are 6 percent?
a. $943.40
b. $985.54
c. $989.99
d. none of the above
Answer:
Money market mutual funds invest primarily in:
a. Treasury bills
b. repurchase agreements
c. municipal bonds
d. commercial paper
Answer:
Which of the following is true regarding the Class A, Class B, and Class C directors of
each Federal Reserve district bank?
a. Class A, B, and C directors are elected by member banks.
b. Class A, B, and C directors are appointed by the Board of Governors.
c. Class A and B directors are elected by member banks, while class C directors are
appointed by the Board of Governors.
d. Class A and B directors are appointed by the Board of Governors, while class C
directors are elected by member banks.
Answer:
The natural unemployment rate
a. can be easily determined by Fed policymakers
b. is a term used by the Fed to cover up a “reserve army of the unemployed”
c. is the unemployment rate that exists when the labor market is in equilibrium and
there is full employment
d. is the unemployment rate consistent with a zero rate of inflation
Answer:
The largest bank use of funds is
a. securities purchases
b. reserve holdings
c. loans
d. nontransactions deposits
Answer:
Concerning monetary variables in the Great Depression of 1929-1933, it is correct to
state that
a. B, M1, and M2 all decreased sharply
b. B increased somewhat, while M1 and M2 decreased sharply
c. B and M1 increased, while M2 decreased
d. B and M2 decreased, while M1 increased
Answer:
Transactions costs are lowest in:
a. municipal bonds
b. Treasury bills
c. U.S. government bonds
d. common stocks
Answer:
July statistics reveal an economy sinking into recession. The President asks for and
receives passage of a new government spending bill, effective the following January.
The time between July and January is the
a. recognition lag
b. implementation lag
c. impact lag
d. none of the above
Answer: