Which of the following will likely trigger an increase in re?
a. The Fed sells securities in the open market and boosts interest rates.
b. A large U.S. corporation unexpectedly goes bankrupt.
c. Banks become more confident as economic uncertainty declines.
d. none of the above
Answer:
The Federal Reserve System operates as a part of
a. the legislative branch of government, and is fully accountable to Congress
b. the executive branch of government, and is a division of the U.S. Treasury
c. the judicial branch of government
d. none of the above
Answer:
A substantial increase in the issuance of government bonds raises the ____ loanable
funds and causes interest rates to ____.
a. demand for; rise
b. demand for; fall
c. supply of; rise
d. supply of; fall
Answer:
The volume of negotiable CDs outstanding normally:
a. rises when the Fed tightens credit conditions
b. rises in periods of recession
c. both of the above
d. none of the above
Answer:
While perusing your monthly bank statement from the Farmers and Drovers National
Bank, you notice the “FDIC Insured” logo at the bottom. Who supervises your bank?
a. the state banking commission, since consumer protection has been delegated to the
states by the government
b. the Federal Reserve, since all national banks must be Fed members
c. the Comptroller of the Currency, since it was the chartering body
d. the FDIC, since it insures the bank’s deposits
Answer:
Since 1973, such major currencies as the dollar and yen
a. have been floating in relation to each other
b. have been fixed in relation to each other
c. were fixed until 1988 and have been floating since then
d. were floating until 1988 and have been fixed since then
Answer:
The impact lag is likely to be longer for ____ policy than for ____
a. monetary; fiscal
b. fiscal; monetary
c. it is likely to be the same for both monetary and fiscal policy
d. not enough information is given to answer the question
Answer:
The example in the text shows that a $7 million withdrawal of cash from Bank Q
(assuming a 10 percent reserve requirement) leads to a systemwide
a. contraction of the money supply of $70 million
b. decrease in bank loans and investments of $63 million
c. expansion of deposits of $70 million
d. increase in bank loans and investments of $63 million
Answer:
The money supply multiplier shows the amount of money per dollar of
a. currency
b. deposits
c. reserves
d. monetary base
Answer:
Which of the following represents a view that a policy non-activist might hold?
a. The economy is inherently stable.
b. The Fed should “lean against the wind.”
c. Self-correcting mechanisms in free-market economies are weak.
d. A policy non-activist would believe all of the above.
Answer:
The interest rate may be thought of as:
a. the price received for lending funds
b. the price paid for borrowing funds
c. the reward for postponing consumption
d. all of the above
Answer:
Convergence criteria for admission to the EMU include standards for
a. inflation rates
b. GDP growth rates
c. money supply growth rates
d. all of the above
Answer:
The behavior of rr during the Great Depression (1929-1933) suggests that
a. rr decreased slowly as deposits were withdrawn from large banks
b. rr decreased sharply as the Fed cut reserve requirements
c. rr increased slowly as deposits were withdrawn from small banks
d. rr increased sharply as the Fed boosted reserve requirements
Answer:
As a general rule, the ECB is ____ accountable and ____ transparent than the Fed.
a. less; less
b. more; more
c. less; more
d. more; less
Answer:
Because of the timing of the deregulation of the S&Ls, which of the following
occurred?
a. the industry became healthier during the following five years
b. the moral hazard problem increased dramatically
c. mortgage interest rates increased sharply
d. S&L profits initially increased dramatically
Answer:
Which of the following is one of the ultimate goals of monetary policy?
a. long-term economic growth
b. price level stability
c. stable exchange rates
d. all of the above
Answer:
The liquidity ratio deemed optimal by banks may have declined in the past 40 years due
to
a. the decrease in interest rates
b. the decline in reserve requirements
c. the trend toward active use of liability management
d. the massive increase in bank holdings of bonds
Answer:
Commercial banks went through a period of severe financial hardship during:
a. the 1993-1996 period
b. the late 1980s and early 1990s
c. the late 1970s
d. the 1960s
Answer:
When perceived default risk increases,
a. lenders redirect funds to riskier markets
b. the yield differential is reduced
c. both of the above are correct
d. neither of the above is correct
Answer:
Members of the Board of Governors are
a. elected by member banks
b. appointed by the U.S. president
c. appointed by the Federal Reserve bank presidents
d. none of the above
Answer:
Because the economy is in equilibrium when aggregate supply equals aggregate
demand,
a. the unemployment rate must equal the natural rate of unemployment
b. there exists no involuntary unemployment
c. there exist no surpluses or shortages; therefore, we are at full employment output
d. none of the above is necessarily true
Answer:
The Treaty of Rome
a. was signed in 1998
b. created a customs union among member countries
c. marked the inception of the European Central Bank
d. did all of the above
Answer:
Periods of sharply rising interest rates inherently create problems for S&Ls because
a. borrowers resist sharply higher mortgage rates
b. S&L assets have longer maturities than S&L liabilities
c. the S&L ‘spread” inevitably declines in such periods
d. all of the above occur
Answer:
The effectiveness of open market operations as a tool to achieve money supply targets
depends critically on
a. the degree of crowding out in the economy
b. the degree of substitutability between government securities and private sector
securities
c. the predictability of the parameters of the money supply multiplier
d. none of the above
Answer:
Countries with the most independent central banks
a. tend to have the lowest rates of unemployment
b. tend to have the highest rates of inflation
c. tend to have the highest rates of unemployment
d. tend to have the lowest rates of inflation
Answer:
Which of the following factors made the period between the late 1920s and the late
1940s so atypical in terms of economic conditions in the United States?
a. the largest economic contraction in U.S. economic history
b. the most costly war ever waged
c. both of the above
d. neither of the above
Answer:
Which of the following is counted among the sources of the monetary base?
a. Ft
b. OA
c. P
d. all of the above
Answer:
Net free reserves is considered a relatively ineffective intermediate target variable for
monetary policy because it scores poorly on the criterion of
a. importance
b. measurability
c. political feasibility
d. stability
Answer:
The wealthiest 1 percent of U.S. households
a. do not tend to invest in the stock market at all
b. hold almost 50 percent of the total stock market wealth
c. hold more than 90 percent of the total stock market wealth
d. do none of the above
Answer:
The price of a Treasury bill with 60 days to maturity and an asked discount rate of 7
percent is:
a. $988.34
b. $942.32
c. $911.66
d. $866.66
Answer:
A rise in interest rates causes ____ to fall and the multiplier to ____.
a. rr; rise
b. k; fall
c. re; rise
d. rr; fall
Answer:
Which of the following payments instruments are least efficient from society’s point of
view?
a. a system of electronic funds transfers
b. credit cards
c. currency
d. all are equally efficient
Answer: