“Cash items in the process of collection” refers to
a. checks deposited in a particular bank which have not yet been credited to that bank
b. accounts payable to local merchants, etc., due to trade credit arrangements
c. checks written on a particular bank which have not yet been cleared against the bank
d. overdue receivables from other commercial banks and customers to whom the bank
has extended loans
Answer:
An increase in the supply of loanable funds corresponds to:
a. an increase in the supply of bonds
b. an increase in the demand for bonds
c. a decrease in the supply of bonds
d. a decrease in the demand for bonds
Answer:
Suppose that in a given week discount loans fall by $700, Treasury holdings of cash rise
by $300, the Treasury’s account at the Fed falls by $1,500, and float increases by $200.
The net impact of these changes will cause the base to
a. fall by $300
b. fall by $700
c. rise by $700
d. rise by $1,300
Answer:
XYZ Corporation pays an annual dividend of $4 per share, sells at $100 per share, and
earns profits of $5 per share. The price/earnings ratio and dividend yield of XYZ
Corporation, respectively, are:
a. 4 and 25 percent
b. 10 and 5 percent
c. 20 and 4 percent
d. none of the above
Answer:
Tobin argued that the long-term (100-year) trend of velocity of money is best explained
by
a. economic uncertainty
b. income
c. institutional factors
d. interest rates
Answer:
The behavior of job growth in the recovery of 2002-2004 can be traced to
a. increases in productivity
b. increases in unionization
c. unusually sluggish growth in output
d. none of the above
Answer:
The Federal Reserve policy response to the events of the Great Depression probably
resulted in
a. strong increases in aggregate demand
b. strong increases in aggregate supply
c. further decreases in aggregate demand
d. further decreases in aggregate supply
Answer:
The term structure of interest rates is
a. a snapshot of yields on securities of different default risk, taken at a single point in
time
b. a snapshot of yields on securities of different maturities, taken at a single point in
time
c. a movie that traces the yield on a particular security as it gets closer to maturity
d. a movie that traces the yields on securities of different risk throughout time
Answer:
The impact lag is probably shorter for ____ policy than for ____ policy.
a. monetary; fiscal
b. fiscal; monetary
c. there is probably no difference in the impact lag
d. not enough information is given to answer the question
Answer:
Closed-end mutual funds
a. are traded in an active secondary market
b. issue shares whose value fluctuates daily
c. are only permitted to issue a certain number of shares
d. all of the above
Answer:
A stock market “bubble”:
a. exists when stock prices sharply exceed those warranted by economic conditions
b. is usually quickly “popped” by aggressive actions from the Federal Reserve
c. likely exists in the United States today
d. all of the above are correct
Answer:
After working late hours at an all-you-can-eat sushi bar, you deposit $200 of tip money
in your checking account at the 24-hour ATM. When you do so
a. your bank’s excess reserves rise
b. your bank’s required reserves rise
c. your bank’s reserves rise
d. all of the above occur
Answer:
Which of the following is an advantage of an ETF (exchange traded fund) over a
mutual fund?
a. ETFs are traded and quoted continuously throughout the day
b. Management fees tend to be lower
c. ETFs allow investors to decide when to take profits
d. all of the above are correct
Answer:
If a recessionary gap exists, the self-correcting mechanism to eliminate it includes
a. a fall in wages because of an excess labor supply at existing wages
b. a rightward shift of the AS curve
c. a decline in the price level
d. all of the above
Answer:
The adverse supply shocks of the 1970s were caused mainly by
a. a flu epidemic that reduced the size of the labor force
b. labor unrest and subsequent strikes
c. particularly poor harvests in the agricultural sector of the economy
d. rapid increases in the price of imported oil
Answer:
The yield to maturity of a 20-year bond with a current yield of 12 percent and a price of
$800 is ____ the yield to maturity of a one-year bond with a current yield of 7 percent
and a price of $910.
a. equal to
b. greater than
c. less than
d. insufficient information is given to answer the question
Answer:
When the Federal Open Market Committee approves its directive, it is then presented to
a. the president of the Federal Reserve Bank of New York
b. the manager of the System Open Market Account
c. the Chairman of the Federal Open Market Committee
d. the Chairman of the Board of Governors
Answer:
The Robinson Crusoe story illustrates that, in order to elevate living standards, societies
must:
a. reduce investment in order to increase consumption
b. increase consumption
c. save in order to consume more in the current period
d. save in order to divert resources into capital goods
Answer:
Most defensive open market operations are conducted via the
a. outright purchase or sale of Treasury securities
b. purchase or sale of government agency securities
c. purchase or sale of repurchase agreements
d. none of the above
Answer:
The principal-agent problem
a. may be used to explain why U.S. authorities responded to the S&L crisis as they did
b. is one type of the adverse selection problem
c. results because principals and agents tend to work together to the detriment of small
depositors
d. none of the above is true
Answer:
Which of the following is likely to display some interest rate sensitivity?
a. precautionary demand for money
b. speculative demand for money
c. transactions demand for money
d. all of the above
Answer:
During the recession of 2001, household spending remained unusually strong because
of
a. income tax cuts
b. abnormally low interest rates
c. both of the above
d. neither of the above
Answer:
Suppose a sharp increase in energy prices occurs. According to aggregate
demand-aggregate supply analysis, which of the following will occur if the Fed does
not respond?
a. unemployment will rise and inflation will remain constant
b. inflation will rise and unemployment will remain constant
c. both inflation and unemployment will rise
d. none of the above
Answer:
Suppose that aggregate expenditures decline and the nation slips into a recession. Then
endogenous forces tend to cause
a. net free reserves to fall
b. the nonborrowed base to rise
c. bank reserves to fall
d. all of the above
Answer:
Strong monetarists argue that
a. the Fed has destabilized the economy in the past, and it should be prevented from
doing so in the future
b. interest rates are the most effective intermediate targets of policy
c. monetary policy only influences the economy via its role in determining interest rates
d. all of the above
Answer:
Okun’s law quantifies the relationship between
a. a nation’s unemployment rate and its level of inflation
b. a nation’s unemployment rate and the resulting loss of output
c. a nation’s inflation rate and the fluctuations in its exchange rate
d. none of the above
Answer:
The event which created the main S&L crisis was
a. a bout of disintermediation in the late 1970s
b. the liberalization of S&L activity under FIRREA
c. the excessive risk S&L managers undertook in the 1980s
d. the removal of deposit interest rate ceilings between 1980 and 1986
Answer:
Which theory of term structure predicts that long-term yields will exceed short-term
yields on average?
a. liquidity premium theory
b. pure expectations theory
c. segmented markets theory
d. none of the above
Answer:
If money demand is sensitive to interest rate changes, then
a. monetary policy will be a relatively weak stabilization tool
b. monetary policy will be an extremely powerful stabilization tool
c. fiscal policy will be a relatively weak stabilization tool
d. none of the above is true
Answer:
If the Fed wishes to expand the monetary base, it can do so by doing all of the
following except:
a. buying securities in the open market
b. reducing the discount rate
c. reducing the reserve requirement
d. all of the above cause the base to rise
Answer: