Which institution would we expect to have the most liquid asset structure?
a. Allstate Auto Insurance
b. Franklin Savings and Loan
c. The Prudential Life Insurance Company
d. TIAA/CREF Retirement Fund
Answer:
Empirical evidence on early Keynesian views indicates that
a. early Keynesians greatly overestimated the effectiveness of monetary policy
b. monetary policy cannot strongly affect economic activity
c. early Keynesians underestimated the effectiveness of monetary policy
d. none of the above is correct
Answer:
If a bank has total assets of $150 million and capital accounts of $12 million, then:
a. its total liabilities are $162 million
b. its total liabilities are $138 million
c. it has an equity multiplier of 8
d. none of the above is true
Answer:
Suppose, in a very primitive society, there are twelve items available for purchase. How
many different prices would there be in a barter economy and in a money economy,
respectively?
a. 66 and 12, respectively
b. 12 and 12, respectively
c. 132 and 12, respectively
d. 12 and 132, respectively
Answer:
In the 1980s and early 1990s, our depository institutions experienced severe economic
times. The institution most severely impacted was the:
a. life insurance company
b. credit union
c. savings and loan association
d. commercial bank
Answer:
Financial intermediaries:
a. channel funds from savers to borrowers
b. have been a source of many financial innovations
c. greatly enhance economic efficiency
d. have done all of the above
Answer:
The theory of term structure that not only accounts for the possibility of predominantly
upward-sloping yield curves but asserts the predominant existence of upward-sloping
yield curves on the basis of its underlying assumptions is the:
a. liquidity premium theory
b. pure expectations theory
c. preferred habitat theory
d. segmented markets theory
Answer:
If the nation’s price level is initially below the equilibrium level, then which of the
following occurs?
a. inventories fall involuntarily and firms cut output and prices
b. inventories rise involuntarily and firms cut output and prices
c. inventories rise involuntarily and firms boost prices
d. none of the above
Answer:
In the system of reserve requirements now in place
a. small banks are subject to higher requirements than large banks
b. savings and loan associations are treated the same as banks
c. there are reserve requirements on negotiable CDs
d. none of the above is true
Answer:
Since 1960, which of the following intermediaries has experienced the largest decline in
its relative share of the intermediation market?
a. mutual funds
b. depository institutions
c. investment intermediaries
d. contractual savings institutions
Answer:
Credit unions specialize in making
a. home mortgage loans
b. commercial real estate loans
c. business loans to small businesses
d. consumer loans for cars, furniture, etc
Answer:
Downward pressure on interest rates is most pronounced during the:
a. first half of a business cycle contraction
b. second half of a business cycle contraction
c. first half of a business cycle expansion
d. second half of a business cycle expansion
Answer:
Suppose that in a given week, other assets rise by $300 and float rises by $500, while
Treasury deposits at the Fed fall by $200. If the Fed desires to neutralize the impact of
these events on the monetary base, the Fed should
a. buy $400 of securities
b. sell $600 of securities
c. sell $1,000 of securities
d. neither buy nor sell securities
Answer:
The real interest rate is defined as:
a. the nominal interest rate plus the rate of inflation
b. the nominal interest rate minus the rate of inflation
c. the rate of inflation minus the nominal interest rate
d. none of the above
Answer:
When Florida Bank expands loans, it ends up
a. losing deposits
b. gaining reserves
c. losing reserves
d. doing none of the above
Answer:
Bank borrowing from the Federal Reserve is referred to as
a. borrowing federal funds
b. bankers’ acceptances
c. float
d. discount loans
Answer:
The Fed should counter a reduction in business confidence by
a. increasing the money supply
b. increasing interest rates
c. reducing the money supply
d. reducing government spending
Answer:
In the Greenspan era of the Fed (1987 – 2004),
a. the unemployment rate was much higher than previously
b. real GDP grew much faster than previously
c. the inflation rate was much lower than previously
d. all of the above are true
Answer:
A U.S. Treasury bill sells at $980 (face value = $1,000), and its discount rate is 6
percent. How many days does it have until maturity?
a. 360 days
b. 180 days
c. 120 days
d. 90 days
Answer:
In the past few decades, the relative importance of commercial banks in the
intermediation process has:
a. increased due to the expansion of business loan demand
b. increased due to the growth in home ownership
c. decreased due to the growth of the commercial paper market
d. decreased due to the downward trend in interest rates
Answer:
In the postwar era, as a general proposition,
a. the base has grown more slowly during business cycle expansions than during
recessions
b. the Fed is increasingly behaving in a countercyclical or stabilizing fashion
c. Fed policy has been entirely procyclical, and therefore destabilizing
d. none of the above is true
Answer:
The McFadden Act of 1927 did which of the following?
a. provided for nationwide branching
b. prohibited national banks from interstate branching
c. prohibited all branch banking
d. opened up branch banking for national banks
Answer:
The EMU consists of
a. all European nations
b. all nations that are members of the European Union
c. about a dozen of the member nations of the European Union
d. none of the above
Answer:
Which statement correctly characterizes the trends regarding the number of unit banks
and the number of bank branches in the past fifty years?
a. the number of unit banks has fallen; the number of branches has risen
b. the number of unit banks has risen; the number of branches has fallen
c. the number of unit banks and the number of branches have fallen
d. none of the above
Answer:
Over long time horizons, such as 30 years
a. stocks have never had negative returns
b. stocks have never had positive returns
c. stocks have often had negative returns
d. stocks have seldom had negative returns
Answer:
Which act gave states the right to regulate intrastate branching of state banks?
a. the Bank Holding Company Act of 1956
b. the McFadden Act of 1927
c. the National Banking Act of 1863
d. the Riegle-Neal Act of 1994
Answer:
Money’s function as a standard of value
a. eliminates the necessity of a double coincidence of wants
b. allows people to quickly assess the relative value of the various goods in an economy
c. allows agents to separate selling and buying across time
d. does all of the above
Answer:
For a stimulative fiscal policy measure financed by the sale of bonds to the public to be
effective
a. velocity must be stable and predictable
b. velocity must rise
c. velocity must fall
d. none of the above is true
Answer:
The stagflation of the 1970s must have been caused by
a. increases in aggregate demand
b. decreases in aggregate demand
c. increases in aggregate supply
d. decreases in aggregate supply
Answer:
The buying and selling of securities by the Fed in order to influence economic activity
is termed the
a. reserve requirement tool
b. portfolio tool
c. open market operations tool
d. discount policy tool
Answer:
Contractionary monetary policy ____ interest rates, causing the dollar to ____ in
foreign exchange markets and net exports to ____.
a. reduces; depreciate; rise
b. reduces; depreciate; fall
c. increases; depreciate; rise
d. increases; appreciate; fall
Answer:
An increase in interest rates can be caused by a(n) ____ in the supply of loanable funds
or a(n) ____ in the demand for loanable funds
a. increase; increase
b. increase; decrease
c. decrease; increase
d. decrease; decrease
Answer: