If equilibrium output is below potential, then
a. the unemployment rate must be at the natural rate of unemployment
b. the unemployment rate must be above the natural rate of unemployment
c. the unemployment rate must be below the natural rate of unemployment
d. not enough information is given to answer the question
Answer:
Reverse repurchase agreements are also known as
a. discounts and advances
b. matched sale-purchase transactions
c. the reserve requirement tax
d. none of the above
Answer:
Regarding the allocation or uses of the monetary base during the 1929-1933 period
a. R increased but Cp decreased
b. both R and Cp increased
c. both R and Cp decreased
d. Cp increased but R decreased
Answer:
If the reserve requirement is 10%, a deposit of $100 cash by a bank customer will
eventually cause the money supply to rise by ____.
a. $1,000
b. $900
c. $100
d. $90
Answer:
Suppose the U.S. government 6s of 2008 are selling at $960 (face value = $1,000).
Regarding this bond, we can state that:
a. a capital loss will accrue at maturity
b. its yield to maturity exceeds its current yield
c. its current yield exceeds its yield to maturity
d. none of the above is necessarily true
Answer:
Which of the following is the best proxy or measure of the rate that S&Ls must pay
their depositors to remain competitive for their depositors’ business?
a. the average return from common stocks
b. the corporate bond yield
c. the mortgage rate
d. the Treasury bill yield
Answer:
Suppose the U.S. economy suffers from a large recessionary gap. An appropriate
response might be to
a. appreciate the dollar to boost U.S. net exports (X – M)
b. boost interest rates to increase the income of bondholders
c. cut government expenditures to balance the budget
d. reduce interest rates to stimulate investment spending
Answer:
An increase in which of the following will work to increase the level of velocity?
a. expected inflation
b. financial innovations
c. interest rates
d. all of the above
Answer:
Which of the following is not legal tender?
a. a $20 dollar bill
b. a dime
c. a checking account in a commercial bank
d. none of the above–all of the above are legal tender
Answer:
During the Great Depression, 1929-1933, approximately how many banks failed?
a. 9,000
b. 7,000
c. 2,000
d. 600
Answer:
Which theory of term structure can explain the propensity for the yield curve to slope
upward?
a. segmented markets
b. liquidity premium
c. preferred habitat
d. all of the above
Answer:
Changes in the total amount of reserves in the banking system are predominantly
caused by
a. the actions of banks in making loans and buying securities
b. the Federal Reserve’s open market operations
c. deposits and withdrawals of bank customers
d. none of the above
Answer:
An increase in re does which of the following?
a. reduces the money multiplier as banks reduce loans
b. reduces the money multiplier as banks expand loans
c. increases the money multiplier as banks reduce loans
d. increases the money multiplier as banks expand loans
Answer:
Most economists today feel that the experience with wage-price controls in the early
1970s had the result of
a. triggering a rightward-shifting aggregate supply curve
b. triggering a leftward-shifting aggregate demand curve
c. being counterproductive
d. assisting in unwinding the inflation of 1960s
Answer:
The empirical evidence with inflation targeting has been
a. neutral, with about half of inflation-targeting nations achieving substantial reductions
in inflation
b. positive, with almost all inflation-targeting nations achieving substantial reductions
in inflation
c. negative, with inflation targeting working in only a few cases
d. described accurately by none of the above
Answer:
The equity multiplier may be defined as the ratio of
a. total assets/equity capital
b. total assets/earnings
c. equity capital/total assets
d. earnings/total assets
Answer:
Given other factors, bank exposure to insolvency increases as
a. the capital accounts ratio rises
b. the loans/total assets ratio falls
c. the liquid assets/total assets ratio falls
d. the negotiable CD/savings deposit ratio falls
Answer:
Differences among yields or interest rates on various financial instruments at any given
point of time may be attributable to:
a. differences in default risk
b. differences in tax considerations
c. differences in time to maturity
d. all of the above
Answer:
Treasury deposits held in commercial banks are known as
a. tax and loan accounts
b. reserves
c. Ft
d. none of the above
Answer:
In an exhibit in the text, inflation and interest rates in a cross section of 13 nations are
related. The study indicates that for this group of nations, the estimate of beta, the
coefficient that relates the level of nominal interest rates to the level of expected
inflation, is:
a. approximately zero
b. 4.28
c. 2.52
d. 1.14
Answer:
An increase in which of the following produces a decrease in the monetary base?
a. Cb
b. Cp
c. Ft
d. P
Answer:
In which theory of term structure will efforts of the Treasury and the Federal Reserve to
twist the yield curve be ineffective?
a. segmented markets theory
b. pure expectations theory
c. both of the above
d. neither of the above
Answer:
The magnitude of the money supply multiplier is influenced by the actions of
a. banks
b. the general public
c. the Federal Reserve
d. all of the above
Answer:
Suppose the U.S. economy suffers from a major inflationary gap. An appropriate
response might be to
a. raise income taxes to reduce consumption expenditures
b. cut income taxes to restore lost purchasing power
c. reduce interest rates to boost investment spending
d. do none of the above
Answer:
The yield curve is most likely to be inverted or descending when:
a. the economy is midway through the expansion phase of the cycle
b. the economy is at the trough of the cycle (bottom of the recession)
c. the general level of interest rates is very high
d. the general level of interest rates is very low
Answer:
Economists today agree that the following definition of money is the most useful:
a. M3
b. M2
c. M1
d. none of the above–there is no such consensus today
Answer:
The range within which the Federal Reserve is authorized by Congress to change
reserve requirements applicable to DDO (above the breakpoint magnitude) is
a. 10 to 20 percent
b. 8 to 14 percent
c. 6 to 10 percent
d. 0 to 4 percent
Answer:
Assuming a 10 percent reserve requirement, $2 billion of U.S. government securities
sold by the Fed to U.S. government securities dealers results in a
a. $2 billion increase in the monetary base
b. $2 billion decrease in the monetary base
c. $20 billion increase in the monetary base
d. $20 billion decrease in the monetary base
Answer:
Which country is a member of the European Union, but NOT the European Monetary
Union?
a. Czech Republic
b. Italy
c. Greece
d. France
Answer:
We discount the expected future payments from stocks because
a. returns from stocks are uncertain
b. the real interest rate is positive
c. inflation reduces purchasing power
d. all of the above are correct
Answer:
Productivity growth generally ____ in the second half of an economic expansion;
productivity growth ____ during the second half of the economic expansion while
William Jefferson Clinton was in office.
a. accelerates; accelerated
b. decelerates; decelerated
c. accelerates; decelerated
d. decelerates; accelerated
Answer:
The NAIRU level
a. is known to be 5.0 percent by policymakers
b. stays in the same position, year after year
c. is accurately represented by both of the above
d. is accurately represented by neither of the above
Answer:
Which of the following events would increase (shift rightward) the aggregate demand
curve in the United States?
a. U.S. stock and bond prices rise
b. the U.S. price level falls
c. Europe falls into a recession
d. none of the above
Answer: