Inflation targeting involves
a. setting acceptable inflation at a single level–for example, 4 percent
b. setting acceptable inflation within a band of acceptable inflation rates–for example,
between 4 and 6 percent
c. either of the above
d. neither of the above
Answer:
Which of the following ratios for the commercial banking system is lower than it was
50 years ago?
a. the ratio of cash/total assets
b. the ratio of securities/total assets
c. both of the above
d. neither of the above
Answer:
Which of the following potential target variables scores the highest on the measurability
criterion?
a. the money stock (M1)
b. total reserves
c. discount loans
d. the monetary base
Answer:
Real interest rates would tend to rise if:
a. people decide to become more thrifty
b. expected returns from capital investment increase
c. the Fed eases monetary policy
d. any of the above occur
Answer:
A policy from which the public can easily guess the central bank’s intentions and
actions is a(n) ____ policy.
a. accountable
b. credible
c. transparent
d. none of the above
Answer:
Traditionally, S&Ls have been dependent on a(n) ____ yield curve to ensure their
profitability.
a. horizontal
b. downward sloping
c. upward sloping
d. the shape of the yield curve is irrelevant to S&L profitability
Answer:
Discretionary monetary policy implies
a. some form of policy rule
b. policy activism
c. policy non-activism
d. none of the above
Answer:
When it is more efficient for one firm to offer a host of products rather than having
those products offered by individual specialized firms, ____ are said to exist.
a. economies of scope
b. economies of scale
c. economies of specialization
d. economies of structure
Answer:
In our money supply formulation, rr refers to
a. a weighted average of the reserve requirements applicable to demand deposits
b. the percentage reserve requirements applicable to time deposits
c. the ratio of bank reserves to the money supply
d. the ratio of bank reserves to total deposits
Answer:
Which empirical regularity can the segmented markets theory not explain?
a. the yield curve is predominantly upward sloping
b. the yield curve tends to shift up and down rather than rotate
c. short-term rates display greater amplitude than long-term rates
d. the segmented markets theory can explain all of these regularities
Answer:
When the dollar appreciates,
a. the U.S. terms of trade deteriorate
b. the trade deficit shrinks
c. imported goods become more expensive to U.S. consumers
d. none of the above occurs
Answer:
If, in a given week, Treasury deposits at the Fed fall by $1,200 million, float falls by
$600 million, and all other factors affecting reserves and the base remain constant, then
if the Fed wishes to keep reserves and the monetary base constant, it must
a. buy $1,800 million of securities
b. buy $600 million of securities
c. sell $1,800 million of securities
d. sell $600 million of securities
Answer:
In an exhibit in the text, which of the following is listed as being a member of the S&L
“hall of blame?”
a. commercial banks
b. President Bush
c. the economics profession
d. none of the above
Answer:
As a general phenomenon, it can be stated that countries which take great pains to
separate the conduct of monetary policy and fiscal policy
a. often experience higher unemployment rates than countries more able to coordinate
policies
b. feel less pressure to monetize budget deficits and thus experience lower rates of
inflation
c. are less able to coordinate policy, and thus they experience higher rates of inflation
d. exhibit none of the above characteristics
Answer:
When the Fed sells securities in the open market
a. aggregate bank reserves rise
b. the money supply rises
c. the monetary base falls
d. none of the above is true
Answer:
Which of the following is potentially a short-range target or operating target of Fed
policy?
a. corporate bond yields
b. discount loans
c. M2
d. none of the above
Answer:
The largest asset and largest liability, respectively, of the Federal Reserve are
a. U.S. Treasury securities and Federal Reserve notes
b. U.S. Treasury securities and bank reserves
c. deposits of banks and Federal Reserve notes
d. Federal Reserve notes and bank reserves
Answer:
U.S. currency held outside of the confines of the U.S.
a. has grown more slowly than currency held within the U.S.
b. is included in foreign nations’ money supply measures
c. is not included in measures of the U.S. money supply
d. now constitutes more than 50 percent of Cp
Answer:
Which legislation sought to undo much of the damage caused by Garn-St. Germain?
a. Competitive Equality in Banking Act
b. DIDMCA
c. FIRREA
d. Glass-Steagall Act
Answer:
In retrospect, which piece of financial legislation appears most ill-advised, as viewed
from the perspective of today?
a. DIDMCA
b. FDICIA
c. FIRREA
d. Garn-St. Germain
Answer:
If an inflationary gap exists, the self-correcting mechanism to eliminate it includes
a. an increase in wages and raw-material prices
b. a rightward shift of the AS curve
c. an increase in wealth
d. all of the above
Answer:
In general, the yield spread between corporate bonds and long-term government bonds:
a. increases in expansions
b. increases in recessions
c. has no relation to the business cycle
d. all of the above may be correct
Answer:
Credit unions invest most of their funds in:
a. consumer loans
b. corporate and municipal bonds
c. corporate stocks and bonds
d. mortgages
Answer:
Zero-coupon bonds differ from most bonds in that they:
a. involve no default risk
b. involve no market risk
c. have no maturity date
d. provide no annual flow of income
Answer:
The Fed controls the money stock principally by making adjustments in its
a. discount lending policies and rates
b. holdings of gold
c. issuance of Federal Reserve Notes
d. portfolio of Treasury securities
Answer:
The development of repurchase agreements and sweep accounts in the 1970s tended to
a. increase the velocity of money
b. decrease the velocity of money
c. have no effect on the velocity of money
d. not enough information is given to answer the question
Answer:
A regime in which the central bank specifies a particular outcome or range of
acceptable outcomes for growth in prices is called
a. fiscal austerity
b. supply side economics
c. inflation targeting
d. monetarism
Answer:
Because of the existence of the Fisher effect, the most effective way for policymakers to
increase nominal interest rates in the short run is to ____ the money stock, and the most
effective way to increase nominal interest rates in the long run is to ____ the money
stock.
a. decrease; decrease
b. decrease; increase
c. increase; decrease
d. increase; increase
Answer:
It is normally true that, the longer the time to maturity of a U.S. Treasury bill:
a. the greater the spread between the bid price and the asked price
b. the more liquid the asset
c. the lower the discount rate
d. the lower the market risk in the Treasury bill
Answer:
One important contrast between early monetarist and early Keynesian mechanisms is
that
a. Keynesians believe monetary policy will be effective only if interest rates change
b. monetarists believe that monetary policy is capable of affecting both consumption
and investment
c. monetarists believe monetary policy will be effective even if interest rates do not
change
d. all of the above are true
Answer:
When the inflation rate is positive,
a. the nominal interest rate will equal the real interest rate
b. the nominal interest rate will be greater than the real interest rate
c. the real interest rate will be greater than the nominal interest rate
d. there is no relationship between the rate of inflation and the magnitude of nominal
and real interest rates
Answer:
The ESCB body analogous to the Federal Reserve’s Board of Governors is
a. the Executive Board
b. the Governing Council
c. the Governors
d. the Council of Economics and Finance Ministers
Answer: