If banks borrowed from the Fed when the federal funds rate was below its target level
A) the supply of reserves would decrease and the federal funds rate could fall even
further.
B) the supply of reserves would increase and the federal funds rate would rise.
C) the supply of reserves would decrease and the federal funds rate would rise.
D) the supply of reserves would increase and the federal funds rate could fall even
further.
If the yield on short-term securities is the same as the yield on comparable long-term
securities, the yield curve will have a
A) positive slope.
B) negative slope.
C) constant slope.
D) zero slope.
For the settlement of futures contracts, the clearing corporation requires that a margin
be placed with the corporation by
A) the short position only.
B) the long position only.
C) the short and the long in all contracts.
D) the short and the long only in extraordinary circumstances.
A drop in six-month LIBOR is good news to __________ in a swap contract.
A) the fixed-rate payer
B) the floating-rate payer
C) both payers
D) neither payer
An unexpected rise in GDP growth should send bond prices __________ and stock
prices __________.
A) up; up
B) up; down
C) down; up
D) down; down
With overnight repos, __________ earn interest while sacrificing virtually no liquidity.
A) corporations
B) banks
C) governments
D) consumers
The amount of investment demand at each interest rate falls. If the Fed holds to an
unchanged interest rate target, the change in GDP is __________ if it had held to an
unchanged money supply target.
A) greater than
B) less than
C) the same as
If I = S, then
A) C + I = S + I.
B) C + S = S + I.
C) C + S = C + I.
D) C – S = S – I.
Banks in the United States still cannot
A) own finance companies.
B) be full-service brokers.
C) offer their own mutual funds.
D) offer merger advisory services.
On the New York Stock Exchange, the role of maintaining orderly markets is carried
out by
A) dealers.
B) brokers.
C) specialists.
D) the SEC.
A matched sale-purchase agreement of government securities by the Fed
A) permanently increases bank reserves.
B) temporarily increases bank reserves.
C) permanently reduces bank reserves.
D) temporarily reduces bank reserves.
Until the year 2000, the Humphrey-Hawkins Act directed the Fed to pursue all of the
following, except
A) maximum employment.
B) price stability.
C) high economic growth.
D) moderate long-term interest rates.
For a commercial bank, a new loan is
A) a reserve.
B) capital.
C) a liability.
D) an asset.
In the Classical view, rising interest rates reduce
A) government spending.
B) saving.
C) velocity.
D) investment.
Which of the following is a primary policy tool of the Federal Reserve?
A) The federal funds rate
B) Open market operations
C) The prime rate
D) The money supply