Which of the following situations is likely to lead to dynamic open market operations?
A) A recession
B) An increase in Federal Reserve float
C) An increase in Treasury cash holdings
D) An increase in currency outstanding
Since the founding of the IMF, most international reserves have been held in
A) gold.
B) silver.
C) U.S. dollars.
D) British pounds sterling.
A secondary market is one in which
A) new securities are issued.
B) financial intermediaries make loans.
C) savers place funds in financial intermediaries.
D) existing securities can be bought and sold.
Compared with other bonds, convertible bonds usually have
A) less liquidity.
B) a higher price.
C) a higher yield.
D) low tax payments.
The demand for reserves is __________ related to the federal funds rate because banks
__________ their excess reserves as the federal funds rate falls.
A) inversely; increase
B) inversely; decrease
C) positively; increase
D) positively; decrease
When a commercial bank borrows from the Federal Reserve,
A) Treasury liabilities rise.
B) Treasury assets rise.
C) Federal Reserve assets rise.
D) bank reserves fall.
Real economic activity at full employment is unaffected by changes in investment
spending when
A) interest rates are low.
B) velocity is flexible.
C) inventories are low.
D) prices are flexible.
Regulation Q was repealed in the __________ by the __________.
A) early 1970s; Garn-St. Germain Act
B) late 1970s; Depository Institutions Deregulation and Monetary Control Act
C) late 1980s; Reigle-Neil Act
D) early 1980s; Depository Institutions Deregulation and Monetary Control Act
The expected yield on an asset with two possible outcomes is equal to the
A) difference between the two outcomes.
B) sum of the possible outcomes multiplied by their respective probabilities.
C) standard deviation of the two outcomes.
D) product of the two outcomes.
Moody’s gives junk bonds a rating below
A) Aaa.
B) Aa.
C) A.
D) Baa.
An increase in the money supply in the simple Keynesian model causes
A) income to fall.
B) inventories to rise.
C) interest rates to fall.
D) investment to fall.
The United States and the United Kingdom are two major __________-oriented
systems.
A) securities
B) equities
C) banking
D) markets
During recent years, the Fed’s focus has clearly been on the use of
A) the discount rate.
B) the federal funds rate.
C) the M2 money supply.
D) borrowed reserves.
A bank that mismatches its asset and liability maturities is
A) trying to reduce credit risk.
B) willingly accepting greater credit risk.
C) essentially engaging in interest-rate speculation.
D) trying to protect itself against interest rate movements.
If the reserve requirement on checkable deposits is .25, the ratio of currency held by the
public to demand deposits is .15, the ratio of time deposits to demand deposits is 3, the
reserve requirement on time deposits is 0, and the ratio of excess reserves to demand
deposits is 0, then the demand deposit multiplier is
A) 5.
B) 4.
C) 3.33.
D) 2.5.
The supply of loanable funds is equivalent to the
A) demand for loanable funds.
B) supply of securities.
C) demand for securities.
D) supply of bonds.
A Treasury bill with an original maturity of six months currently sells for $972.58. The
bill was issued 30 days ago. An investor who purchases this bill today would have a
yield on a discount basis of __________ percent.
A) 6.58
B) 5.50
C) 5.42
D) 6.49
An unexpected fall in Retail Sales should send bond prices __________ and stock
prices __________.
A) up; up
B) up; down
C) down; up
D) down; down
A sign that the Federal Reserve is moving to lower interest rates would be
A) a reduction in bank reserves.
B) an increase in margin requirements.
C) a widening gap between the Treasury bill yield and the discount rate.
D) a narrowing gap between the Treasury bill yield and the discount rate.