Which of the following is a correct statement regarding the balance sheet of the Federal
Reserve?
A) Fed assets = Fed liabilities + Federal Reserve notes
B) Fed assets = Fed liabilities + Fed capital accounts
C) Fed assets = Fed liabilities + bank reserves
D) Fed assets = bank reserves + Federal Reserve notes outstanding
Which of the following will cause the aggregate demand curve to shift to the left?
A) An increase in the price level
B) An increase in the interest rate
C) An increase in money demand
D) An increase in investment expenditures
As part of the “wealth channel of monetary policy,” a higher money supply __________
bond prices and thus __________ spending.
A) raises; raises consumption
B) raises; raises investment
C) lowers; lowers consumption
D) lowers; lowers investment
Economies of scale in information production are enjoyed by
A) small borrowers.
B) small lenders.
C) large borrowers.
D) large lenders.
Until the 1980s most private pension plans were “defined __________” plans under
which the periodic employer payment into the plan was __________.
A) benefit; variable
B) benefit; preset
C) contribution; variable
D) contribution; preset
The Federal Reserve
A) is uninvolved with banks.
B) has little impact on overall economic activity.
C) directly influences the lending and deposit creation activities of banks.
D) issues mandates telling businesses how much to invest.
According to Monetarists, a direct substitution between cash balances and real goods
results from a change in
A) investment spending.
B) consumption spending.
C) government spending.
D) the money supply.
Bank ownership of corporate stock is “discouraged” by regulators in
A) the United States.
B) the United Kingdom.
C) Germany.
D) Japan.
The “dual” nature of our banking system got its start in the
A) 1820s.
B) 1860s.
C) 1910s.
D) 1930s.
Almost all corporate bonds are sold through
A) auction markets.
B) brokers.
C) commercial banks.
D) underwriting syndicates.
Crowding out would not occur if the
A) IS curve is horizontal.
B) IS curve is vertical.
C) LM curve is horizontal.
D) LM curve is vertical
The transactions motive links money demand and
A) interest rates.
B) money supply.
C) the liquidity trap.
D) income.
Because banking is very __________-intensive, a bank generally becomes successful if
it can __________ the ratio of salary and wages to total assets.
A) capital; raise
B) capital; lower
C) labor; raise
D) labor; lower
According to economic theory, a rising money supply influences stock prices through
a(n) __________ in the __________ stock.
A) increase; demand for
B) decrease; demand for
C) increase; supply of
D) decrease; supply of
Approximately __________ of the impact of monetary policy on GDP after one year
stems from the effective of changes in wealth on consumer spending.
A) 10 percent
B) 25 percent
C) 50 percent
D) 75 percent
The LM curve represents combinations of income and the interest rate at which
A) money demand equals money supply when the money supply is fixed.
B) money supply equals money demand when the money demand is fixed.
C) money demand equals money supply when the money supply can vary.
D) money supply equals money demand when both the money supply and money
demand can vary.