If the federal funds rate is above the equilibrium federal funds rate, then the supply of
reserves would be __________ than the demand for reserves and the banks would try to
__________ reserves causing the federal funds rate to fall.
A) greater than; lend
B) greater than; borrow
C) less than; lend
D) less than; borrow
Ensuring that all information relevant for the pricing of securities is available to the
public is the responsibility of the
A) Federal Reserve.
B) Securities and Exchange Commission.
C) New York Stock Exchange.
D) NASD.
Bank reserves will decrease if
A) Fed liabilities decrease.
B) currency held by the public decreases.
C) float decreases.
D) Fed assets increase.
A small firm’s __________ usually has the task of getting to know the loan officers of
local banks.
A) accountant
B) owner
C) production manager
D) tax attorney
__________ contributions to a defined __________ pension plan are tax-deferred until
retirement.
A) Employer; benefit
B) Employer; contribution
C) Employee; benefit
D) Employee; contribution
A consol has an annual coupon payment of $50. If the price of the consol rose from
$400 to $500, the yield on the consol would
A) fall from 10 percent to 8 percent.
B) fall from 12.5 percent to 10 percent.
C) rise from 10 percent to 12.5 percent.
D) rise from 8 percent to 10 percent.
Which of the following cannot be controlled precisely by the Federal Reserve?
A) Government securities held by the New York Federal Reserve
B) The discount rate
C) Reserve requirement ratios
D) Total bank reserves
What is Y – S equal to?
A) I
B) C – T
C) I + G
D) C
An example of an “insider trading” law is that
A) no officer of a corporation is allowed to hold stock in that corporation.
B) an officer of a corporation must report to the SEC any buying or selling of stock in
that corporation.
C) no dealer in domestic securities is allowed to handle foreign securities.
D) no more than 25 percent of the outstanding shares of a corporation may be held by
the executives of that corporation.
If the Treasury prints currency to finance an expenditure, the impact on the money
supply is similar to when the Treasury borrows from the
A) banking system when it is fully loaned-up.
B) banking system when it has excess reserves.
C) non-bank public.
D) Federal Reserve.
A mutual life insurance company is owned and controlled by its
A) partners.
B) managers.
C) stockholders.
D) policyholders.
When the Federal Reserve was formed, state-chartered banks were __________ Fed
member banks.
A) automatically made
B) required to become
C) given the option to become
D) not allowed to become
Lenders expecting lower inflation will
A) supply more loanable funds at each nominal interest rate.
B) supply less loanable funds at each nominal interest rate.
C) supply more loanable funds at each real interest rate.
D) supply less loanable funds at each real interest rate.
The economy tends to be less stable with a __________ LM curve causing interest rates
to be rather __________ to shifts in the IS curve.
A) steeper; sensitive
B) steeper; insensitive
C) flatter; sensitive
D) flatter; insensitive
In the simple Keynesian expenditure model, a marginal propensity to consume of .9
leads to an expenditure multiplier of
A) .1.
B) .9.
C) 9.
D) 10.
Assume that a security has two possible outcomes. There is a 50 percent chance that the
yield will equal 12 percent and a 50 percent chance that the yield will equal 4 percent.
The expected yield for this security is
A) 16 percent.
B) 12 percent.
C) 8 percent.
D) 4 percent.
For federally chartered banks, the “primary” federal regulator is the
A) Federal Reserve.
B) FDIC.
C) House Banking Committee.
D) Comptroller of the Currency.
If wages and prices are flexible and expectations are formed rationally, an increase in
the money supply will cause
A) real wages to rise.
B) real wages to fall.
C) nominal wages to rise.
D) nominal wages to fall.
Currently, 20-year Treasury bonds have a yield of 7 percent, while one-year Treasury
bills have a yield of 5 percent. Based on this information, the yield curve is
A) upward sloping.
B) downward sloping.
C) a horizontal line.
D) None of the above.
In the Monetarist view, the aggregate demand curve will be unstable when __________
is __________.
A) exogenous investment; stable
B) the money supply; stable
C) exogenous investment; varies
D) money supply; varies