According to the bank reserve equation, the largest factor supplying reserves to the
banking system is
A) Federal Reserve purchases of government securities.
B) Treasury currency outstanding.
C) float.
D) currency in circulation.
Federal Reserve policy appears to be
A) more concerned with avoiding recession rather than preventing inflation.
B) more concerned with preventing inflation rather than avoiding recession.
C) equally concerned with avoiding recession and preventing inflation.
D) motivated by whether inflation or recession is the current problem.
The U.S. financial system is a(n) __________ system.
A) markets-oriented
B) angel financing
C) banking-oriented
D) loan committee
If the federal funds rate is below 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
We would expect the euro to depreciate when there is a __________ shift in the euro
demand curve or a __________ shift in the euro supply curve.
A) rightward; rightward
B) rightward; leftward
C) leftward; rightward
D) leftward; leftward
If the Treasury finances an expenditure by borrowing from the Fed, the money supply
A) and bank reserves fall.
B) and bank reserves rise.
C) rises while bank reserves remain unchanged.
D) remains unchanged as bank reserves rise.
Which of the following is the least liquid?
A) A checking account
B) A government bond
C) A traveler’s check
D) A money market deposit account
If investment becomes more interest-sensitive,
A) monetary policy will have a smaller impact on the equilibrium interest rate.
B) monetary policy will have a greater impact on equilibrium income.
C) fiscal policy will have a smaller impact on equilibrium income.
D) fiscal policy will have a larger impact on the equilibrium interest rate.
In the futures market, the difference between the price of the futures and the underlying
asset is eliminated by
A) speculators.
B) hedgers.
C) arbitrageurs.
D) longs.
Deposit insurance has been __________ in achieving its goals of preventing runs and
__________.
A) successful; protecting small investors
B) successful; protecting large investors
C) unsuccessful; protecting small investors
D) unsuccessful; protecting large investors
The total amount of interest collected after two years from a $6,000 loan with a simple
annual interest rate of 6 percent is equal to
A) $360.
B) $720.
C) $12,360.
D) $6,360.
A good purchase for an investor seeking a high degree of liquidity with minimal market
risk would be a U.S.
A) Treasury bill.
B) Treasury bond.
C) Treasury note.
D) savings bond.
Financial institutions are just like other firms in that they attempt to maximize
A) total assets.
B) total liabilities.
C) capital.
D) profits.
Contractual inflexibility is most likely to slow price adjustment in the
A) money market.
B) capital market.
C) real estate market.
D) labor market.
What is Y – C equal to?
A) S
B) S + T
C) I + G
D) T
Monetarists have maintained the Classical tradition by emphasizing the
A) importance of government’s fine-tuning policies.
B) inflationary impact of government spending.
C) instability of money demand.
D) inherent stability of the economy.
IBFs are designed to compete with
A) Eurobonds.
B) off-balance-sheet activities.
C) shell branches.
D) letters of credit.
Because audited financial statements are __________ to prepare, restrictive covenants
rarely appear in loan contracts to companies with __________ than $1 million in assets.
A) inexpensive; more
B) inexpensive; less
C) expensive; more
D) expensive; less
An initial deficiency in reserves of $20 and a required reserve ratio of .5 lead to a
maximum demand deposit contraction of
A) $8.
B) $40.
C) $50.
D) $80.
Which type of U.S. government security is a kind of zero-coupon security?
A) Federal funds note
B) U.S. Treasury note
C) U.S. Treasury bill
D) U.S. Treasury bond
An increase in inflationary expectations __________ interest rate.
A) raises the natural
B) raises the nominal
C) lowers the natural
D) lowers the nominal
Keynesians assume that there is a powerful direct link between aggregate demand and
A) velocity.
B) real money balances.
C) exogenous investment spending.
D) interest rates.