Monetarists tend to think that the aggregate demand curve is
A) stable.
B) vertical.
C) horizontal.
D) sensitive to changes in investment spending.
If all future expected short-term interest rates are equal to the current short-term interest
rate, the expectations theory predicts that the yield curve would be
A) horizontal.
B) upward sloping.
C) downward sloping.
D) vertical.
The Federal Reserve Bank of New York
A) executes open market operations.
B) sets reserve requirements.
C) establishes the prime rate.
D) establishes the three-month Treasury bill rate.
The fewer the stockholders in a corporation the __________ likely they are to be
motivated to monitor the corporation’s management, thus the __________ the severity
of the manager-stockholder conflict.
A) more; greater
B) more; fewer
C) less; greater
D) less; fewer
If the required reserve ratio is increased from .1 to .2, the demand deposit expansion
multiplier
A) increases from 10 to 5.
B) increases from 4 to 4.5.
C) decreases from 5 to 2.5.
D) decreases from 10 to 5.
The consensus of major econometric models is that monetary policy has
A) no effect on real GDP.
B) an effect on real GDP only in the long run.
C) a negative effect on real GDP.
D) a substantial short-run effect on real GDP.
Keynesians argue that changes in wages will lag price level changes even if
expectations are formed rationally because
A) workers have very little bargaining power compared with that of management.
B) only a small percentage of workers are unionized.
C) wages are often set by long-term contracts.
D) workers often have incorrect information.
In the Classical model, the aggregate supply curve determines the
A) price level.
B) inflation rate.
C) level of output.
D) money supply.
If an inflation forecast is based on last year’s inflation rate, it is said to be
A) historical.
B) rational.
C) logical.
D) adaptive.
“LIBID” is the rate at which U.S. banks
A) lend to their best customers.
B) borrow Eurodollar market.
C) lend in the Eurodollar market.
D) borrow in the jumbo CD market.
All secondary trading of municipal bonds occurs
A) through commercial banks.
B) in the over-the-counter market.
C) through life insurance companies.
D) in the New York Municipal Bond Market.
Using the pure expectations theory of term structure, a positively sloped yield curve
indicates that investors expect
A) short term interest rates to fall.
B) short term interest rates to rise.
C) falling long term interest rates.
D) rising long term interest rates.
The importance of the float is that it
A) exists at all.
B) fluctuates considerably.
C) decreases total reserves.
D) is very stable.
The buyer of a put option on Boeing with a strike price of $75 and an expiration date in
November 2003 has the
A) right to buy 100 shares of Boeing at $75 on or before November 1999.
B) right to sell 100 shares of Boeing at $75 on or before November 1999.
C) right to buy 100 shares of Boeing at $75 on or after November 1999.
D) right to sell 100 shares of Boeing at $75 on or after November 1999.
A security with a high degree of marketability sells at a price that is
A) highly volatile.
B) unpredictable.
C) lower than other securities.
D) higher than the equilibrium price of less marketable securities.
Suppose a bank has total assets of $4,000,000,000 and total deposits and other liabilities
of $3,500,000,000. The bank’s leverage ratio is
A) 11.2%.
B) 12.5%.
C) 14.3%.
D) 87.5%.
Junk bonds are defined as those bonds the rating services consider to be
A) investment grade.
B) high risk or speculative grade.
C) financial grade.
D) in default.
Mutual funds that offer limited shares that are not redeemable are referred to as
A) open-end.
B) closed-end.
C) negotiable.
D) nonnegotiable.
Under __________ a borrower gets advance approval from the SEC to issue securities
up to a certain amount at an unspecified time in the future.
A) advance registration
B) pre-registration
C) guaranteed registration
D) shelf registration
As a source of bank funds, __________ has fallen by nearly two-thirds in relative
importance since 1970.
A) time deposits
B) transactions deposits
C) savings deposits
D) equity
Finance companies are the largest issuers of
A) commercial paper.
B) shares.
C) long-term securities.
D) repurchase agreements.