When currency outstanding increases,
A) gold certificates rise.
B) the money supply increases.
C) Fed assets increase.
D) bank deposits at the Fed decrease.
Good news about an economic indicator __________ the denominator of a bond’s
valuation formula, __________ the bond’s price.
A) raises; raising
B) raises; lowering
C) lowers; raising
D) lowers; lowering
Repurchase agreements are often used to
A) increase bank reserves permanently.
B) increase bank reserves temporarily.
C) reduce bank reserves permanently.
D) reduce bank reserves temporarily.
When the economy is at full employment __________ interest rates are __________ by
an expansionary monetary policy if inflationary expectations are generated.
A) real; decreased
B) real; increased
C) nominal; decreased
D) nominal; increased
“Bad news” about an expenditure-related indicator drives bond prices __________ and
stock prices __________.
A) up; up
B) up; down
C) down; up
D) down; down
Unlike private placements, publicly-sold securities lack
A) any kind of statement of the financial condition of the borrower.
B) a secondary market.
C) a definite maturity date.
D) restrictive covenants.
The yield to maturity of a zero-coupon bond with a one-year maturity, a face value of
$1,000, and a purchase price of $909 is closest to
A) 10 percent.
B) 11 percent.
C) 9 percent.
D) 5 percent.
The assumption that people may choose to hold excess money balances when there is
an increase in the money supply is emphasized by
A) supply-side economists.
B) Monetarists.
C) Keynesians.
D) rational expectations theorists.
Which of the following is not a major purpose of financial intermediaries?
A) Transaction costs
B) Diversification
C) Information
D) All of the above are major purposes of financial intermediaries.
Suppose that for several periods the aggregate demand and supply curves have been
intersecting at the same point, and at full employment. Then the central bank increases
money growth as the result of an unannounced policy change. Under New Classical
assumptions the likely short-run result is __________ output and __________ price
level.
A) rising; a rising
B) rising; an unchanged
C) unchanged; a rising
D) unchanged; an unchanged
The standard deviation around an expected value is a useful measure of
A) expected value of an asset.
B) economic value of an asset.
C) the difference between the best-case return of an asset and its worst-case return.
D) deviation of an asset’s actual returns from its expected returns.
An increase in money demand will shift the
A) IS curve to the left.
B) IS curve to the right.
C) LM curve to the left.
D) LM curve to the right.
The Chicago Board of Trade promotes liquidity in the futures market by
A) setting prices.
B) establishing a price floor.
C) allowing the short or the long to renegotiate contract terms.
D) standardizing contract terms.
The only difference between Treasury notes and bonds is
A) the frequency of coupon payments.
B) that notes are issued on a discount basis and bonds make coupon payments.
C) maturity.
D) the agency issuing the security.
Two-year securities are yielding 6 percent, and comparable one-year securities are
yielding 8 percent. According to the pure expectations theory, the market expects next
year’s comparable one-year securities to yield
A) 14 percent.
B) 8 percent.
C) 6 percent.
D) 4 percent.
__________ occurs because firms have an incentive to become riskier after their loans
are funded.
A) Moral hazard
B) Adverse selection
C) Manager-stockholder conflict
D) Manager-lender conflict
Real wages will rise if
A) money supply growth is less than expectations.
B) real interest rates fall.
C) aggregate demand is less than aggregate supply.
D) money supply growth exceeds the inflation rate.
A rise in foreign productivity tends to __________ foreign prices and causes the dollar
to __________ relative to the foreign currency.
A) raise; appreciate
B) raise; depreciate
C) lower; appreciate
D) lower; depreciate
Using the Cambridge equation, by how much does the demand for money rise at a
constant real GDP of $2,000 billion when the price level rises by 10 percent from 1.00,
given k = 0.25?
A) $200 billion
B) $20 billion
C) $550 billion
D) $50 billion
Most municipal bonds are issued in
A) serial maturity form.
B) single maturity form.
C) convertible form.
D) commercial form.