Immediately after being collected, taxes are deposited in
A) tax and loan accounts.
B) the Federal Reserve Bank of New York.
C) Federal Reserve district banks around the country.
D) the Congressional Vault.
Which of these indicators is probably the most politically sensitive?
A) Housing starts
B) Capacity utilization
C) Employment
D) Car sales
With an upward sloping LM curve, a falling interest rate __________ money demand,
so that an expansionary monetary policy is __________ than in the case of a vertical
LM curve.
A) raises; stronger
B) raises; weaker
C) has no effect on; stronger
D) has no effect on; weaker
Which of the following is the most liquid?
A) A Eurodollar deposit
B) Currency
C) A checking account
D) A small-denomination time deposit
In the Classical model, an increase in aggregate demand leads to __________ real GDP
and __________ price level.
A) an unchanged; an unchanged
B) a rising; an unchanged
C) a rising; a rising
D) an unchanged; a rising
U.S. Treasury deposits at the Fed are
A) part of M1, M2, and M3.
B) part of M1 and M2.
C) part of M1.
D) not part of the money supply.
An exchange rate system under which currencies are allowed to fluctuate with frequent
interventions by central banks is called a
A) freely floating system.
B) fixed system.
C) managed floating system.
D) None of the above.
The slope of the LM curve will be steeper the __________ is the income-sensitivity of
the demand for money and the __________ is the interest-sensitivity of the demand for
money.
A) less; less
B) less; greater
C) greater; less
D) greater; greater
As part of the “exchange rate channel of monetary policy,” a higher money supply
causes a __________ interest rate and thus __________ of the domestic currency.
A) higher; appreciation
B) higher; depreciation
C) lower; appreciation
D) lower; depreciation
In the Classical interest theory, saving and investment determine
A) the price level.
B) unemployment.
C) the money supply.
D) interest rates.
A rise in government expenditure __________ the natural rate of interest.
A) lowers
B) raises
C) has no effect on
D) has an uncertain effect on
“A lower price level may lower the interest rate, but investment demand may not
respond to this.” This is a statement a __________ economist might make as an
explanation of why the economy __________ pull out of a recession.
A) Classical; will
B) Classical; may not be able to
C) Keynesian; will
D) Keynesian; may not be able to
When banks make new loans, the effect on reserves is the same as
A) holding excess reserves.
B) expanding capital.
C) purchasing securities.
D) acquiring deposits.
Which of the following is not true regarding mortgages?
A) Some of them, called ARMs, have interest rates that are adjusted periodically.
B) FHA-VA mortgages are insured by government agencies.
C) They always have a fixed mortgage rate.
D) They often have maturities between 25 and 30 years.
If original excess reserves are $10 million, and if the potential change in demand
deposits is $153 million, then the demand deposit expansion multiplier is
A) 1.53.
B) 0.65.
C) 10.0.
D) 0.07.
Assuming a nominal interest rate of 6 percent, an unemployment rate of 4 percent, and
an inflation rate of 2 percent, the real interest rate is approximately
A) 2 percent.
B) 4 percent.
C) 6 percent.
D) 8 percent.
According to the Monetarists, the money supply is a major factor determining
A) aggregate supply.
B) aggregate demand.
C) velocity.
D) real wages.
Empirical evidence indicates that security returns have
A) greater probability of exceeding expected value yields.
B) greater probability of yielding below expected value returns.
C) a symmetrical probability distribution.
D) a probability distribution that cannot be measured.
Financial systems have all but which of the following in common?
A) market-oriented emphasis
B) payments systems
C) central banks
D) information asymmetries
What type of loan led the wave of bank lending in the 1970s and 1980s?
A) consumer loan
B) commercial mortgage
C) loans to state and local governments
D) commercial paper
By requiring minimum reporting, disclosure, vesting, funding, and investment
standards, the __________ helps safeguard employee pension rights.
A) Employee Retirement Income Security Act
B) Federal Deposit Insurance Corporation
C) Social Security Act
D) Federal Reserve
A Treasury bill with an original maturity of six months currently sells for $972.58. The
bill was issued 30 days ago. An investor who purchases this bill today would have a
bond equivalent yield of __________ percent.
A) 6.49
B) 6.77
C) 5.58
D) 5.65
Keynesian theory emphasizes
A) aggregate supply.
B) rational expectations.
C) short-run analysis.
D) Say’s Law.
Bonds without a maturity date are called
A) zero-coupon bonds.
B) preferred bonds.
C) common bonds.
D) consols.
An increase in the money supply is most likely to lead to rising prices when
A) velocity is declining.
B) money demand is rising.
C) supply and demand are equal.
D) the economy is producing under conditions of high employment.