In a ________ banking system, commercial banks provide a full range of banking,
securities, and insurance services, all within a single legal entity.
A) universal
B) severable
C) barrier-free
D) dividerless
As the costs associated with deposit outflows ________, the banks willingness to hold
excess reserves will ________.
A) decrease; increase
B) increase; decrease
C) increase; increase
D) decrease; not be affected
Futures contracts are regularly traded on the
A) Chicago Board of Trade.
B) New York Stock Exchange.
C) American Stock Exchange.
D) Chicago Board of Options Exchange.
An agreement to exchange dollar bank deposits for euro bank deposits in one month is a
A) spot transaction.
B) future transaction.
C) forward transaction.
D) deposit transaction.
Everything else held constant, if consumption expenditure falls by 160 when disposable
income falls by 200, the mpc is
A) 0.
B) 0.2.
C) 0.4.
D) 0.8.
Managers (________) may act in their own interest rather than in the interest of the
stockholder-owners (________) because the managers have less incentive to maximize
profits than the stockholder-owners do.
A) principals; agents
B) principals; principals
C) agents; agents
D) agents; principals
To prevent bank runs and the consequent bank failures, the United States established the
________ in 1934 to provide deposit insurance.
A) FDIC
B) SEC
C) Federal Reserve
D) ATM
The absence of money illusion means that
A) as real income doubles, the demand for money doubles.
B) as interest rates double, the demand for money doubles.
C) as the money supply doubles, the demand for money doubles.
D) as the price level doubles, the demand for money doubles.
Compared to interest rates on long-term U.S. government bonds, interest rates on
three-month Treasury bills fluctuate ________ and are ________ on average.
A) more; lower
B) less; lower
C) more; higher
D) less; higher
To say that the forward market lacks liquidity means that
A) forward contracts usually result in losses.
B) forward contracts cannot be turned into cash.
C) it may be difficult to make the transaction.
D) forward contracts cannot be sold for cash.
Which of the following statements accurately describes the two measures of the money
supply?
A) The two measures do not move together, so they cannot be used interchangeably by
policymakers.
B) The two measures’ movements closely parallel each other, even on a
month-to-month basis.
C) Short-run movements in the money supply are extremely reliable.
D) M2 is the narrowest measure the Fed reports.
According to the Taylor rule, the Fed should raise the federal funds interest rate when
inflation ________ the Fed’s inflation target or when real GDP ________ the Fed’s
output target.
A) rises above; drops below
B) drops below; drops below
C) rises above; rises above
D) drops below; rises above
Suppose that the European Central Bank conducts a main refinancing sale. Everything
else held constant, this would cause the demand for U.S. assets to ________ and the
U.S. dollar will ________.
A) increase; appreciate
B) increase; depreciate
C) decrease; appreciate
D) decrease; depreciate
A person remodeling her house could obtain a loan from a
A) sales finance company.
B) consumer finance company.
C) business finance company.
D) public finance company.
A contractionary monetary policy decreases net exports by ________ interest rates and
________ the value of the dollar.
A) lowering real; decreasing
B) lowering real; increasing
C) raising nominal; increasing
D) raising real; increasing
Financial markets promote economic efficiency by
A) channeling funds from investors to savers.
B) creating inflation.
C) channeling funds from savers to investors.
D) reducing investment.
Everything else held constant, increased demand for a country’s exports causes its
currency to ________ in the long run, while increased demand for imports causes its
currency to ________.
A) appreciate; appreciate
B) appreciate; depreciate
C) depreciate; appreciate
D) depreciate; depreciate
A financial contract that obligates one party to exchange a set of payments it owns for
another set of payments owned by another party is called a
A) hedge.
B) call option.
C) put option.
D) swap.
Under a gold standard in which one dollar could be turned in to the U.S. Treasury and
exchanged for 1/20th of an ounce of gold and one German mark could be exchanged for
1/100th of an ounce of gold, an exchange rate of ________ marks to the dollar would
stimulate a flow of gold from the United States to Germany.
A) 7
B) 6
C) 5
D) 4
Bank’s make their profits primarily by issuing
A) equity.
B) negotiable CDs.
C) loans.
D) NOW accounts.
The riskiness of an asset’s returns due to changes in interest rates is
A) exchange-rate risk.
B) price risk.
C) asset risk.
D) interest-rate risk.
Aggregate output is ________ related to autonomous consumer expenditure, and is
________ related to planned investment spending.
A) negatively; negatively
B) negatively; positively
C) positively; negatively
D) positively; positively
The fact that an economy always returns to the natural rate level of output is known as
A) the excess demand hypothesis.
B) the price-adjustment mechanism.
C) the self-correcting mechanism.
D) the natural rate of unemployment.
A hyperinflation is
A) a period of extreme inflation generally greater than 50% per month.
B) a period of anxiety caused by rising prices.
C) an increase in output caused by higher prices.
D) impossible today because of tighter regulations.
As their relative riskiness ________, the expected return on corporate bonds ________
relative to the expected return on default-free bonds, everything else held constant.
A) increases; increases
B) increases; decreases
C) decreases; decreases
D) decreases; does not change
The bond demand curve is ________ sloping, indicating a(n) ________ relationship
between the price and quantity demanded of bonds, everything else equal.
A) downward; inverse
B) downward; direct
C) upward; inverse
D) upward; direct
A feature of Bitcoin, a new type of electronic money, that make it attractive as a
medium of exchange is
A) anonymous transactions.
B) volatility of value.
C) heavy regulations by the central bank.
D) wide acceptance by businesses.
If aggregate output is below the natural rate level, activists of policies would
recommend that the government
A) do nothing.
B) try to eliminate the high unemployment by attempting to shift the aggregate supply
curve to the right.
C) try to eliminate the high unemployment by attempting to shift the aggregate demand
curve to the right.
D) try to eliminate the high unemployment by attempting to shift the aggregate demand
curve to the left.
Planned investment spending, a component of aggregate demand, is equal to
A) fixed investment plus actual inventory investment.
B) fixed investment plus unplanned inventory investment.
C) fixed investment.
D) fixed investment plus planned inventory investment.
Suppose it takes roughly two years for monetary policy to have a significant impact on
inflation. If inflation is currently low but policymakers believe inflation will rise over
the next two years with an unchanged stance of monetary policy, when should they
tighten monetary policy to prevent the inflationary surge?
A) now
B) wait until overt signs of inflation appear
C) next year
D) two years later
If merchants in the country Zed choose to close their doors, preferring to be stuck with
rotting merchandise rather than worthless currency, then one can conclude that Zed is
experiencing a
A) superdeflation.
B) hyperdeflation.
C) disinflation.
D) hyperinflation.
Which of the following are NOT contractual savings institutions?
A) life insurance companies
B) credit unions
C) pension funds
D) state and local government retirement funds
The factor accounting for the steepest rise in the currency ratio since 1892 is
A) taxes.
B) bank panics.
C) illegal activity.
D) an increase in wealth.