The two cornerstones of Classical economics are the Quantity Theory and
A) Liquidity Preference Theory.
B) disequilibrium analysis.
C) Say’s Law.
D) the Phillips Curve.
In the Keynesian model when desired investment exceeds desired saving,
A) inventories rise.
B) inventories fall.
C) the price level rises.
D) the price level falls.
When the Federal Reserve was formed, federally-chartered banks were __________
Fed member banks.
A) allowed to become
B) required to become
C) given the option to become
D) not allowed to become
The effectiveness with which markets bring buyers and sellers together is called
A) pricing efficiency.
B) operating efficiency.
C) the theory of efficient markets.
D) bid-asked spread efficiency.
A gold purchase by the U.S. Treasury
A) reduces bank reserves.
B) increases bank reserves.
C) increases Federal Reserve equity.
D) leaves bank reserves unaffected.
Conflict resolution of the manager-stockholder conflict in larger market-oriented firms
is most effectively accomplished by
A) financial intermediation (monitoring).
B) financial intermediation (ownership consolidation).
C) rating agencies.
D) managerial compensation.
Rather than accept delivery, most traders in futures markets choose
A) to make margin payments.
B) settlement by offset.
C) to mark-to-market.
D) to make arbitrage payments.
In the Keynesian model, if interest rates fall below what people consider normal,
households will respond by
A) decreasing the saving rate.
B) reducing the saving rate.
C) holding more money.
D) holding more bonds.
A speculator who feels strongly that short rates will be rising over the next few years
might want to be a __________ payer in a swap contract; if she is wrong there is
__________ downside risk.
A) fixed-rate; no
B) fixed-rate; considerable
C) floating-rate; no
D) floating-rate; considerable
Which of the following must decline if there is a reserve deficiency in the banking
system?
A) Demand deposits
B) Reserves
C) Net worth
D) The demand deposit multiplier
If the Treasury finances an expenditure by borrowing from banks with excess reserves,
the money supply will
A) remain unchanged.
B) rise by an amount equal to the expenditure.
C) rise by a multiple of the expenditure.
D) fall by a multiple of the expenditure.
If financial markets were perfect, financial intermediaries would
A) be illegal.
B) handle roughly half of all finance.
C) be the conduit of all finance.
D) probably not exist.
A Monetarist-oriented econometric model is likely to emphasize that monetary policy
affects economic activity
A) directly through changes in government spending.
B) directly through changes in the money supply.
C) indirectly through changes in velocity.
D) indirectly through changes in money demand.
The rate at which money turns over is the definition of
A) velocity.
B) liquidity.
C) GDP.
D) aggregate demand.
Currently challenging Treasury bills as the centerpiece of the money market is (are)
A) federal funds.
B) Eurodollars.
C) commercial paper.
D) negotiable CDs.
In the Keynesian model, liquidity preference refers to the
A) demand for capital.
B) demand for consumer goods.
C) demand for money.
D) money supply.
The German bond market
A) is very large by international standards.
B) is very small by international standards.
C) is about the same size as the U.S. bond market.
D) shrunk considerably in the 1990s.
All financial securities share the characteristic that they represent a claim to future
A) interest income.
B) ownership.
C) cash flows.
D) dividend payments.
In a barter economy, the only way people can invest is if
A) consumption is positive.
B) there is inflation.
C) they save by acquiring goods directly.
D) money is introduced.