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When the Fed lends to depository institutions, the loans are called
A) federal funds.
B) discount loans.
C) repurchase agreements.
D) reverse repurchase agreements.
Answer:
Discount loans available to health banks which can be used for any purpose are called
A) primary credit.
B) secondary credit.
C) seasonal credit.
D) repo loans.
Answer:
A coupon bond has an annual coupon of $75, a par value of $1000, and a market price
of $900. Its current yield equals
A) 50%.
B) 33%.
C) its yield to maturity.
D) Not enough information has been provided to calculate the current yield for this
bond.
Answer:
The national economic forecast for the next two years prepared by the staff of the Board
of Governors is published in the
A) green book.
B) beige book.
C) blue book.
D) Fed book.
Answer:
A lender who is worried that its cost of funds might rise during the term of a loan it has
made can hedge against this rise by
A) buying futures contracts on Treasury bills.
B) selling futures contracts on Treasury bills.
C) buying call options on Treasury bills.
D) increasing the amount of money which it lends.
Answer:
Financial securities that represent partial ownership of a corporation are known as
A) bonds.
B) stocks.
C) coupons.
D) dividends.
Answer:
In the early 1930s
A) countries that abandoned the gold standard suffered severe inflation.
B) countries that tried to defend the gold standard suffered more depression than
countries that abandoned the gold standard.
C) the gold standard was abandoned by every major industrial country except England.
D) the United States was the first major industrial country to abandon the gold standard.
Answer:
Suppose that the banking system currency has no excess reserves and that a bank
receives a deposit into a checking account of $10,000 in currency. If the required
reserve ratio is 0.20, what is the maximum amount that the banking system can lend
out?
A) $8,000
B) $10,000
C) $40,000
D) $50,000
Answer:
Which groups were opposed to the Bank of the United States?
A) northeastern industrial interests
B) northeastern financial interests
C) southern and western agrarian and small-business interests
D) exporters
Answer:
According to Taylor's rule, all of the following variables help explain the behavior of
the federal funds rate EXCEPT
A) output gap.
B) current inflation.
C) inflation gap.
D) yield curve.
Answer:
The financial system is primarily a means by which
A) funds are transferred from savers to borrowers.
B) money is put into circulation.
C) the government puts into operation its plans for the economy.
D) business firms distribute their goods.
Answer:
Which of the following would cause the long-run aggregate supply curve to shift?
A) an increase in the price level
B) a decrease in the expected price level
C) an increase in labor productivity
D) an autonomous increase in consumption spending
Answer:
How can the Fed reduce the implicit tax on banks resulting from reserve requirements?
A) lowering the discount rate
B) paying interest on reserves
C) reducing the federal funds rate
D) increasing the federal funds rate
Answer:
An increase in the expected profitability of investment will cause
A) IS to shift right.
B) IS to shift left.
C) MP to shift upward.
D) MP to shift downward.
Answer:
A small open economy
A) is unable to affect the world real interest rate by its borrowing and lending decisions.
B) will always be a net borrower from abroad.
C) will always be a net lender abroad.
D) is almost never able to borrow abroad.
Answer:
Open market operations generally involve
A) the Fed making discount loans to depository institutions.
B) the Fed buying and selling common stock in order to affect the liquidity of the stock
market.
C) the Fed buying and selling U.S. government securities.
D) private investors buying and selling securities directly on exchanges, rather than
through brokers.
Answer:
Which of the following statements about checkable deposits is correct?
A) Checkable deposits are a larger fraction of banks' funds today than in 1973.
B) Checkable deposits are a smaller fraction of banks' funds today than in 1973.
C) All checkable deposits pay interest.
D) No checkable deposits pay interest.
Answer:
Which of the following statements about the rate of return is NOT correct?
A) The total rate of return may be greater or less than the current yield.
B) The total rate of return may be greater or less than the rate of capital gain.
C) The total rate of return may never be negative.
D) The total rate of return is greater than the coupon, holding everything else constant.
Answer:
If the FOMC's directive indicates a change in monetary policy, the account manager at
the Fed's Open Market Trading Desk must
A) design dynamic open market operations.
B) design defensive open market operations.
C) seek approval of the change from the Secretary of the Treasury.
D) seek approval of the change from a majority of the presidents of the Federal Reserve
district banks.
Answer:
How did the Fed peg interest rates during World War 2?
A) by setting a low federal funds rate
B) by agreeing to purchase any bonds that were not purchased by private investors
C) through extensive use of discount loans
D) through nationalization of the banking system
Answer:
As of 2012, about how many banks were there in the United States?
A) 57
B) 2000
C) 6200
D) 14,000
Answer:
The supply curve for loanable funds would increase due to a(n)
A) increase in wealth.
B) increase in expected inflation.
C) decrease in the liquidity of bonds relative to other assets.
D) increase in the information costs of bonds relative to other assets.
Answer:
The primary assets of the Fed are
A) discount loans and reserves.
B) discount loans and government securities.
C) government securities and reserves.
D) discount loans and open market operations.
Answer:
All of the following are benefits of securitization EXCEPT
A) risk sharing.
B) reduced interest rates that borrowers pay on loans.
C) increased liquidity.
D) fewer adverse selection problems.
Answer:
A key point made by the Gordon-Growth model is that the
A) value of a stock depends on investor's expectations about the future profitability of a
firm.
B) past trends in a stock's behavior indicate future price trends.
C) dividends have little to do with a stock's value.
D) risk has little effect on a stock's value.
Answer:
An open market purchase
A) increases the monetary base.
B) decreases the monetary base.
C) increases the federal funds rate.
D) is another name for a discount loan.
Answer:
An asset is
A) the same thing as a liability.
B) a thing of value that can be owned.
C) money, as opposed to stock or bonds.
D) anything that never declines in value.
Answer:
Suppose that research shows that by buying stocks issued by companies whose names
begin with the letter G investors can earn above-normal returns in even-numbered
years. From the perspective of the efficient markets hypothesis,
A) this is further evidence that the hypothesis is correct.
B) this would be considered a pricing anomaly.
C) investors must have insider information on these companies.
D) purchasers of these stocks must have been noise traders.
Answer:
Underwriting involves
A) insuring the life or health of individuals.
B) guaranteeing a price for new capital to the issuing firm.
C) selling stock more cheaply than conventional stockbrokers.
D) issuing stock and using the proceeds to buy bonds.
Answer:
Securitization refers to
A) changing the mix in a financial portfolio away from stocks and toward bonds.
B) selling directly to investors loans or securities that were formerly held by financial
intermediaries.
C) banks insisting that collateral be supplied on previously unsecured loans.
D) reducing the exposure of a bank's portfolio to interest rate risk.
Answer:
The key concept in the new classical approach to the aggregate supply curve is
A) the impact of imperfect information on business decisions.
B) the impact of changes in the price level on real balances.
C) the inverse relationship between the real interest rate and desired investment
spending.
D) the crowding out of investment spending by government spending.
Answer:
The members of Federal Reserve district bank boards of directors who represent the
public interest are known as
A) Class A directors.
B) Class B directors.
C) Class C directors.
D) Class D directors.
Answer:
