With a surplus in our balance of payments, there is an excess __________ dollars in the
foreign exchange market, causing the dollar to __________.
A) demand for; appreciate
B) demand for; depreciate
C) supply of; appreciate
D) supply of; depreciate
The Federal Reserve considers any business with less than __________ employees to
be ‘small.”
A) 10
B) 100
C) 500
D) 1500
From a Keynesian perspective, a short-run decrease in investment spending will shift
the aggregate
A) supply curve to the left.
B) supply curve to the right.
C) demand curve to the left.
D) demand curve to the right.
Which of the following accounts for differences in the yield to maturity on U.S.
government bonds with the same maturity?
A) Capital gains tax treatment
B) Chance of repayment
C) Marketability
D) Default risk
The __________ lag refers to the problem of getting an accurate fix on what is
happening in the economy.
A) recognition
B) realization
C) impact
D) None of the above.
When a bank receives a check drawn on an account from another commercial bank, the
bank gains
A) capital equal to the amount of the check.
B) capital equal to the required reserve ratio times the amount of the check.
C) reserves equal to the amount of the check.
D) reserves equal to the required reserve ratio times the amount of the check.
With a decrease in government expenditure we
A) move up along the aggregate demand curve.
B) move down along the aggregate demand curve.
C) shift the aggregate demand curve to the right.
D) shift the aggregate demand curve to the left.
Assume a demand deposit multiplier of 2 and a government expenditure of $10 million.
If the Treasury borrows that much from the banking system, bank reserves will
A) rise by $2 million.
B) rise by $10 million.
C) rise by $20 million.
D) remain unchanged.
“Information problematic” borrowers must usually go the __________ finance route
and issue __________ securities.
A) direct; traded
B) direct; nontraded
C) indirect; traded
D) indirect; nontraded
In open market operations, when the Fed __________ securities, bank reserves
__________.
A) buys; contract
B) buys; expand
C) sells; expand
D) None of the above.
Mezzanine debt funds hold quite __________ assets issued by __________ companies.
A) risky; small to midsized
B) risky; large
C) safe; small to midsized
D) safe; large
Most stock market experts agree that monetary policy
A) has virtually no impact on stock prices.
B) has a minor impact on stock prices.
C) has a significant impact on stock prices.
D) is the only determinant of stock prices.
If one-year securities are yielding 5 percent, but the market anticipates that rates for
one-year securities will rise to 7 percent, then according to the expectations theory,
current two-year securities should be yielding
A) 12 percent.
B) 7 percent.
C) 6 percent.
D) 5 percent.
Keynesians believe in a relatively stable __________ curve, and thus recommend a
monetary policy targeting the __________.
A) IS; money supply
B) IS; interest rate
C) LM; money supply
D) LM; interest rate
Statistical studies indicate that the liquidity trap
A) occurs during most recessions.
B) occurs during inflationary periods.
C) occurred only during the Great Depression.
D) has not occurred.
If the price of $1 is 1.67 Swiss francs, the price of a Swiss franc is
A) $0.33.
B) $1.67.
C) $2.00.
D) $0.67.
Anything that causes the United States to buy fewer foreign goods shifts the foreign
currency __________ curve to the __________.
A) demand; right
B) demand; left
C) supply; right
D) supply; left
A rise in domestic productivity tends to __________ domestic prices and causes the
dollar to __________ relative to foreign currencies.
A) raise; appreciate
B) raise; depreciate
C) lower; appreciate
D) lower; depreciate
If the MPC is b, then the multiplier is
A) 1/(1 – b).
B) b/(1 – b).
C) 1/(1 + b).
D) b/(1 + b).
An outright purchase of government securities by the Fed
A) permanently increases bank reserves.
B) temporarily increase bank reserves.
C) permanently reduces bank reserves.
D) temporarily reduces bank reserves.
The monetary base will increase if
A) currency outstanding decreases.
B) loans by the Fed to commercial banks decrease.
C) bank reserves increase.
D) vault cash in banks increases.
The difference in the selling and purchase prices of government securities in a typical
overnight repurchase agreement is set to reflect
A) the difference in the auction price of the securities and their current market price.
B) the overnight cost of funds.
C) LIBOR.
D) the discount on Treasury bills.
A risky small business stands the best chance of finding external financing from
A) a commercial finance company.
B) a commercial bank.
C) an investment bank.
D) trade credit.
Monetarists argue that the demand for money is unresponsive to interest rates, i.e.
depends on income only, produces a
A) vertical LM function.
B) horizontal LM function.
C) vertical IS function.
D) horizontal IS function.