Which of the following best describes the ideal quantity of money?
A) It equals the amount of spending.
B) It equals the level of GDP.
C) It equals the price level.
D) It stabilizes prices while allowing a high level of employment.
Among the state nonmember banks, __________ have federal deposit insurance
through the FDIC.
A) all
B) virtually all
C) a minority
D) none of them
“Partial” crowding out of fiscal policy occurs when the
A) LM curve is horizontal.
B) LM curve is upward-sloping.
C) LM curve is vertical.
D) IS curve is vertical.
Which of the following is a primary market transaction?
A) Sally Wither purchases 100 shares of IBM through her broker.
B) Kold Co. issues 1 million new shares through Morgan Stanley.
C) Bob Hill sells 1,000 shares of Disney directly to his friend.
D) Kip Peters sells 1,000 shares of Dush, Inc., which he bought in an IPO last month,
through his broker.
If a person prefers a gamble with an expected value of $100 to a sure $100 that person
is
A) irrational.
B) a risk lover.
C) nonsystematic.
D) managing a portfolio.
The central bank of the United States is the
A) Federal Reserve.
B) Securities and Exchange Commission.
C) Federal Deposit Insurance Corporation.
D) Department of the Treasury.
Federal Reserve liabilities are equal to
A) gold certificates + other Fed liabilities.
B) bank reserves + other Fed liabilities.
C) Federal Reserve notes.
D) cash + loans + U.S. Treasury deposits.
If financial intermediation were substantially reduced, the likely initial effect on
individual investors would be
A) higher inflation.
B) a shift to a barter economy.
C) a reduction in disintermediation.
D) increased risk.
Economic models using computer simulations can provide an estimate of the
A) recognition lag.
B) decision lag.
C) bureaucratic lag.
D) impact lag.
Among marketable government securities, the largest dollar volume is in the form of
A) Treasury bonds.
B) Treasury notes.
C) Treasury bills.
D) federal funds.
The Bureau of Labor Statistics unveils an unemployment rate figure every
A) two weeks.
B) month.
C) two months.
D) quarter.
Which of the following is not included in M3?
A) Institutional money market mutual fund shares
B) Large-denomination time deposits
C) Small-denomination time deposits
D) All of the above are included in M3.
Monetarists argue that an exogenous increase in investment spending is likely to be
offset by a decrease in
A) the money supply.
B) interest rates.
C) government spending.
D) consumption.
In a(n) __________ insurance policy, the savings component is allocated among a menu
of investment options.
A) whole
B) term
C) universal
D) variable
A decrease in the interest rate causes
A) movement up the IS curve.
B) movement down the LM curve.
C) the IS curve to shift to the left.
D) the LM curve to shift to the right.
The problem of moral hazard that resulted from federal deposit insurance can be
attributed to all of the following except
A) depositors have little incentive to monitor their bank.
B) deposit premiums until recently did not depend on risk.
C) risk aversion by managers of banks plus bank examination.
D) the incentive of bank stockholders to increase risk because they share
disproportionately in success but the FDIC shares disproportionately in failure.