When the economy is in the liquidity trap,
A) velocity is constant.
B) monetary policy is impotent.
C) fiscal policy is impotent.
D) income is zero
In markets-oriented systems, handling of the manager-stockholder conflict in large
firms is through
A) rating agencies.
B) the potential for takeovers.
C) management ownership of the firm.
D) bank ownership of the firm.
Which of the following statements is incorrect?
A) Trading in government securities averages more than twenty times a typical day’s
trading on the New York Stock Exchange.
B) All marketable government securities are initially issued at auctions held by the
Federal Reserve.
C) Government security auction participants include government securities dealers and
large banks.
D) U.S. government securities are increasingly traded around the clock on virtually a
nonstop basis.
When interest rates are relatively low, investors generally expect interest rates to
__________. Thus, investors prefer to hold __________ securities
A) fall; long-term
B) fall; short-term
C) rise; long-term
D) rise; short-term
A rightward shift of aggregate demand will raise output only if
A) wages remain unchanged.
B) wages rise by a lower percentage than prices.
C) wages rise by the same percentage as prices.
D) wages rise by a greater percentage than prices.
In return for their services in the primary securities market, investment banks earn a fee
called a(n)
A) underwriting spread.
B) bid-asked spread.
C) dealer’s spread.
D) broker’s spread.
Reverse repurchase agreements are often used to
A) increase bank reserves permanently.
B) increase bank reserves temporarily.
C) reduce bank reserves permanently.
D) reduce bank reserves temporarily.
Suppose that during a given month 500,000 persons quit their job to become
self-employed. This will cause
A) the unemployment rate to fall.
B) the unemployment rate to rise.
C) payroll employment to rise.
D) payroll employment to fall.
E) no change in either the unemployment rate or payroll employment.
A major loophole was punched through the McFadden Act as banks
A) formed bank holding companies.
B) developed negotiable certificates of deposit.
C) began paying interest on checkable deposits.
D) converted themselves into savings-and-loans.
If the required reserve ratio is decreased from .2 to .1 the demand deposit expansion
multiplier
A) increases from 5 to 10.
B) increases from 4 to 4.5.
C) decreases from 5 to 2.5.
D) decreases from 2 to 1.
The principal policy-maker of the Federal Reserve is the
A) Chairman of the Federal Reserve Board of Governors.
B) president of the New York Federal Reserve bank.
C) president of the Washington, D.C. Federal Reserve bank.
D) Comptroller of the Currency.
Which of the following institutions is not eligible to borrow from the Federal Reserve at
the discount rate?
A) Federal government
B) Commercial banks
C) Credit unions
D) Mutual savings banks
The interest elasticity of money demand is estimated to be
A) small in absolute value.
B) large in absolute value.
C) highly volatile.
D) not statistically different from zero.
Banks prefer __________ hold excess reserves because __________.
A) not to; excess reserves earn no interest
B) not to; banks are not required to hold them
C) to; excess reserves earn interest
D) to; banks need them to prevent runs
If government bond rates __________, stock prices generally __________.
A) fall; rise
B) increase; rise
C) fall; fall
D) None of the above.