A good example of using the discount rate to serve the lender of last resort role for the
financial system occurred during the
A) savings and loan crisis of the 1980s.
B) stock market crash of 1987.
C) sharp rise in government deficits during the 1980s.
D) developing-country debt crisis of the 1980s.
Assets with zero covariance have yields that are
A) inversely related.
B) positively correlated.
C) negatively correlated.
D) independent.
A bond has an annual coupon rate of 7 percent, a $1,000 face value, and ten years
remaining until maturity. The bond currently sells for $1,138. The yield to maturity for
this bond is __________ percent. (Note: This question requires a financial calculator.)
A) 7.0
B) 5.2
C) 13.8
D) 10.0
A sudden expectation of future appreciation of the dollar causes funds to flow
__________ the United States and the dollar to actually __________.
A) out of; depreciate
B) out of; appreciate
C) into; depreciate
D) into; appreciate
If a 5 percent increase in the money supply always leads to a 5 percent increase in
nominal GDP, this indicates that
A) the price level is constant.
B) the economy is at full employment.
C) velocity is constant.
D) real GDP is constant.
If autonomous investment spending falls as a result of a decline in the expected rate of
return on investment, GDP would not have to fall if the government __________ taxes
or __________ government spending.
A) increased; increased
B) increased; decreased
C) decreased; increased
D) decreased; decreased
Unlike dealers, brokers
A) deal in the primary market.
B) deal in equity and not in debt.
C) do not buy or sell for their own account.
D) get most of their funds from consumer deposits.
Commercial paper has a maximum maturity of
A) one day.
B) seven days.
C) 30 days.
D) 270 days.
In the complete algebraic formulation of ISLM,
A) monetary policy is useless when h is infinite or n is zero.
B) monetary policy is useless when n is infinite or h is zero.
C) fiscal policy is useless when h is infinite or n is zero.
D) both fiscal and monetary policy are useless.
A horizontal aggregate supply curve reflects the assumption that the
A) price level is constant.
B) velocity of money is constant.
C) saving rate is equal to zero.
D) economy is at full employment.
In comparing the returns on U.S. and German Treasury securities, investors
A) should forecast the future dollar/euro exchange rate.
B) may disregard the future dollar/euro exchange rate.
C) should assume the future dollar/euro exchange rate is the same as today’s.
D) should assume the euro will depreciate if the German interest rate is above the U.S.
interest rate.
Compared with the average man, the average woman pays
A) less for health insurance but more for life insurance.
B) less for life insurance but more for health insurance.
C) more for life and health insurance.
D) less for life and health insurance.
Which of the following is not a factor in the equation of exchange?
A) Money velocity
B) Money supply
C) The price level
D) Nominal income
Under the new discount window system, the interest rate for primary credit loans is set
A) one percentage point below the federal funds rate target.
B) one percentage point above the federal funds rate target.
C) two percentage points above the federal funds rate target.
D) two percentage points below the federal funds rate target.
Noninterest-bearing checking accounts are known as
A) demand deposits.
B) NOW accounts.
C) money market deposit accounts.
D) money market mutual funds.
Universal life insurance was created in response to
A) the popularity of whole life insurance.
B) the popularity of variable life insurance.
C) high interest rates.
D) deregulation of banking.
If there is an exogenous decrease in investment spending, Monetarists argue that there
would be little or no effect on real output because the interest rate would __________,
investment would __________, saving would __________, and consumption would
__________.
A) decline; increase; increase; decrease
B) decline; increase; decrease; increase
C) rise; decrease; decrease; increase
D) rise; decrease; increase; increase
Which of the following is assumed constant in the short-run Classical model?
A) Money supply
B) Output
C) Aggregate demand
D) Wages
Federal Reserve Bank directors
A) have relatively little influence in monetary policy decisions.
B) determine bank reserve requirements.
C) determine bank capital requirements.
D) set the federal funds rate.
An important implication of the idea that markets are efficient is that
A) an investor can make money by buying undervalued stocks and selling overvalued
ones.
B) the price of a share immediately incorporates new publicly available information
that affects its value.
C) dealers can ignore some new information on a share that affects its value.
D) an investor can make above average returns in the stock market by doing careful
research of public information about selected stocks.
Assume that the yield on long-term U.S. government bonds rises. The yield on
corporate bonds with the same maturity will __________, because investors will
substitute __________ for __________.
A) rise; government bonds; corporate bonds
B) rise; corporate bonds; government bonds
C) fall; government bonds; corporate bonds
D) fall; corporate bonds; government bonds
In the 1960s, banks started __________ in order to maneuver around the Glass-Steagall
act.
A) opening foreign branches
B) using Section 20 affiliates
C) forming one-bank holding companies
D) dropping Federal Reserve membership
A rising price level (inflation) causes
A) reduced barter activity.
B) consumers to shift from checking accounts to currency.
C) a decrease in the money supply.
D) a decrease in the value of money.
With overnight repos, __________ gain access to short-term funds to lend.
A) corporations
B) banks
C) governments
D) consumers
In an economy with no government or foreign sector, which of the following always
holds true, ex-post?
A) Consumption equals investment.
B) Velocity equals money demand.
C) Saving equals consumption.
D) Saving equals investment.