Which of these government financing methods is generally the least inflationary?
A) Printing currency
B) Borrowing from the banking system
C) Borrowing from the central bank
D) Borrowing from the non-bank public
Factors supplying and absorbing bank reserves constitute the
A) Federal Reserve credit equation.
B) bank reserve equation.
C) equation of exchange.
D) money market.
The steeper the LM curve
A) the more effective is monetary policy.
B) the less effective is monetary policy.
C) the greater is the interest-sensitivity of investment.
D) the greater is the interest-sensitivity of the money supply.
In the Keynesian view, the main source of economic fluctuations is
A) interest rates.
B) investment.
C) consumption.
D) inflation.
What method of financing government spending leads to the least crowding-out?
A) Money creation
B) Taxation
C) Selling bonds to the public
D) Selling government assets, like national parks
In the complete algebraic formulation of ISLM,
A) the government spending multiplier is greater than the tax mulitplier as long as b <1.
B) the government spending mulitplier is less than the tax multiplier as long as b<1.
C) monetary policy is always more powerful than fiscal policy.
D) fiscal policy is always more powerful than monetary policy.
An “unsecured” loan is one
A) with no stated collateral.
B) that is pending approval by a bank loan committee.
C) which has collateral.
D) in which the borrower is delinquent in loan payments but has not formally defaulted
on.
In the “cost of capital channel” of monetary policy, a lower interest rate __________
spending.
A) raises consumption
B) raises investment
C) lowers consumption
D) lowers investment
The Phillips Curve implies a trade-off between
A) investment and saving.
B) inflation and unemployment.
C) employment and income.
D) investment and government deficits.
If all information is reflected in current prices, the market is
A) resilient.
B) deep.
C) primary.
D) efficient.
In the Monetarists’ view, a one-time increase in the price level results from a(n)
A) technological improvement.
B) increase in the labor force.
C) supply shock.
D) interest-rate increase.
An unexpected fall in car sales should send bond prices __________ and stock prices
__________.
A) up; up
B) up; down
C) down; up
D) down; down
Which of the following is a plausible explanation for a downward shift in the
consumption function?
A) A decline in home values
B) A decline in wages
C) A decrease in the personal income tax rate
D) A rise in wages
A relatively flat LM curve implies that wide fluctuations in the goods sector cause
A) wide fluctuations in real output.
B) wide fluctuations in the price level.
C) wide fluctuations in the interest rate.
D) crowding out of private investment.
Which of the following is an interest rate target specified in the FOMC directive?
A) Discount rate
B) Treasury bond rate
C) Federal funds rate
D) The prime rate
Quincy Ritter pays $1,100 for a bond with a face value of $1,000. The coupon rate is 10
percent, and payments are made annually. The current yield is equal to
A) 9.5 percent.
B) 9.1 percent.
C) 10 percent.
D) 11.1 percent.
All successful bidders in a Treasury bill auction pay the __________ price for their
bids.
A) market-clearing
B) highest accepted
C) average
D) lowest accepted
If an person believes that it is likely that interest rates will increase, she is likely to hold
less
A) money.
B) real assets.
C) stock.
D) bonds.
Which of the following statements is incorrect with respect to the 1980s?
A) Corporate financing migrated from the short-term bank loan market to the
commercial paper market.
B) Money market funds could offer transactions services coupled with a diversified
money market investment vehicle at very low costs because of advances in computer
technology.
C) Specialized monitoring services of commercial banks became more important
because of new asset valuation models.
D) Innovations in information technology made some small borrowers more
“bankable.”
In privately held firms the manager-stockholder conflict is
A) worse than in the larger firm.
B) the same as it is in the larger firm.
C) less severe than in the larger firm.
D) there is no manager-stockholder conflict because the manager is the owner.
When the Fed receives an inflow of Federal Reserve notes, its
A) assets rise.
B) liabilities decline.
C) liabilities increase.
D) assets decline.