__________ argue that any exogenous decrease in investment spending would be
countered automatically by either increased consumption or interest-sensitive
investment spending.
A) Monetarists
B) Keynesians
C) Classical economists
D) None of the above.
Most economists believe the LM curve to be
A) horizontal most of the time.
B) upward-sloping.
C) vertical.
D) downward-sloping.
__________ is not a cash flow associated with a bond.
A) Payment to purchase a bond
B) Periodic interest payments
C) Periodic dividend payments
D) Repayment of the face value when the bond matures
Suppose a new employee is promised a pension payment of $8000 in the twenty-fourth
year after joining the firm. The current pension contribution of $1200 a year. Assuming
an eight percent rate of return, this pension plan is said to be
A) fully funded.
B) partly funded.
C) unfunded.
D) fully vested.
In the ISLM framework, monetary policy has the greatest impact on equilibrium
income
A) when desired saving = desired saving.
B) when money supply is infinitely elastic.
C) the greater is the interest-sensitivity of money demand.
D) when the interest rate is rising.
Which of the following is not included in M2?
A) Bank repurchase agreements
B) Savings deposits
C) Travelers’ checks
D) Small-denomination time deposits
When the U.S. Treasury purchases gold from a member of the non-bank public, the
immediate effect is that __________ and __________.
A) reserves increase; currency in circulation decreases
B) reserves decrease; currency in circulation increases
C) reserves increase; Treasury deposits decrease
D) reserves decrease; Treasury deposits increase
The two main determinants of money demand are
A) GDP and the money supply.
B) aggregate supply and aggregate demand.
C) interest rates and income.
D) the inflation rate and the money supply.
Today, central banks __________ intervene to influence floating exchange rates.
A) never
B) seldom
C) frequently
D) are required
The fixed-rate payer in a swap contract pays a
A) current capital market rate.
B) capital market rate minus one percentage point.
C) capital market rate plus one percentage point.
D) capital market rate plus a premium based on creditworthiness.
Which of the following is a lagging economic indicator?
A) Housing starts
B) Employment
C) Retail sales
D) Inflation
A stock is expected to pay a dividend of $2.50 per share indefinitely. The stock is
expected to generate a return of 8 percent in the foreseeable future. Based on this
information, a fair price of this stock would be
A) $25.00.
B) $31.25.
C) $20.00.
D) Cannot be determined without additional information.
Consumer finance companies get their funds primarily from
A) the federal government.
B) selling stock.
C) selling commercial paper.
D) issuing long term bonds.
Pension funds are partially guaranteed by the
A) Social Security Administration.
B) Federal Deposit Insurance Corporation.
C) Federal Reserve.
D) Pension Benefit Guaranty Corporation.
The inability of the Federal Reserve to explain movements in M1 demand has led to
A) less emphasis on money growth as a policy tool.
B) the Federal Reserve’s targeting V1 growth more closely.
C) the Federal Reserve’s switching to M2 and M3 targets.
D) All of the above.
Since the 1970s, the M1 demand for money has been
A) relatively stable.
B) unpredictable.
C) constant.
D) unmeasurable.
In order to manage risk of failure and protect guarantors, the Employee Retirement
income Security Act (ERISA) established all of the following requirements on pension
funds except for minimum
A) disclosure of information.
B) reporting requirements.
C) investment standards.
D) risk-based capital requirements.
Which of the following groups within the Federal Reserve System is primarily
concerned with public relations?
A) The Federal Open Market Committee
B) The Federal Advisory Council
C) The Federal Reserve Bank presidents
D) The Board of Governors
The deposit expansion multiplier is decreased if the Federal Reserve
A) buys government securities.
B) sells government securities.
C) lowers reserve requirements.
D) raises reserve requirements.