A sudden expectation of future depreciation 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
According to the expectations theory of term structure, if next year’s short-term interest
rate is expected to be above the current short-term rate, the
A) current long-term rate will be equal to the current short-term rate.
B) current long-term rate will be below the current short-term rate.
C) current long-term rate will be above the current short-term rate.
D) yield curve will have a negative slope.
Funding for the operations of the Board of Governors of the Federal Reserve is derived
from
A) taxes collected from commercial banks.
B) the governments of the states in which the district banks operate.
C) appropriations from the United States Congress.
D) earnings of the Federal Reserve district banks.
In the Keynesian model, an increase in government spending increases
A) the money supply by an equal amount.
B) the money supply by a multiple amount.
C) aggregate demand by an equal amount.
D) aggregate demand by a multiple amount.
When the Federal Reserve float __________, bank reserves __________.
A) rises; fall
B) rises; rise
C) rise; are unchanged
D) rise; change unpredictably
Which of the following is NOT a practice that prevents risk-shifting by a borrower?
A) limited-liability ownership
B) placing liens on collateral
C) personal guarantees
D) restrictive covenants
A commercial bank’s reserves consist of
A) capital and U.S. Treasury securities.
B) vault cash and U.S. Treasury securities.
C) vault cash and deposits with the Federal Reserve.
D) deposits with the Federal Reserve and U.S. Treasury securities.
In the Classical system, the total output of goods and services and total employment are
determined by all of the following except
A) the interest rate.
B) the labor force.
C) the supply of capital.
D) existing technology.
Assume that the M1 multiplier is 2.5. If the Federal Reserve purchases $200 worth of
government securities, the money supply will
A) rise by $200.
B) rise by $500.
C) fall by $200.
D) fall by $500.
A deficit in our balance of payments causes the dollar to __________, which causes the
deficit to __________.
A) appreciate; increase
B) appreciate; decrease
C) depreciate; increase
D) depreciate; decrease
In 1981, the combined net worth of the entire savings-and-loan industry in the United
States was estimated by economists to be
A) $150 billion.
B) close to zero.
C) -$20 billion.
D) -$150 billion.
When interest rates are relatively high, 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
Life insurance companies are supervised and regulated by the
A) Federal Home Loan Bank Board.
B) Securities and Exchange Commission.
C) states in which they operate.
D) Federal Reserve.
The Federal Reserve is considered by experts to be a government agency that is
A) totally independent from the rest of the federal government.
B) semi-independent from the rest of the federal government.
C) closely tied to Congress.
D) subservient to the interests of large money-center banks.
Commercial paper represents the
A) capital assets of business firms.
B) short-term liabilities of the most creditworthy business firms and finance companies.
C) long-term liabilities of investment banks.
D) short-term liabilities of commercial banks.
If companies decrease investment spending because of lower expected returns on
projects, forecasters should anticipate (everything else the same) that
A) GDP will rise.
B) the money supply will fall.
C) interest rates will fall.
D) saving will increase.
__________ is the narrowest and most traditional definition of money.
A) M1
B) M2
C) M3
D) M4
Private placements avoid
A) restrictive agreements.
B) public disclosure of financial information that is required of securities that are
registered with the SEC.
C) the need for collateral.
D) the primary market.