“Good news” about an expenditure-related indicator drives bond prices __________
and stock prices __________.
A) up; up
B) up; down
C) down; up
D) down; down
Monetarists differ from Classical economists in that they argue that
A) changes in the money supply affect only the price level in the long run.
B) velocity is not fixed but is predictable.
C) the economy tends to be stable around full employment.
D) the demand for money is a fixed fraction of nominal GDP.
Fiscal policy is most effective when
A) I is very sensitive to r.
B) LP is not very sensitive to r.
C) LP is very sensitive to r.
D) I is not very sensitive to r.
Assume that the Cambridge k = 0.25. If the transactions demand for money is equal to
$20,000, then income is equal to
A) $20,000.
B) $80,000.
C) $10,000.
D) $5,000.
When the owners of a company hire full-time executives to make the day-to-day
decisions, this __________ the __________ problem.
A) alleviates; stockholder-lender
B) alleviates; manager-stockholder
C) exacerbates; stockholder-lender
D) exacerbates; manager-stockholder
Which of the following institutions is not subject to Federal Reserve’s reserve
requirements?
A) A state-chartered commercial bank
B) A savings and loan association
C) A money market mutual fund
D) A credit union
Monetarists believe that the type of monetary policy that would lead to greater
economic stability is
A) a money supply rule.
B) a constant money supply.
C) a counter-cyclical monetary policy.
D) a pro-cyclical monetary policy.
An efficient financial system
A) must disseminate information to lenders about the quality of financial claims issued.
B) provides minimal information about financial markets.
C) provides perfect information regarding investment opportunities to savers.
D) does not provide any information to borrowers.
In 2002, __________ had the largest dollar value of mergers and acquisitions.
A) the United States
B) the United Kingdom
C) Germany
D) Japan
In the standard consumption function of C = a + bY, the MPC is
A) Y.
B) bY.
C) a.
D) b.
A 91-day $10,000 Treasury bill is selling for $9,000. The bill’s coupon equivalent yield
is __________ percent.
A) 3.96
B) 4.46
C) 8.02
D) 10.0
Currencies of different countries are traded in the so-called
A) money market.
B) foreign exchange market.
C) capital account.
D) current account.
If the required reserve ratio is .25, demand deposits are $400 million, and total reserves
are $150 million, then excess reserves are
A) $25 million.
B) $50 million.
C) $75 million.
D) $125 million.
An insurance company economist would
A) forecast interest rates.
B) talk only to their direct superiors, but not to the institution’s corporate customers.
C) not be concerned about the costs and benefits of some internal investment project.
D) have little use for statistical analysis.
In Germany, banks __________ shares in the large firms they lend to, which
__________ lender-stockholder conflict.
A) are not allowed to own; is their way of minimizing
B) are not allowed to own; gives rise to
C) own a considerable bloc of; is their way of minimizing
D) own a considerable bloc of; gives rise to
Voting members of the Federal Open Market Committee are
A) the Board of Governors, the presidents of five Federal Reserve Banks, and the
Comptroller of the Currency.
B) the Board of Governors and presidents of five Federal Reserve Banks.
C) the Board of Governors and all twelve Federal Reserve Bank presidents.
D) the Board of Governors, all twelve Federal Reserve Bank presidents, and the
Secretary of the Treasury.
As part of the “wealth channel of monetary policy,” a lower money supply __________
interest rates and thus __________ bond prices.
A) raises; raises
B) raises; lowers
C) lowers; raises
D) lowers; lowers
It is __________ in the United States for a bank to require a business owner to put up
some of his personal assets as “__________” collateral for a loan to his business.
A) legal; inside
B) legal; outside
C) illegal; inside
D) illegal; outside
The Cambridge k is all of the following except
A) the reciprocal of the income velocity of money.
B) a transactions demand for money.
C) the fraction of GDP that people wish to hold in the form of money balances.
D) the velocity of money.
A bank’s net interest income is roughly analogous to a manufacturing firm’s
A) total reserves.
B) gross profit.
C) total cost.
D) gross interest income.