The members of Federal Reserve district bank boards of directors appointed by the
Board of Governors are known as Class
(a) A directors.
(b) B directors.
(c) C directors.
(d) D directors.
Answer:
Which of the following statements is accurate?
(a) Between the Great Depression and the mid-1970s in the United States commercial
banks prospered, but S&Ls did not.
(b) Between the Great Depression and the mid-1970s in the United States S&Ls
prospered, but commercial banks did not.
(c) Between the Great Depression and the mid-1970s in the United States both
commercial banks and S&Ls prospered.
(d) Between the Great Depression and the mid-1970s in the United States neither
commercial banks nor S&Ls prospered.
Answer:
When market participants use all available information
(a) market prices become signals for financial and economic decisions.
(b) spot prices converge to future prices.
(c) prices of financial assets remain constant over long periods of time.
(d) hedging is no longer necessary.
Answer:
Special Drawing Rights are issued by
(a) the U.S. Treasury.
(b) the Federal Reserve.
(c) the United Nations.
(d) the International Monetary Fund.
Answer:
Which of the following is the correct expression for the nominal market interest rate?
(a) r = i =
(b) i = r =
(c) r = i
(d) i = r
Answer:
During a period of economic expansion, when expected profitability is high
(a) the supply curve for bonds shifts to the left.
(b) the demand curve for loanable funds shifts to the right.
(c) the equilibrium interest rate falls.
(d) the equilibrium price of bonds rises.
Answer:
Mean reversion refers to the tendency for
(a) futures prices to revert to the prices of the underlying securities.
(b) the long-run mean return on stocks to equal the long-run mean return on bonds.
(c) stocks with high returns today to experience low returns in the future and for stocks
with low returns today to experience high returns in the future.
(d) financial analysts whose stock picks have earned above-normal returns in the past to
be unable to pick stocks that will perform as well in the future.
Answer:
Which of the following pieces of advice is an advocate of the bank lending channel
most likely to give to officials in an emerging market economy?
(a) Focus on the development of financial markets because they will be the chief
sources of funds to business.
(b) Make sure that financial institutions are developed along with financial markets.
(c) Keep interest rates low to enable young, growing enterprises to borrow in financial
markets.
(d) Use credit controls to deal with excessive bank lending.
Answer:
A decrease in the willingness or ability of banks to lend has a significant impact on the
economy because
(a) it causes the short-run aggregate supply curve to shift to the left.
(b) it causes the short-run aggregate supply curve to shift to the right.
(c) some borrowers from banks are unable to borrow from nonmoney markets.
(d) bank profits decline and employment in the banking sector contracts.
Answer:
Debt instruments are also called
(a) equities.
(b) credit market instruments.
(c) prospectuses.
(d) units of account.
Answer:
The equation of exchange
(a) holds better for some periods of time in the United States than for other periods of
time.
(b) holds better for certain countries than for other countries.
(c) is an identity and therefore always holds.
(d) has been disproved by modern economic analysis.
Answer:
Treasury currency outstanding
(a) is a liability of the Fed.
(b) is an asset of the Fed.
(c) is not an item on the Fed’s balance sheet.
(d) consists primarily of Federal Reserve notes.
Answer:
In what year did the mutual fund industry in the United States begin?
(a) 1812
(b) 1924
(c) 1974
(d) 1990
Answer:
The most important derivative instruments are
(a) futures and options contracts.
(b) common stocks.
(c) corporate bonds.
(d) government bonds.
Answer:
If a wheat crop turns out to be unusually large,
(a) farmers will likely gain and millers will likely lose.
(b) millers will likely gain and farmers will likely lose.
(c) both farmers and millers will likely lose.
(d) both farmers and millers will likely gain.
Answer:
What is the length of a term for the Chairman of the Board of Governors?
(a) One year
(b) Four years
(c) 14 years
(d) 28 years
Answer:
If you look at the financial page listings for options contracts and find that prices on call
options on Treasury bonds are rising over a particular time period, options market
investors must expect that
(a) Treasury bond prices will be higher in the future.
(b) Treasury bond prices will be lower in the future.
(c) Treasury bond yields will be higher in the future.
(d) call option prices will fall again at the end of the period.
Answer:
The demand for money for transactions is
(a) independent of the price level.
(b) likely to fall during periods of inflation.
(c) proportional to the price level.
(d) constant over long periods of time.
Answer:
Items in the process of collection are generated by
(a) open market operations.
(b) discount loans.
(c) the Fed’s check-clearing role.
(d) spending by the Treasury from its Fed accounts.
Answer:
Under the gold standard, if the demand for U.S. goods increased, which of the
following would happen?
(a) Gold would flow into the United States.
(b) The U.S. monetary base would decline.
(c) Prices in the United States would fall.
(d) The United States would experience a balance of trade deficit.
Answer:
The main reason central banks engage in foreign-exchange interventions is to
(a) stabilize the domestic money supply.
(b) stabilize domestic interest rates.
(c) stabilize foreign interest rates.
(d) stabilize the exchange rate.
Answer:
In 2003, the total value of debt instruments was
(a) roughly equal to the total value of equities.
(b) roughly 1/3 less than the total value of equities.
(c) roughly 1/3 more than the total value of equities.
(d) roughly one-tenth the total value of equities.
Answer:
The theory of portfolio allocation
(a) predicts how savers allocate their assets.
(b) explains the relative liquidity of different assets.
(c) explains the relative riskiness of different assets.
(d) predicts the inflation rate.
Answer:
The existence of cost of living adjustments in many wage contracts
(a) assures that these wages fully adjust to aggregate nominal disturbances.
(b) results in these wages being completely rigid.
(c) does not result in these wages fully adjusting to aggregate nominal disturbances.
(d) is being phased out under recent federal legislation.
Answer:
A checkable deposit that pays no interest is known as a
(a) demand deposit.
(b) certificate of deposit.
(c) NOW account.
(d) time deposit.
Answer:
All of the following are part of Euronext (an integrated European stock exchange)
except
(a) Paris Bourne.
(b) London Exchange.
(c) Amsterdam Exchange.
(d) Brussels Exchange.
Answer:
Diversification refers to the
(a) splitting of wealth into many assets.
(b) difference between the liquidity of an asset and its risk.
(c) difference of converting investments in common stocks into investments in bonds.
(d) difference of selling common stocks in a weak market.
Answer:
If the Japanese yen appreciates against the U.S. dollar,
(a) Japanese businesses gain by a decrease in the dollar price of exports to the United
States.
(b) Japanese consumers gain by a decrease in the yen price of U.S. exports to Japan.
(c) Japanese consumers lose by an increase in the yen price of U.S. exports to Japan.
(d) U.S. consumers gain by an decrease in the dollar price of Japanese exports to the
United States.
Answer:
In an effort to increase government revenue, Congress and the president decide to
increase the corporate profits tax. The likely result will be
(a) the supply curve for bonds shifts to the right.
(b) the demand curve for loanable funds shifts to the left.
(c) the equilibrium interest rate rises.
(d) the equilibrium price of bonds falls.
Answer:
The finding that output declines following the implementation of a contractionary
policy by the Fed indicates that
(a) reverse causation appears to explain the correlation between changes in money and
changes in output.
(b) money is neutral in the short run.
(c) the real business cycle model’s explanation of the correlation between money and
output is incorrect.
(d) money is neutral in the long run.
Answer:
What are federally chartered banks called?
(a) Federal banks
(b) Federal Reserve banks
(c) National banks
(d) Central banks
Answer:
Fiat money
(a) is money that would have no value if it were not usable as money.
(b) is illegal in most advanced, industrial countries.
(c) is usually some type of precious metal.
(d) will generally be accepted in trade for less than its face value.
Answer:
In order to convert the equation of exchange into a theory of money demand, we need
to rewrite it as
(a) V = PY/M.
(b) M/P = (1/V)Y.
(c) M = PY/V.
(d) P/M = V/Y.
Answer:
When did the Fed first begin to use open market operations as a policy tool?
(a) The 1920s
(b) The 1930s
(c) The 1960s
(d) The 1980s
Answer: