One of the factors that contributed to the success German policymakers had using a
monetary targeting type policy starting in the mid-1970s and continuing through the
next two decades was that
A) they used a rigid target for the money growth rate.
B) they implemented policy so their inflation rate goal was met in the short run.
C) the money target was flexible to allow the Bundesbank to concentrate on other goals
as needed.
D) they rarely communicated the intentions of policy to the public in order to keep the
public from panicking.
Which of the following policy measures prohibited compliance officers from being
involved in producing or selling credit ratings?
A) the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
B) Sarbanes-Oxley Act of 2002
C) Global Legal Settlement of 2002
D) Gramm-Leach-Bliley Act of 1999
E) Riegle-Neal Act of 1994
In the basic closed-economy ISLM model, the goods market equilibrium condition is
A) output = consumption + investment + government spending.
B) output = consumption + investment + government spending – tax.
C) output = consumption + investment + government spending + net export.
D) output = potential output.
In the basic closed-economy ISLM model, as the interest sensitivity of investment
spending increases, fiscal policy has ________ effect on output and monetary policy
has ________ effect on output.
A) less; less
B) more; more
C) more; less
D) less; more
When financial institutions are able to reduce the costs of information for each service
they offer by applying the same information source to each service, we say that the
financial institution is realizing
A) economies of scope.
B) economies of scale.
C) increasing returns.
D) diminishing marginal returns.
A decrease in the liquidity of corporate bonds, other things being equal, shifts the
demand curve for corporate bonds to the ________ and the demand curve for Treasury
bonds shifts to the ________.
A) right; right
B) right; left
C) left; left
D) left; right
Parties who have bought a futures contract and thereby agreed to ________ (take
delivery of) the bonds are said to have taken a ________ position.
A) sell; short
B) buy; short
C) sell; long
D) buy; long
The spread between interest rates on low quality corporate bonds and U.S. government
bonds
A) widened significantly during the Great Depression.
B) narrowed significantly during the Great Depression.
C) narrowed moderately during the Great Depression.
D) did not change during the Great Depression.
The seller of an option has the
A) right to buy or sell the underlying asset.
B) obligation to buy or sell the underlying asset.
C) ability to reduce transaction risk.
D) right to exchange one payment stream for another.
An autonomous monetary policy easing reduces real interest rates and raises aggregate
output ________ and the inflation rate rises ________.
A) temporarily; permanently
B) permanently; temporarily
C) permanently; permanently
D) temporarily; temporarily
If the required reserve ratio is 5 percent, currency in circulation is $400 billion,
checkable deposits are $800 billion, and excess reserves total $0.8 billion, then the M1
money multiplier is
A) 2.5.
B) 2.72.
C) 2.3.
D) 0.551.
When yield curves are flat
A) long-term interest rates are above short-term interest rates.
B) short-term interest rates are above long-term interest rates.
C) short-term interest rates are about the same as long-term interest rates.
D) medium-term interest rates are above both short-term and long-term interest rates.
Assume you are holding Treasury securities and have sold futures to hedge against
interest-rate risk. If interest rates fall
A) the increase in the value of the securities equals the decrease in the value of the
futures contracts.
B) the decrease in the value of the securities equals the increase in the value of the
futures contracts.
C) both the securities and the futures contracts decrease in value.
D) both the securities and the futures contracts increase in value.