Which of the following is not responsible for the post-World War II rise in M1 velocity?
A) The relatively wide historical definition of M1
B) The increasing attractiveness of other categories of financial assets
C) Attractive yield on financial assets other than money
D) The lending of money to earn higher interest rates
Assume that nominal GDP is $2 trillion and the money supply is $400 billion. The
velocity of money is __________.
A) $2.4 trillion
B) $1.6 trillion
C) 0.2
D) 5.0
At any point below the current IS curve, there is an
A) excess demand for goods.
B) excess supply of goods.
C) excess demand for money.
D) excess supply of money.
All __________ are required to be insured by the Federal Deposit Insurance
Corporation.
A) commercial banks
B) savings banks
C) national banks
D) state banks that are not members of the Federal Reserve
A call option gives the owner the
A) right to sell the underlying asset at a fixed price.
B) right to buy the underlying asset at a fixed price.
C) obligation to sell the underlying asset at a fixed price.
D) obligation to buy the underlying asset at a fixed price.
A higher price level causes us to
A) move up along an aggregate demand curve.
B) move down along an aggregate demand curve.
C) shift the aggregate demand curve to the right.
D) shift the aggregate demand curve to the left.
When hyperinflation occurs, money becomes a less efficient medium of exchange
because money ceases to be a reliable
A) store of value.
B) unit of account.
C) investment.
D) source of income.
Assume that the M1 multiplier is 3 and the Federal Reserve sells $100 million worth of
government securities. Bank reserves will
A) rise by $100 million.
B) fall by $100 million.
C) fall by $300 million.
D) fall by $33.33 million.
An unexpected rise in the growth rate of the CPI should send bond prices __________
and stock prices __________.
A) up; up
B) up; down
C) down; up
D) down; down
If the price of a Swiss franc is $0.60, the price of a dollar is __________ Swiss francs.
A) 0.40
B) 1.40
C) 1.67
D) 6.0
The equilibrium interest rate will fall if the
A) supply of loanable funds decreases.
B) demand for loanable funds decreases.
C) demand for securities decreases.
D) inflation rate increases.
The Riegel-Neal Act of 1994 made reciprocity pacts
A) legal.
B) illegal.
C) irrelevant.
D) temporary.
The ratio of non-performing loans to total loans is a measure of a bank’s __________
risk.
A) credit
B) leverage
C) interest rate
D) liquidity
If wages do not instantaneously adjust to reflect expected inflation that is based on an
anticipated increase in the money supply,
A) the aggregate demand and positively sloped aggregate supply curve shift to the right
at the same time.
B) the positively sloping aggregate supply curve shifts to the left after the aggregate
demand curve shifts to the right.
C) the positively sloping aggregate supply curve shifts to the left before the aggregate
demand curve shifts to the right.
D) the positively sloping aggregate supply curve does not shift to the right at the same
time as the aggregate demand curve shifts to the left.
A drop in deposit rates, all else constant, __________ a bank’s __________ risk.
A) lowers; credit
B) lowers; interest rate
C) raises; credit
D) raises; interest rate
Pension plans in which employee benefits are set by the plan and the employer
contributions are adjusted to meet those benefits is called a
A) defined benefit plan.
B) defined contribution plan.
C) a fully vested plan.
D) an unfunded plan.
In the Keynesian world a rising real money supply causes GDP to __________ by
__________ the real interest rate which causes a(n) __________ in investment.
A) increase; increasing; increase
B) increase; decreasing; increase
C) decrease; increasing; increase
D) decrease; increasing; decrease