__________ the required reserve ratio will __________ the potential for multiple
expansion.
A) Raising; increase
B) Lowering; decrease
C) Raising; decrease
D) None of the above.
If inflation becomes a serious problem, a Monetarist-oriented President is likely to
favor a policy emphasizing
A) slower monetary growth.
B) lower interest rates.
C) higher taxes.
D) wage and price controls.
An increase in shipments of currency from the Federal Reserve to commercial banks
will
A) increase the money supply.
B) increase bank reserves.
C) reduce bank reserves.
D) have no effect on bank reserves.
The Federal Reserve often begins to tighten monetary policy after a trough in the
business cycle because of
A) the impact lag.
B) the recognition lag.
C) bureaucratic indecision.
D) the time necessary to get Congress to act.
A lower price level causes us to
A) move up along the aggregate demand curve.
B) move down along the aggregate demand curve.
C) shift the aggregate demand curve to the right.
D) shift the aggregate demand curve to the left.
The country of Zamula is currently experiencing conditions of full employment and
capacity output. Which of the following is incorrect?
A) Increases in the money supply by the central bank of Zamula become more and
more likely to generate rising prices.
B) Real economic growth in Zamula is likely to increase.
C) Inflation will result in Zamula if the increase in the money supply is exactly large
enough to provide funds for the enlarged volume of transactions.
D) All of the above are true.
The greater the marginal propensity to consume, the
A) flatter the IS curve will be.
B) steeper the IS curve will be.
C) flatter the LM curve will be.
D) steeper the LM curve will be.
That segment of the market for securities which have original maturities of more than
one year is called the
A) stock market.
B) derivative securities market.
C) money market.
D) capital market.
Modern Monetarists argue that the velocity of money is
A) constant.
B) the inverse of the money multiplier.
C) unmeasurable.
D) predictable.
The smaller the typical depositor at a financial institution, the __________ likely that
some of the institution’s deposits are federally insured and thus the __________ heavily
that institution tends to be regulated.
A) less; less
B) less; more
C) more; less
D) more; more
By convention, commercial paper issuers are divided into
A) individuals and corporations.
B) private institutions and government institutions.
C) large businesses and small businesses.
D) financial companies and nonfinancial companies.
Your business’ success is most likely to be affected by Federal Reserve policy if it is in
the
A) defense industry.
B) health services industry.
C) restaurant industry.
D) residential construction industry.
The supply of and demand for bank reserves determines the
A) Treasury bill rate.
B) prime rate.
C) discount rate.
D) federal funds rate.
Bank reserves are increased by
A) Treasury currency outstanding.
B) Treasury cash holdings.
C) Federal Reserve capital.
D) currency in circulation.
Which of the following positions is included on the Federal Open Market Committee?
A) Comptroller of the Currency
B) Chairman of the Council of Economic Advisors
C) Chairman of the Federal Reserve Board of Governors
D) Secretary of the Treasury
Suppose k = 0.25. With a $10 billion decrease in the money supply, the LM curve shifts
A) to the left by $40 billion.
B) to the left by $4 billion.
C) to the left by $2.5 billion.
D) to the right by $0.25 billion.
Which of the following is not a major institutional investor in the stock market?
A) Mutual funds
B) Pension funds
C) Insurance companies
D) Commercial banks
Conventional wisdom holds that there are __________ in banking.
A) economies of scope but not scale
B) economies of scale but not scope
C) economies of both scope and scale
D) neither scope nor scale economies
Members of the Board of Governors serve
A) fourteen year terms.
B) four-year terms.
C) at the discretion of the Federal Reserve Chairman.
D) at the discretion of the President of the United States.
The textbook defines a “large” business as having assets in excess of
A) $50 million.
B) $150 million.
C) $500 million.
D) $1 billion.
In the Cambridge version of the Quantity Theory of Money, the amount of real money
balances __________ after an increase in the nominal money supply.
A) increases
B) decreases
C) is unchanged
D) Cannot be determined from the information given.
In a(n) __________ insurance policy, the savings component pays a money market rate
of interest that changes with market conditions.
A) whole
B) term
C) universal
D) variable
As long as wages and prices are flexible, an anticipated change in the money supply
will lead to an increase in
A) the unemployment rate.
B) industrial production.
C) nominal income.
D) real wages.
A bank’s net interest margin is
A) total interest income minus total interest expense.
B) net interest income as a percent of bank equity.
C) net interest income as a percent of total bank assets.
D) net interest as a percent of total income.