The Phillips curve, modified with the addition of expected inflation into the analysis, is
known as
a. the expectations-augmented Phillips curve.
b. the long-run Phillips curve.
c. the inflation-surprise theory.
d. the Phillips-curve non-accelerating inflation theory of unemployment.
Answer:
A state bank that is a member of the Federal Reserve System and is not in a financial
holding company or a bank holding company is mainly supervised by the
a. Federal Deposit Insurance Corporation.
b. Federal Reserve.
c. Office of the Comptroller of the Currency.
d. National Credit Union Administration.
Answer:
A rise in the price level, everything else remaining unchanged, causes short-run
aggregate supply to
a. decline.
b. not change.
c. increase.
d. rise at first, then decline later.
Answer:
If potential output is $22.7 trillion and the output gap is 12.8%, then actual output is
a. 14.2 trillion.
b. 16 trillion.
c. 19.8 trillion.
d. 20.6 trillion.
Answer:
The nominal interest rate in an economy is 5 percent, and there is also a 15 percent
probability of having cash lost or stolen in the economy. Given this information, what is
the cost of going to the ATM for an individual who spends $10 daily and has a total cost
of holding cash = (365/T) + T.Assume that the individual visits the ATM once in every
T days.
a. $1
b. $2
c. $3
d. $4
Answer:
Economists who try to predict recessions find that recessions are
a. easy to predict.
b. difficult to predict.
c. non-existent before the year 2000.
d. non-existent since the year 2000.
Answer:
A money-growth rule that responds to the state of the economy is rule.
a. a lagging
b. a leading
c. a nonactivist
d. an activist
Answer:
In the two-period model, suppose a household’s income in the first period is $40,000,
income in the second period is
$50,000, and the real interest rate is 25 percent. What is the maximum amount that the
household would be able to spend in the first period?
a. $40,000
b. $50,000
c. $80,000
d. $100,000
Answer:
Which of the following is a disadvantage of inflation targeting?
a. It reduces the flexibility of the central bank.
b. It makes the goals of the central bank explicit.
c. It leads to the problem of time inconsistency.
d. It raises the expected inflation rate.
Answer:
A charter is a bank’s application for
a. investing in non-bank activities.
b. going into business.
c. making a loan to a corporation.
d. opening up a new branch.
Answer:
A bank’s reserves equal its
a. government securities.
b. transactions deposits.
c. vault cash plus deposits at the Federal Reserve.
d. cash assets plus government securities.
Answer:
Which of the following bonds is likely to have the highest term premium?
a. A one-year bond
b. A five-year bond
c. A ten-year bond
d. A thirty-year bond
Answer:
The arbitrage-pricing theory was developed as an alternative to the
a. the efficient market hypothesis.
b. the random walk theory.
c. capital asset pricing model.
d. rational expectations theory.
Answer:
Suppose a bank earned $12 million in interest on its assets of $157 million, it paid out
$8 million in interest on its liabilities (excluding capital) of $172 million, and it paid its
workers $3 million in total compensation. The bank’s profit equals
a. $12 million.
b. $8 million.
c. $3 million.
d. $1 million.
Answer:
The letter E, in the CAMELS rating system, which is used to assess the health of the
banks, represents the _____
for a bank.
a. elasticity of demand.
b. equal opportunity compliance.
c. earnings.
d. elements of risk.
Answer:
Investment spending on physical capital is about of aggregate demand.
a. 1/10
b. 1/6
c. 1/4
d. 1/2
Answer:
Federal Reserve Banks mostly pay for their central banking operations through
a. government tax revenue.
b. interest on the securities they own.
c. fees charged to banks that use their services.
d. dividends paid by local banks.
Answer:
A____ is a loan from the Fed to a small agricultural bank.
a. federal credit discount loan
b. secondary credit discount loan
c. primary credit discount loan
d. seasonal credit discount loan
Answer:
Credit cards are
a. not counted as money because they represent borrowings and not payments.
b. counted as part of M1.
c. the same as stored-value cards.
d. counted as part of M2, but not M1.
Answer:
Your favorite magazine, Fun with Present Value, offers you four different subscription
deals for the next four years. It has guaranteed its current and future subscription rates,
as shown below. Which will you take, if your annual rate of discount is 6 percent and
you want to get the magazine for four years?
a. A one-year subscription for $24, followed by a one-year renewal each year for $24
each year.
b. A two-year subscription for $45, followed by a two-year renewal for $48.
c. A three-year subscription for $72, followed by a one-year renewal for $24.
d. A four-year subscription for $89.
Answer:
Foreign investment is composed of______ investment plus______ investment.
a. inventory; financial
b. portfolio; direct
c. portfolio; indirect
d. inventory; physical capital
Answer:
In a structural VAR, a restriction that describes the impact of the current-period value of
one variable on the current-period value of another variable is known as a______
restriction.
a. contemporaneous
b. long-run
c. short-run
d. structural
Answer:
Another name for commodity money is
a. fiat money.
b. glitter money.
c. full-bodied money.
d. inside money.
Answer:
In the long run, the only economic variable that the Federal Reserve can affect is
a. inflation.
b. output.
c. unemployment.
d. the exchange rate.
Answer:
The interest rate in the market for loans of reserves between banks is the
a. three-month Treasury bill rate.
b. reserve ratio.
c. discount rate.
d. federal funds rate.
Answer:
Aggregate supply tells us
a. the amount of goods and services being purchased in an economy.
b. the amount of goods and services being produced in an economy.
c. the total amount of physical capital in an economy.
d. the total amount of investments in an economy.
Answer:
Which of the following statements correctly identifies an advantage of checking
accounts over cash?
a. Checks are more convenient to use for day to day transactions.
b. Checks are accepted by almost all sellers while cash may not be accepted.
c. Checks are more liquid than cash.
d. Lost or stolen checks cannot be used unless they have the account holder’s signature.
Answer:
The dollar value of a company’s stock rose from $20 to $21 during a year. If the stock
paid a dividend of $3, the return on the stock was____
a. 20 percent
b. 1 percent
c. 3 percent
d. 14 percent
Answer:
Consider two stocks: A and B. The price of stock A is $400, while the price of stock B
is $600. If the fundamental value of both stocks is $500,
a. stock A is overvalued and stock B is undervalued.
b. stock A is undervalued and stock B is overvalued.
c. both stocks are undervalued.
d. both stocks are overvalued.
Answer:
Under the purchase-and-assumption method of handling a bank failure, the FDIC
a. takes over the bank and controls its operations.
b. closes the bank, sells off the assets, pays off insured depositors, and then pays off
creditors of the bank if funds remain.
c. keeps the bank open and lends funds to it so that it is able to continue its operations.
d. finds a buyer for the bank, giving the buyer the good assets of the bank, and assumes
the bad loans of the bank.
Answer:
Currently in the United States, money in checking accounts is
a. commodity money.
b. outside money.
c. inside money.
d. illegal tender.
Answer:
The federal funds rate is the interest rate in the market for
a. mortgage loans.
b. loans of reserves between banks.
c. loans of government securities.
d. federal agency securities.
Answer:
In 1990, exchange rates were: 61 U.S. dollars per U.K. pound and 144 Japanese yen per
U.S. dollar. In 2000, the exchange rates were: 62 U.S. dollars per U.K. pound and 102
Japanese yen per U.S. dollar. Based on the data,
a. the U.S. dollar appreciated versus the U.K. pound and the U.S. dollar depreciated
versus the Japanese yen.
b. the U.S. dollar appreciated versus both the U.K. pound and the Japanese yen.
c. the U.S. dollar depreciated versus the U.K. pound and the U.S. dollar appreciated
versus the Japanese yen.
d. the U.S. dollar depreciated versus both the U.K. pound and the Japanese yen.
Answer:
Gresham’s Law states that
a. the more you make, the more you spend.
b. bad money drives out good money.
c. money supply creates its own demand.
d. money is not a suitable medium of exchange.
Answer:
M2 includes
a. large-denomination time deposits.
b. term repurchase agreements.
c. stockholder’s equity of banks.
d. M1.
Answer: