In the United States, monetary policy is carried out by
(a) the Federal Reserve System.
(b) Congress.
(c) the President.
(d) Congress and the President acting together.
Answer:
At the time monetary union in Europe began in 1999, which of the following countries
declined to participate?
(a) France
(b) Sweden
(c) Italy
(d) Germany
Answer:
The typical Eurodollar loan
(a) matures in less than one year.
(b) matures in five to ten years.
(c) is for a smaller amount than the typical commercial loan made in the United States.
(d) has its principal and interest guaranteed by IMF.
Answer:
Which of the following factors contributed to the problems that banks began to face
during the 1960s and 1970s?
(a) Very low interest rates
(b) Very low inflation rates
(c) Banking regulations enacted during the 1930s
(d) Prolonged periods of recession
Answer:
In comparing the views of economists on stabilization policy in the 1960s with the
views of economists on stabilization policy in the 1990s, one can say
(a) few economists in the 1960s favored stabilization policy, while most economists in
the 1990s favored stabilization policy.
(b) economists’ views on stabilization policy have changed very little since the 1960s.
(c) fewer economists in the 1990s than in the 1960s believed it is possible to use
stabilization policy to fine-tune the economy.
(d) almost no economists in the 1990s believe stabilization policy should be used.
Answer:
An increase in the real interest rate will
(a) increase investment demand.
(b) decrease the cost of funds for investment.
(c) cause businesses to divert funds from investment to the purchase of financial assets.
(d) reduce the federal budget deficit.
Answer:
By in the mid and late 1990s Japanese banks were experiencing difficulties in which
areas?
(a) Real estate lending and poor management
(b) Overly strict government regulation
(c) High inflation
(d) High taxes
Answer:
According to the real business cycle model,
(a) prices are flexible in the long run, but not in the short run.
(b) prices are flexible in the short run, but not in the long run.
(c) prices are flexible in both the short run and the long run.
(d) prices are inflexible in both the short run and the long run.
Answer:
The Open Market Trading Desk is
(a) another name for the Federal Open Market Committee.
(b) an organization of private traders in government securities.
(c) the area on the floor of the New York Stock Exchange set aside for bond trading.
(d) a group of bond traders at the Federal Reserve Bank of New York.
Answer:
To deal with difficulties in administering pension funds, Congress in 1974 passed the
(a) Corrupt Pension Fund Reform Act.
(b) Securities and Exchange Act.
(c) Employee Retirement Income Security Act.
(d) Social Security Act.
Answer:
The leading federal regulatory body for financial markets in the United States is the
(a) Federal Bureau of Investigation.
(b) Securities and Exchange Commission.
(c) Federal Financial Market Bureau.
(d) Investors Protection Agency.
Answer:
Federal deposit insurance for credit unions is provided by the
(a) Office of Thrift Supervision.
(b) FDIC.
(c) National Credit Union Share Insurance Fund.
(d) Federal Reserve System.
Answer:
When a bond is listed as having two maturity dates,
(a) the bond is callable and may be redeemed by the issuer on the first maturity date.
(b) half of the par value of the bond will be paid on the first date and the other half on
the second date.
(c) interest payments on the bond begin on the first date and end on the second date.
(d) the purchaser may insist on being paid the par value of the bond on the first maturity
date.
Answer:
Which of the following statements concerning federal deposit insurance is NOT true?
(a) The FDIC, in effect, insures all deposits in large banks.
(b) Regulators have been reluctant to impose a coinsurance requirement on deposit
insurance.
(c) Regulators have been reluctant to reduce the dollar value of deposits that can be
insured.
(d) The FDIC seems likely to do away with the too-big-to-fail doctrine.
Answer:
An increase in the volume of discount loans
(a) increases the monetary base but decreases the money supply.
(b) decreases the monetary base but increases the money supply.
(c) increases both the monetary base and the money supply.
(d) decreases both the monetary base and the money supply.
Answer:
Congress established the FOMC because
(a) a group was needed to set reserve requirements for member banks.
(b) of a lack of coordination among district banks in carrying out open market
operations.
(c) Congress was attempting to expand its influence within the Federal Reserve System.
(d) a group was needed to coordinate the setting of discount rates by the district banks.
Answer:
Wealth is
(a) the sum of the value of assets.
(b) equal to income.
(c) a flow variable.
(d) the sum of the value of assets minus value of liabilities.
Answer:
Suppose that when your wealth increases from $1 million to $2 million, your holdings
of U.S. savings bonds increases from $100,000 to $175,000. Your wealth elasticity of
demand for savings bonds then is
(a) less than 1 and savings bonds are a necessity asset.
(b) greater than 1 and savings bonds are a necessity asset.
(c) less than 1 and savings bonds are a luxury asset.
(d) greater than 1 and savings bonds are a luxury asset.
Answer:
During the mid-to-late 1930s
(a) the Fed cut reserve requirements in order to stimulate the economy.
(b) banks accumulated substantial excess reserves.
(c) the Fed successfully reduced bank holdings of excess reserves by raising required
reserve ratios.
(d) the economy grew rapidly despite large increases in bank holdings of excess
reserves and increases in required reserve ratios.
Answer:
Risk-neutral savers care
(a) only about expected returns and not about the variability of those returns.
(b) only about the variability of returns and not about their expected value.
(c) about both expected returns and the variability of those returns.
(d) about neither expected returns nor about the variability of those returns.
Answer:
A one-year discount bond with a par value of $1000 sold today, at issuance, for $943
has a yield to maturity of
(a) 4.30%
(b) 5.70%
(c) 6.04%
(d) 9.43%
Answer:
Suppose Acme Widget issues a discount bond with a face value of $10,000 payable in
one year with an interest rate of 5%. How much will Acme receive for the bond?
(a) $9500
(b) $9524
(c) $15,000
(d) $10,500
Answer:
If the orange crop turns out to be unusually small,
(a) orange growers will likely gain and orange juice sellers will likely lose.
(b) orange growers will likely lose and orange juice sellers will likely gain.
(c) both orange growers and orange juice sellers will likely lose.
(d) both orange growers and orange juice sellers will likely gain.
Answer:
The Fed controls intermediate target variables only indirectly mainly because
(a) they are also subject to influence by other parts of the federal government.
(b) private-sector decisions also influence these variables.
(c) of information lags.
(d) of impact lags.
Answer:
The coupon rate is the
(a) yearly coupon payment divided by the face value of the bond.
(b) yearly coupon payment divided by the market value of the bond.
(c) difference between the face value of the bond and its par value.
(d) difference between the face value of the bond and its market value.
Answer:
Where do the FDIC’s funds come from?
(a) Congress appropriates money for the FDIC, just as it does for other federal agencies.
(b) The FDIC earns income through the insurance premiums paid by insured banks and
from investment earnings.
(c) The FDIC sells bonds in the financial markets.
(d) The FDIC relies on voluntary contributions from the banking community.
Answer:
The intersection of the IS curve and the FE line
(a) represents money market equilibrium.
(b) determines the equilibrium level of current output and the equilibrium inflation rate.
(c) represents goods market equilibrium.
(d) determines the equilibrium real interest rate and the equilibrium inflation rate.
Answer:
When economists refer to the role of money as a medium of exchange, they mean that
(a) worn out currency is easily exchanged at a bank.
(b) currency may be exchanged for gold at offices of the U.S. Treasury.
(c) money is of medium importance in explaining the workings of the economy.
(d) money is a generally accepted means of payment for settlement of trade in goods
and services.
Answer:
As a result of higher expected inflation,
(a) the demand and supply curves for loanable funds both shift to the right and the
equilibrium interest rate usually rises.
(b) the demand and supply curves for loanable funds both shift to the left and the
equilibrium interest rate usually falls.
(c) the demand curve for loanable funds shifts to the right, the supply curve for loanable
funds shifts to the left, and the equilibrium interest rate usually rises.
(d) the demand curve for loanable funds shifts to the left, the supply curve for loanable
funds shifts to the right, and the equilibrium interest rate usually rises.
Answer:
Which of the following statements is true?
(a) While the financial system creates financial assets, it plays no role in increasing
their liquidity.
(b) While financial assets are not created by the financial system, the financial system
provides ways of increasing their liquidity.
(c) The financial system has little to do with either creating or increasing the liquidity of
financial assets.
(d) The financial system both creates financial assets and provides ways of increasing
their liquidity.
Answer:
When was the common European currency introduced?
(a) 1914
(b) 1945
(c) 1970
(d) 1999
Answer:
How many Federal Reserve districts are there?
(a) 1
(b) 2
(c) 12
(d) 50
Answer: