The primary goal of the European Central Bank is
A) price stability.
B) exchange rate stability.
C) interest rate stability.
D) high employment.
The declining cost of computer technology has made ________ a reality.
A) brick and mortar banking
B) commercial banking
C) virtual banking
D) investment banking
The nonactivists who opposed the recent fiscal stimulus package argue that
A) fiscal stimulus would take too long to work because of long implementation lags.
B) fiscal stimulus might kick in after the economy had already recovered.
C) fiscal stimulus could lead to increased volatility in inflation and economic activity.
D) all of the above.
E) none of the above.
An increase in the expected inflation rate will ________ the ________ for gold,
________ its price, everything else held constant.
A) increase; demand; increasing
B) decrease; demand; decreasing
C) increase; supply; increasing
D) decrease; supply; increasing
Which of the following securities has the lowest interest rate?
A) junk bonds
B) U.S. Treasury bonds
C) investment-grade bonds
D) corporate Baa bonds
U.S. dollar deposits in foreign banks outside the U.S. or in foreign branches of U.S.
banks are called
A) Atlantic dollars.
B) Eurodollars.
C) foreign dollars.
D) outside dollars.
Which of the following policy measures created an Office of Credit Ratings at the SEC
with its own staff and the authority to fine credit-rating agencies and to deregister an
agency if it produces bad 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
From before the financial crisis began in September of 2007 to when the crisis was over
at the end of 2009, the huge expansion in the Fed’s balance sheet and the monetary base
did not result in a large increase in monetary supply because
A) most of it just flowed into holdings of excess reserve.
B) the Fed also increased the required reserve ratio.
C) the Fed also conducted open market sales.
D) the discount loan decreased.
When the financial crisis started in August 2007, inflation was rising and the Fed began
an aggressive easing lowering of the federal funds rate, which indicated that
A) there was an upward movement along the monetary policy curve.
B) there was a downward movement along the monetary policy curve.
C) the monetary policy curve shifted upward.
D) the monetary policy curve shifted downward.
In the Keynesian cross diagram, an increase in autonomous consumer expenditure
causes the aggregate demand function to shift ________ and the equilibrium level of
aggregate output to ________, everything else held constant.
A) up; rise
B) up; fall
C) down; rise
D) down; fall
You have observed that the forecasts of an investment advisor consistently outperform
the other reported forecasts. The efficient markets hypothesis says that future forecasts
by this advisor
A) may or may not be better than the other forecasts. Past performance is no guarantee
of the future.
B) will always be the best of the group.
C) will definitely be worse in the future. What goes up must come down.
D) will be worse in the near future, but improve over time.
Exchange rates are determined in
A) the money market.
B) the foreign exchange market.
C) the stock market.
D) the capital market.
An increase in the domestic interest rate causes the demand for domestic assets to
________ and the domestic currency to ________, everything else held constant.
A) increase; appreciate
B) increase; depreciate
C) decrease; appreciate
D) decrease; depreciate
Collateralized debt is also know as
A) unsecured debt.
B) secured debt.
C) unrestricted debt.
D) promissory debt.
The Fed’s use of the ________ as an operating target in the 1970s resulted in ________
monetary policy.
A) federal funds rate; countercyclical
B) federal funds rate; procyclical
C) M1 money supply; countercyclical
D) M1 money supply; procyclical
An inverted yield curve
A) slopes up.
B) is flat.
C) slopes down.
D) has a U shape.
An autonomous appreciation of the U.S. dollar makes American goods ________
expensive relative to foreign goods which ________ net exports in the U.S.
A) less; decreases
B) less; increases
C) more; decreases
D) more; increases
High-powered money minus reserves equals
A) reserves.
B) currency in circulation.
C) the monetary base.
D) the nonborrowed base.
Which of the following benefits directly from any increase in the corporation’s
profitability?
A) a bond holder
B) a commercial paper holder
C) a shareholder
D) a T-bill holder
When Americans or foreigners expect the return on ________ assets to be high relative
to the return on ________ assets, there is a ________ demand for dollar assets,
everything else held constant.
A) dollar; foreign; constant
B) dollar; foreign; higher
C) foreign; dollar; higher
D) foreign; dollar; constant
A decline in the expected inflation rate causes the demand for money to ________ and
the demand curve to shift to the ________, everything else held constant.
A) decrease; right
B) decrease; left
C) increase; right
D) increase; left
The supply curve for bonds has the usual upward slope, indicating that as the price
________, ceteris paribus, the ________ increases.
A) falls; supply
B) falls; quantity supplied
C) rises; supply
D) rises; quantity supplied
The life insurance industry’s share of total financial intermediary assets fell from 15.3%
at the end of 1970 to 11.5% at the end of 1980 because of
A) poor investment returns in the 1970s.
B) widespread failures of life insurance companies.
C) federal regulations limiting the sale of life insurance.
D) unpredictability of payouts.
Regulations designed to provide information to the marketplace so that investors can
make informed decisions are called
A) disclosure requirements.
B) efficient market requirements.
C) asset restrictions.
D) capital requirements.
In the Keynesian framework, as long as output is ________ the equilibrium level,
unplanned inventory investment will remain ________, firms will continue to raise
production, and output will continue to rise.
A) below; negative
B) above; negative
C) below; positive
D) above; positive
The additional incentive that the purchaser of a Treasury security requires to buy a
long-term security rather than a short-term security is called the
A) risk premium.
B) term premium.
C) tax premium.
D) market premium.
An important source of short-term funds for commercial banks are ________ which can
be resold on the secondary market.
A) negotiable CDs
B) commercial paper
C) mortgage-backed securities
D) municipal bonds
In the Keynesian model of income determination, consumer expenditure includes
spending by
A) consumers on personal computers.
B) businesses on personal computers.
C) governments on personal computers.
D) foreigners on domestic personal computers.
If the required reserve ratio is 10 percent, currency in circulation is $400 billion,
checkable deposits are $1000 billion, and excess reserves total $1 billion, then the
excess reserves-checkable deposit ratio is
A) 0.01.
B) 0.10.
C) 0.001.
D) 0.05.
A monetary expansion ________ stock prices due to a decrease in the ________ and an
increase in the ________, everything else held constant.
A) reduces; future sales price; expected rate of return
B) reduces; current dividend; expected rate of return
C) increases; required rate of return; future sales price
D) increases; required rate of return; dividend growth rate
In one of the earliest studies on the link between interest rates and money demand using
United States data, James Tobin concluded that the demand for money is
A) sensitive to interest rates.
B) not sensitive to interest rates.
C) not sensitive to changes in income.
D) not sensitive to changes in bond values.
If stock prices are expected to climb next year, everything else held constant, the
________ curve for bonds shifts ________ and the interest rate ________.
A) demand; left; rises
B) demand; right; rises
C) demand; left; falls
D) supply; left; rises
By taking the long position on a futures contract of $100,000 at a price of 115 you are
agreeing to ________ a ________ face value security for ________.
A) sell; $100,000; $115,000.
B) sell; $115,000; $100,000.
C) buy; $100,000; $115,000.
D) buy; $115,000; $100,000.
Factors that decrease the demand for bonds include
A) an increase in the volatility of stock prices.
B) a decrease in the expected returns on stocks.
C) a decrease in the inflation rate.
D) a decrease in the riskiness of stocks.