If a central bank does not want to see its currency fall in value, it may pursue ________
monetary policy to ________ the domestic interest rate, thereby strengthening its
currency.
A) expansionary; raise
B) contractionary; raise
C) expansionary; lower
D) contractionary; lower
Which of the following is NOT an example of a backup line of credit?
A) loan commitments
B) overdraft privileges
C) standby letters of credit
D) mortgages
One of the factors that contributed to the success German policymakers had using a
monetary targeting type policy starting in the mid-1970s and continuing through the
next two decades was that
A) they used a rigid target for the money growth rate.
B) they implemented policy so their inflation rate goal was met in the short run.
C) the money target was flexible to allow the Bundesbank to concentrate on other goals
as needed.
D) they rarely communicated the intentions of policy to the public in order to keep the
public from panicking.
Assume you are holding Treasury securities and have sold futures to hedge against
interest-rate risk. If interest rates rise
A) the increase in the value of the securities equals the decrease in the value of the
futures contracts.
B) the decrease in the value of the securities equals the increase in the value of the
futures contracts.
C) both the securities and the futures contracts decrease in value.
D) both the securities and the futures contracts increase in value.
Which of the following are NOT reported as assets on a bank’s balance sheet?
A) cash items in the process of collection
B) deposits with other banks
C) U.S. Treasury securities
D) checkable deposits
Inflationary pressures caused the FOMC to increase the federal funds rate by of a
percentage point in June 2004, and by exactly the same amount at every subsequent
FOMC meeting through June of 2006. Theses actions
A) caused an upward movement along the monetary policy curve.
B) caused a downward movement along the monetary policy curve.
C) shifted the monetary policy curve upward.
D) shifted the monetary policy curve downward.
The development of money market mutual funds contributed to the growth of ________
since the money market mutual funds need to hold liquid, high-quality, short-terms
assets.
A) the commercial paper market
B) the municipal bond market
C) the corporate bond market
D) the junk bond market
By analyzing aggregate demand through its component parts, we can conclude that,
everything else held constant, a decline in the inflation rate causes
A) an increase in real interest rates, an increase in investment spending, and a decline in
aggregate output demand.
B) a decline in real interest rates, a decrease in investment spending, and an increase in
aggregate output demand.
C) a decline in real interest rates, an increase in investment spending, and an increase in
aggregate output demand.
D) an increase in real interest rates, a decline in investment spending, and a decline in
aggregate output demand.
The new Consumer Financial Protection Bureau is an independent agency but is funded
and housed within
A) the Treasury Department.
B) the Federal Reserve.
C) the SEC.
D) the IRS.
If actual output is less than equilibrium output, firms will ________ output to keep from
________ inventories.
A) increase; accumulating
B) increase; depleting
C) decrease; depleting
D) decrease; accumulating
If the banking system has a large amount of reserves, many banks will have excess
reserves to lend and the federal funds rate will probably ________; if the level of
reserves is low, few banks will have excess reserves to lend and the federal funds rate
will probably ________.
A) fall; fall
B) fall; rise
C) rise; fall
D) rise; rise
When the Treasury acquires gold or SDRs, it issues certificates to the ________, which
are a claim on the gold or SDRs, and in turn is credited with deposit balances at the
________.
A) Federal Reserve System; Fed
B) Federal Reserve System; IMF
C) International Monetary Fund; Fed
D) International Monetary Fund; IMF
The aggregate supply curve is the total quantity of
A) raw materials offered for sale at different inflation rates.
B) final goods and services offered for sale at the current inflation rate.
C) final goods and services offered for sale at different inflation rates.
D) intermediate and final goods and service offered for sale at different inflation rates.
An expansionary monetary policy lowers the real interest rate, causing the domestic
currency to ________, thereby ________ net exports.
A) appreciate; raising
B) appreciate; lowering
C) depreciate; raising
D) depreciate; lowering
According to the efficient markets hypothesis, purchasing the reports of financial
analysts
A) is likely to increase one’s returns by an average of 10%.
B) is likely to increase one’s returns by about 3 to 5%.
C) is not likely to be an effective strategy for increasing financial returns.
D) is likely to increase one’s returns by an average of about 2 to 3%.
In the Keynesian cross diagram, an increase in autonomous consumer expenditure
causes the aggregate demand function to shift up, the equilibrium level of aggregate
output to ________, and the IS curve to shift to the ________, everything else held
constant.
A) rise; left
B) rise; right
C) fall; left
D) fall; right
Compared to the United States, Japan’s experience with monetary targeting during the
1978––1987 period performed
A) better with regard to the inflation rate and output fluctuations.
B) worse with regard to the inflation rate and output fluctuations.
C) better with regard to the inflation rate, but worse with regard to output fluctuations.
D) worse with regard to the inflation rate, but better with regard to output fluctuations.
If wealth increases, the demand for stocks ________ and that of long-term bonds
________, everything else held constant.
A) increases; increases
B) increases; decreases
C) decreases; decreases
D) decreases; increases
China chooses to have ________ and ________ and therefore, cannot have free capital
mobility at the same time.
A) a fixed exchange rate; no control of monetary policy
B) a fixed exchange rate; an independent monetary policy
C) a flexible exchange rate; an independent monetary policy
D) a flexible exchange rate; no control of monetary policy
An autonomous monetary policy easing ________ real interest rates and ________
output in the short run, thereby ________ stock prices.
A) raises; lowers; lowering
B) raises; raises; raising
C) lowers; raises; raising
D) lowers; raises; lowering
Which of the following are TRUE for discount bonds?
A) A discount bond is bought at par.
B) The purchaser receives the face value of the bond at the maturity date.
C) U.S. Treasury bonds and notes are examples of discount bonds.
D) The purchaser receives the par value at maturity plus any capital gains.
If the required reserve ratio is 15 percent, the simple deposit multiplier is
A) 15.0.
B) 1.5.
C) 6.67.
D) 3.33.
A case for capital inflow controls can be made because capital inflows
A) can cause a lending boom and lead to excessive risk taking.
B) never finance productive investments.
C) always finance productive investments.
D) are less likely to cause financial crises than regulation of banking activities.
New information that might lead to a decrease in a stock’s price might be
A) an expected decrease in the level of future dividends.
B) a decrease in the required rate of return.
C) an expected increase in the dividend growth rate.
D) an expected increase in the future sales price.
Comparing Tobin’s model of the speculative demand for money with Keynesian
speculative demand
A) both models imply that individuals hold only money or only bonds.
B) the Keynesian model implies individuals diversify their asset holdings, while the
Tobin model predicts that individuals hold only money or only bonds.
C) the Tobin model implies individuals diversify their asset holdings, while the
Keynesian model predicts that individuals hold only money or only bonds.
D) both models imply that individuals diversify their asset holdings.
The spectacular growth in international banking can be explained by
A) the rapid growth in international trade.
B) the 1988 Basel Agreement.
C) the collapse of the Bretton Woods system.
D) the creation of the World Trade Organization.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 included
which of the following provisions to deal with conflicts of interest in the credit-rating
Industry?
1. 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.
2. Forced credit-rating agencies to provide reports to the SEC when their employees go
to work for a company that has been rated by them in the last twelve months.
3. Prohibited compliance officers from being involved in producing or selling credit
ratings.
4. Required the SEC to prevent issuers of asset-backed securities from choosing the
credit-rating agencies that will give them the highest rating and supported earlier
initiatives by the SEC.
5. Authorized investors to bring lawsuits against credit-rating agencies for a reckless
failure to get the facts when providing a credit rating.
A) 1, 2, 3, and 4.
B) 2, 3, 4, and 5.
C) none.
D) 1, 2, 3, 4, and 5.
Which policy measure requires investment banks to sever the links between research
and securities underwriting?
A) Sarbanes-Oxley Act of 2002
B) Global Legal Settlement of 2002
C) Gramm-Leach-Bliley Act of 1999
D) Riegle-Neal Act of 1994
Which of the following is NOT part of the shadow banking system?
A) the transformer
B) the servicer
C) the bundler
D) the distributor
According to the household liquidity effect, an expansionary monetary policy causes a
________ in the value of households’ financial assets, causing consumer durable
expenditure to ________.
A) decline; rise
B) rise; rise
C) rise; fall
D) decline; fall
A credit-driven bubble arises when ________ in lending causes ________ in asset
prices which can cause ________ in lending.
A) a decrease; a decrease; an increase
B) a decrease; an increase; an increase
C) an increase; an increase; a further increase
D) a decrease; a decrease; a further decrease
