The fluctuations in the growth rate of M1 during 19791982
(a) were substantial, as a result of the stabilizing of the federal funds rate.
(b) were substantial, but below those experienced under Burns and Miller.
(c) were substantial and were greater than those experienced under Burns and Miller.
(d) were very small compared to experience before and since.
Answer:
Why did seats on the major exchanges decline in value in the late 1990s?
(a) The decline in stock prices
(b) The rise in interest rates
(c) Competition from electronic trading
(d) Increased government regulation
Answer:
Federal Reserve districts
(a) conform to state boundaries.
(b) group together economically similar states.
(c) have equal populations.
(d) cut across state and economic boundaries.
Answer:
If the quantity of money is $4 trillion and nominal GDP is $8 trillion, velocity is
(a) 0.5.
(b) 2.
(c) $32 trillion.
(d) not computable unless the value of the price level is given.
Answer:
In April 2003, about how much in securities did the Federal Reserve hold?
(a) $685 million
(b) $685 billion
(c) $6.85 trillion
(d) $750 trillion
Answer:
In the long run the key reason that money is neutral is that
(a) the federal budget is balanced.
(b) prices are flexible.
(c) business cycles have become much milder.
(d) the nominal interest rate must equal the real interest rate.
Answer:
The Humphrey-Hawkins Act of 1978
(a) committed the federal government to promoting full employment, even if it comes
at the expense of a stable price level.
(b) committed the federal government to promoting a stable price level, even if it comes
at the expense of full employment.
(c) committed the federal government to promoting full employment and a stable price
level.
(d) removed the Secretary of the Treasury from the Board of Governors of the Federal
Reserve.
Answer:
If an investment bank underwrites an issue on a “best efforts” basis,
(a) the issuing company receives nothing unless the investment bank sells the complete
issue at the offering price.
(b) the issuing company must pay the investment bank’s fee only if the investment bank
is found to have done its best to market the security issue.
(c) the investment bank makes no guarantee and is required to sell to investors only as
much of the issue as it can.
(d) the investment bank will raise the indicated funds from an issue that is either all
stock or all bonds.
Answer:
During the 1980s the Reagan administration intervened in foreign-exchange markets
(a) when directly required to do so by the International Monetary Fund.
(b) only to raise the foreign-exchange value of the dollar.
(c) only to lower the foreign-exchange value of the dollar.
(d) both to lower and raise the foreign-exchange value of the dollar.
Answer:
The speculative attack on the British pound in 1967 succeeded because
(a) the pound was seriously undervalued relative to the dollar.
(b) Britain decided to drop out of the Bretton Woods system.
(c) British exports greatly exceeded British imports, causing a large inflow of gold.
(d) the Bank of England lacked the international reserves to defend the existing
exchange rate indefinitely.
Answer:
An increase in the money supply will tend to raise stock prices and
(a) reduce spending by consumers as they attempt to save in order to have the funds to
buy more stock.
(b) increase spending by consumers as their wealth increases.
(c) decrease spending by firms as they cut back on buying new plant and equipment.
(d) decrease spending by firms as they cut back on inventory holdings.
Answer:
The Polish experience indicates that
(a) the aggregate supply curve is vertical, even in the short run.
(b) changes in the expected price level do not affect aggregate supply.
(c) the transition from a centrally planned to a market economy can result in an upward
shift in the short-run aggregate supply curve.
(d) increases in the factor productivity will shift the long-run aggregate supply curve to
the left.
Answer:
During the late 1970s, households, businesses, and policymakers shifted to the opinion
that
(a) higher inflation was acceptable provided it resulted in higher employment.
(b) higher inflation was acceptable provided it resulted in higher output.
(c) reducing inflation was necessary even if it resulted in lower levels of employment
and output.
(d) a reduction in inflation should take place provided it did not result in disinflation.
Answer:
Fed officials have argued that deregulation and financial innovation during the 1980s
(a) have led to higher inflation.
(b) have led to an increase in the volatility of interest rates.
(c) have made M1 less relevant as a measure of the medium of exchange.
(d) have made using free reserves as an operating target more desirable.
Answer:
All else being equal, increases in firms’ net worth result in
(a) increases adverse selection problems.
(b) increases moral hazard problems.
(c) increases in capital investment spending.
(d) a greater gap between the cost of internal and external financing.
Answer:
If you have a checking account at First National Bank, the account is
(a) an asset to both you and First National.
(b) a liability to both you and First National.
(c) an asset to First National and a liability to you.
(d) an asset to you and a liability to First National.
Answer:
The terms of futures contracts traded in the United States
(a) are standardized as to amount or value, but not as to location and time of delivery.
(b) are standardized as to location or time of delivery, but not as to amount or value.
(c) are not standardized, but are determined entirely on the basis of the agreement
entered into by the buyer and seller.
(d) are standardized as to amount or value and as to location or time of delivery.
Answer:
The current yield is
(a) always equal to the yield to maturity on a coupon bond.
(b) always equal to the coupon rate on a coupon bond.
(c) roughly equal to the yield to maturity on very long-term bonds.
(d) roughly equal to the yield to maturity on a short-term bond.
Answer:
A risk-loving saver will
(a) prefer Choice 1 to Choice 2.
(b) prefer Choice 2 to Choice 1.
(c) be indifferent between Choice 1 and Choice 2.
(d) Not enough information has been provided to be certain of the saver’s decision.
Answer:
If U.S. consumers increase their demand for Canadian goods,
(a) they are willing to pay more U.S. dollars per Canadian dollar.
(b) they are willing to pay fewer U.S. dollars per Canadian dollar.
(c) the U.S. dollar appreciates.
(d) the U.S. dollar price of Canadian goods in the United States rises, but the U.S.
dollar-Canadian dollar exchange rate is unaffected.
Answer:
The M2 aggregate
(a) includes M1 plus short-term investment accounts.
(b) includes M1 plus large-denomination time deposits.
(c) equals currency plus checking account deposits at commercial banks.
(d) is the best definition of definitive money.
Answer:
Which of the following is NOT a Federal Reserve asset?
(a) The Fed’s holdings of foreign exchange
(b) The Federal Reserve building in Washington, D.C.
(c) Shares of stock purchased in the Federal Reserve system by member banks
(d) The computer systems used in the Federal Reserve district banks
Answer:
According to the real business cycle model, changes in the money supply will affect
economic activity
(a) in neither the short run nor the long run.
(b) in the short run but not the long run.
(c) in the long run but not the short run.
(d) in both the short run and the long run.
Answer:
The loss of business to the commercial paper market that banks have suffered has been
particularly damaging because
(a) most of the lost business was from foreign borrowers.
(b) most of the lost business was from low-quality borrowers.
(c) most of the lost business was from high-quality borrowers.
(d) most of the lost business was from local municipalities.
Answer:
Expansionary shifts of the aggregate demand curve
(a) can originate in either the assets market or the goods market.
(b) can originate in the assets market, but not the goods market.
(c) can originate in the goods market, but not the assets market.
(d) cannot originate in either the assets market or the goods market.
Answer:
In the new Keynesian view a monopolistically competitive firm may fail to increase the
price of its product as demand increases because
(a) if it does so it will lose all of its customers.
(b) the cost to it of changing prices may exceed the benefit of doing so.
(c) prices of monopolistically competitive firms are regulated by the federal
government and may only be changed with permission.
(d) for a monopolistically competitive firm price is below marginal cost.
Answer:
If the preferred habitat theory is correct, a reduction by the Treasury in the supply of
30-year bonds should
(a) lower their price and increase their yield.
(b) increase their price and lower their yield.
(c) lower both their price and their yield.
(d) increase both their price and their yield.
Answer:
Movements in the money supply are associated with
(a) changes in interest rates and inflation, but not with changes in output.
(b) changes in inflation and output, but not with changes in interest rates.
(c) changes in interest rates and output, but not with changes in inflation.
(d) changes in interest rates, inflation, and output.
Answer:
During an economic expansion
(a) excess reserves will fall, discount loans will rise, and free reserves will rise.
(b) excess reserves will rise, discount loans will rise, and free reserves will rise.
(c) excess reserves will fall, discount loans will rise, and free reserves will fall.
(d) excess reserves will fall, discount loans will fall, and free reserves will rise.
Answer:
In 2003 the assets of money market mutual funds were approximately
(a) $1 billion.
(b) $227 billion.
(c) $575 billion.
(d) $2156 billion.
Answer:
Credit controls are
(a) actions by banks to deny loans to risky borrowers.
(b) attempts by the Fed to control credit by manipulating the money supply.
(c) regulatory restrictions on bank lending.
(d) attempts by credit card issuers to screen out bad credit risks.
Answer:
The credit crunch at the beginning of the 19901991 recession is attributable to
(a) banks’ concern about the strength of borrowers’ balance sheets.
(b) the imposition of credit controls by the federal government.
(c) disintermediation brought about by rising interest rates.
(d) a shift by depositors from bank deposits to other investments.
Answer: