If the price of a futures contract increases, then
(a) the exchange will collect the amount of the increase from the seller of the contract
and transfer it to the account of the buyer of the contract.
(b) the exchange will collect the amount of the increase from the buyer of the contract
and transfer it to the account of the seller of the contract.
(c) the exchange will collect the amount of the increase from both the buyer and the
seller and place it in escrow until the delivery date.
(d) the additional funds will be required from either the buyer or the seller until the
delivery date.
Answer:
Suppose the GDP implicit price deflator was 102.6 in 2001 and 105.0 in 2002.
Therefore, the inflation rate in 2002 would be
(a) 2.3%.
(b) 2.6%.
(c) 5.0%.
(d) 105%.
Answer:
In comparing the yield to maturity on a Treasury bill with the yield on a discount basis
on the same bill, we can say that the yield to maturity
(a) will always be greater than the yield on a discount basis.
(b) will always be less than the yield on a discount basis.
(c) will always be equal to the yield on a discount basis, provided the holding period is
the same as the number of years to maturity.
(d) rises whenever the yield on a discount basis falls.
Answer:
Stanley Fischer has estimated that the annual excess burden in the United States of an
inflation rate of 5% is approximately
(a) $30 million.
(b) $30 billion.
(c) $300 billion.
(d) $3 trillion.
Answer:
Which of the following statements is correct concerning the views of new Keynesians
and new classicals concerning aggregate supply?
(a) New classical economists believe the short-run and long-run aggregate supply
curves are both vertical.
(b) New Keynesian economists believe the short-run and long-run aggregate supply
curves slope upward.
(c) Both new Keynesian and new classical economists believe the aggregate supply
curve is vertical in the long run.
(d) Both new Keynesian and new classical economists believe the aggregate supply
curve slopes upward in the long run.
Answer:
An important private arrangement to deal with bank runs during the pre-Federal
Reserve period was called
(a) the New York Clearing House.
(b) the Federal Funds Market.
(c) Check Clearing, Inc.
(d) the Bank Loan Fund.
Answer:
The United States has a dual banking system in the sense that
(a) the public may deposit money in either commercial banks or savings-and-loan
associations.
(b) banks offer both demand deposits and time deposits to savers.
(c) banks are chartered by the federal government and by state governments.
(d) banks both take in deposits and make loans.
Answer:
Explicit capital controls are
(a) used by most industrialized countries.
(b) an important reason why domestic and foreign assets are not perfect substitutes.
(c) less important than information barriers as an obstacle to the international
diversification of portfolios.
(d) the most important reason why interest rates differ internationally on assets with
similar risk and liquidity characteristics.
Answer:
Which of the following is NOT true of stock markets?
(a) Most of the trading takes place in already issued stock.
(b) Every time a share of a company’s stock changes hands, that company receives a
payment.
(c) The dollar volume of trading is less than the dollar volume of trading on bond
markets.
(d) They help carry out direct finance.
Answer:
If the central bank buys foreign assets,
(a) the domestic monetary base will decline.
(b) domestic short-term interest rates will decline.
(c) the foreign-exchange value of the domestic currency will rise.
(d) its holdings of international reserves will rise.
Answer:
Comparing the range of the one-year returns on stocks to the range of the 20-year
returns over the period from 1926 to 1999 reveals that
(a) the range has been about the same.
(b) the range has been narrower for one-year returns.
(c) the range has been narrower for twenty-year returns.
(d) there has been no consistent relationship between the ranges for one-year returns
and 20-year returns.
Answer:
At a point below the LM curve,
(a) there is an excess supply of money.
(b) there is an excess supply of nonmoney assets.
(c) the real interest rate is above its equilibrium level.
(d) there is an excess supply of goods.
Answer:
The Fed’s difficulties in producing greater monetary control after October 1979 were
attributable to
(a) fluctuations in the economy and in financial markets.
(b) using free reserves as an operating target.
(c) the agreement with the Treasury to peg interest rates.
(d) using nonborrowed reserves as an operating target.
Answer:
At a point above the LM curve
(a) there is an excess demand for money.
(b) there is an excess supply of nonmoney assets.
(c) the real interest rate is above its equilibrium level.
(d) there is an excess demand for goods.
Answer:
The quantity theory of money
(a) included the interest rate, but did not include income as a factor in the demand for
money.
(b) included income, but did not include the interest rate as a factor in the demand for
money.
(c) did not include either income or the interest rate as factors in the demand for money.
(d) included both income and the interest rate as factors in the demand for money.
Answer:
Vesting refers to
(a) the right of the holder of an insurance policy to collect for an insurable event.
(b) the shielding of returns on whole life policies from taxation.
(c) the length of service required of an employee before he or she is eligible for a
pension.
(d) the payments made by an employee into a pension plan.
Answer:
A key assumption behind the explanation of exchange rate determination in the short
run is
(a) trade barriers are unimportant in the short run.
(b) changes in price levels are unimportant in the short run.
(c) exchange rates represent prices of financial assets in one currency relative to prices
of similar financial assets in another currency.
(d) trade barriers and changes in price levels are unimportant in the short run.
Answer:
Hedgers are primarily interested in
(a) betting on anticipated changes in prices.
(b) reducing their exposure to the risk of price fluctuations.
(c) increasing market liquidity.
(d) reducing the spread between bid and ask prices on bonds.
Answer:
If the quantity of money is $1 trillion and real GDP is $4 trillion, velocity is
(a) 0.25.
(b) 4.
(c) $4 trillion.
(d) not computable unless the value of the price level is given.
Answer:
Which of the following assigns widely-followed bond ratings?
(a) Standard & Poor’s Corporation
(b) Securities and Exchange Commission
(c) Federal Reserve
(d) IBM
Answer:
Negotiable certificates of deposit were developed in order to
(a) compete for loan business that had been going to the commercial paper market.
(b) circumvent interest rate regulations on deposits.
(c) increase assets that were acceptable as collateral for discount loans.
(d) circumvent reserve requirements.
Answer:
In what country were the ten largest banks in the world located during the 1980s and
early 1990s?
(a) United States
(b) Japan
(c) Germany
(d) Canada
Answer:
The Treasury’s account at the Fed is known as
(a) the Tax and Loan Account.
(b) the General Account.
(c) the Disbursement Account.
(d) the Big Account.
Answer:
The default risk premium
(a) brings the expected yield on a security into equality with the expected yield on a
default-free security.
(b) compensates risk-neutral investors for increased variability in yields.
(c) required by risk-neutral investors is always greater than that required by risk-averse
investors.
(d) is always zero for risk-neutral investors.
Answer:
What is the most liquid market in the world?
(a) The market for gold
(b) The market for U.S. Treasury bonds
(c) The market for Japanese government bonds
(d) The market for U.S. corporate bonds
Answer:
The Fed’s largest liability is
(a) currency outstanding.
(b) securities.
(c) reserve accounts of member banks.
(d) U.S. Treasury deposits.
Answer:
Which of the following countries experienced hyperinflation during the 1920s?
(a) The United States
(b) Canada
(c) Germany
(d) England
Answer:
Forward transactions
(a) allow savers and borrowers to conduct a transaction now and settle in the future.
(b) allow savers and borrowers to postpone a transaction from now to the future.
(c) always involve increased risk compared with spot transactions.
(d) may not be conducted on organized exchanges.
Answer:
“Sallie Mae” was established to encourage lending to
(a) individual home buyers.
(b) students.
(c) large corporations.
(d) farmers.
Answer:
The theory of portfolio allocation describes
(a) why savers behave as they do when selecting one asset rather than another.
(b) the relationship among interest rates on bonds of different maturities.
(c) why firms sometimes raise funds by issuing equities and sometimes by issuing debt.
(d) the reasons why assets differ in their degree of liquidity.
Answer:
Twenty years ago banks
(a) could make mortgage loans, but could not make loans to businesses
(b) could make loans to businesses, but could not make mortgage loans.
(c) sold most loans to investors.
(d) held most loans until they were paid off.
Answer:
When was the National Banking Period?
(a) 18361863
(b) 18631913
(c) 19131934
(d) 19341990.
Answer:
When an economy relies on specialization,
(a) the economy will generally produce only one product.
(b) the economy will usually be heavily agricultural.
(c) each individual in the economy produces the goods or services for which he or she
has relatively the best ability.
(d) each individual will be assigned by the government to produce that good or service
the government believes the economy should specialize in.
Answer:
Keynes called the willingness of individuals to hold money to pay for unexpected
transactions,
(a) the transactions motive.
(b) the impulse motive.
(c) the speculative motive.
(d) the precautionary motive.
Answer: