1) The portfolio theories of money demand state that the demand for real money
balances is ________ related to income and ________ related to the nominal interest
rate
A) positively; negatively
B) positively; positively
C) negatively; negatively
D) negatively; positively
2) The Phillips curve indicates that when the labor market is ________, production
costs will ________ and aggregate supply increases
A) easy; rise
B) easy; fall
C) tight; fall
D) tight; rise
3) 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) 001
B) 010
C) 0001
D) 005
4) Under the Gramm-Leach-Bliley Act the oversight of the securities activities of bank
holding companies belongs to
A) the SEC
B) the Comptroller of the Currency
C) the US Treasury
D) the Federal Reserve
5) Excessive volatility refers to the fact that
A) stock returns display mean reversion
B) stock prices can be slow to react to new information
C) stock price tend to rise in the month of January
D) stock prices fluctuate more than is justified by dividend fluctuations
6) Which of the following monetary policy tools is more effective when the economy
faces the interest rate zero-lower-bound problem?
A) Open market operation
B) Discount policy
C) Required reserve ratio
D) The Fed’s liquidity provision
7) 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) US Treasury bonds and notes are examples of discount bonds
D) The purchaser receives the par value at maturity plus any capital gains
8) In this type of arrangement, any balances above a certain amount in a corporation’s
checking account at the end of the business day are “removed” and invested in
overnight securities that pay the corporation interest This innovation is referred to as a
A) sweep account
B) share draft account
C) removed-repo account
D) stockman account
9) An $8,000 coupon bond with a $400 coupon payment every year has a coupon rate of
A) 5 percent
B) 8 percent
C) 10 percent
D) 40 percent
10) If a bank needs to raise the amount of capital relative to assets, a bank manager
might choose to
A) buy back bank stock
B) pay higher dividends
C) shrink the size of the bank
D) sell securities the bank owns and put the funds into the reserve account
11) Everything else held constant, a monetary contraction is characterized by ________
output and ________ interest rates
A) rising; rising
B) rising; falling
C) falling; rising
D) falling; falling
12) A reduction in government spending causes the equilibrium level of aggregate
output to ________ at any given interest rate and shifts the ________ curve to the
________, everything else held constant
A) rise; LM; right
B) fall; IS; left
C) fall; LM; left
D) rise; IS; right
13) When Happy Feet Corporation announces that their fourth quarter earnings are up
10%, their stock price falls This is consistent with the efficient markets hypothesis
A) if earnings were not as high as expected
B) if earnings were not as low as expected
C) if a merger is anticipated
D) the company just invented a new bunion product
14) A bank has excess reserves of $6,000 and demand deposit liabilities of $100,000
when the required reserve ratio is 20 percent If the reserve ratio is raised to 25 percent,
the bank’s excess reserves will be
A) -$5,000
B) -$1,000
C) $1,000
D) $5,000
15) If the required reserve ratio is 15 percent, currency in circulation is $400 billion,
checkable deposits are $800 billion, and excess reserves total $08 billion, then the M1
money multiplier is
A) 25
B) 167
C) 23
D) 0651
16) If workers believe that government policymakers will increase aggregate demand to
avoid a politically unpopular increase in unemployment when workers demand higher
wages, then workers will not fear higher unemployment and their wage demands will
result in
A) demand-pull inflation
B) hyperinflation
C) deflation
D) cost-push inflation
17) The government agency that oversees the banking system and is responsible for the
conduct of monetary policy in the United States is
A) the Federal Reserve System
B) the United States Treasury
C) the US Gold Commission
D) the House of Representatives