Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
1) Small-denomination time deposits refer to certificates of deposit with a denomination
of less than
A) $1,000
B) $10,000
C) $100,000
D) $1,000,000
2) According to aggregate demand and supply analysis, the rising oil prices coupled
with the global financial crisis in 2007-2008 caused the unemployment rate to
________ and the level of real aggregate output to ________
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
3) Regarding central bank independence,
A) the Fed is more independent than the European Central Bank
B) the European Central Bank is more independent than the Fed
C) the trend in industrialized nations has been to reduce central bank independence
D) the Bank of England has the longest tradition of independence of any central bank in
the world
4) Decisions by depositors to increase their holdings of ________, or of banks to hold
excess reserves will result in a ________ expansion of deposits than the simple model
predicts
A) deposits; smaller
B) deposits; larger
C) currency; smaller
D) currency; larger
5) The reduction of brokerage commissions for trading common stocks that occurred in
1975 caused the demand for bonds to ________ and the demand curve to shift to the
________
A) fall; right
B) fall, left
C) rise; right
D) rise; left
6) ________ in the domestic interest rate causes the demand for domestic assets to shift
to the ________ and the domestic currency to appreciate, everything else held constant
A) An increase; right
B) An increase; left
C) A decrease; right
D) A decrease; left
7) A decrease in the quantity of money supplied shifts the money supply curve to the
________, and the equilibrium interest rate ________, everything else held constant
A) right; falls
B) right; rises
C) left; falls
D) left; rises
8) Velocity is defined as
A) P + M + Y
B) (P M)/Y
C) (Y M)/P
D) (P Y)/M
9) Banks' asset portfolios include state and local government securities because
A) they help to attract business from these government entities
B) banks consider them helpful in attracting accounts of Federal employees
C) the Federal Reserve requires member banks to buy securities from state and local
governments located within their respective Federal Reserve districts
D) there is no default-risk with state and local government securities
10) Everything else held constant, an increase in expected inflation, lowers the expected
return on ________ compared to ________ assets
A) bonds; financial
B) bonds; real
C) physical; financial
D) physical; real
11) One of the criticisms of Basel 2 is that it is procyclical That means that
A) banks may be required to hold more capital during times when capital is short
B) banks may become professional at a cyclical response to economic conditions
C) banks may be required to hold less capital during times when capital is short
D) banks will not be required to hold capital during an expansion
12) Economic theory suggests that ________ interest rates are ________ important than
________ interest rates in explaining investment behavior
A) nominal; more; real
B) real; less; nominal
C) real; more; nominal
D) market; more; real
13) When the interest rate is ________, ________ investments in physical capital will
earn more than the cost of borrowed funds, so planned investment spending is
________
A) high; few; high
B) high; few; low
C) low; few; high
D) low; many; low
E) high; many; high
14) Approaches to establishing central bank credibility include
A) inflation targeting
B) exchange rate targeting
C) central bank independence
D) appointment of a more conservative central banker
E) all of the above
15) Suppose, while cleaning out its closets, a worker at the Federal Reserve bank
branch in Memphis discovers a painting of Elvis (medium: acrylic on velvet) that used
to grace the walls of the conference room Suppose further that, at a public auction, the
bank sells the painting for $1995 This sale will cause ________ in the monetary base,
everything else held constant
A) an increase of $1995
B) an increase of more than $1995
C) a decrease of $1995
D) a decrease of more than $1995
16) If a bank has excess reserves greater than the amount of a deposit outflow, the
outflow will result in equal reductions in
A) deposits and reserves
B) deposits and loans
C) capital and reserves
D) capital and loans
17) The type of monetary policy regime that the Federal Reserve has been following in
recent years can best be described as
A) monetary targeting
B) inflation targeting
C) policy with an implicit nominal anchor
D) exchange-rate targeting
18) Which of the following is not an operating instrument?
A) Nonborrowed reserves
B) Monetary base
C) Federal funds interest rate
D) Discount rate
19) If unplanned investment is positive, firms will ________ production and output will
________
A) cut; rise
B) cut; fall
C) increase; rise
D) increase; fall
