The yen is considered to be stronger if:
A) it takes fewer yen to acquire a foreign currency such as a dollar
B) it takes more yen to acquire a foreign currency such as a dollar
C) it takes fewer dollars to acquire a yen
D) it takes fewer dollars and fewer euros to acquire a yen
Answer:
A reduction in expected inflation will result in all of the following EXCEPT:
A) lower nominal interest rates
B) lower real interest rates
C) reduced demand for bonds
D) increased supply of bonds
Answer:
Which of the following statements is correct?
A) Federal Reserve district banks are owned by the government.
B) Member banks receive no return on the stock they own in Federal district banks.
C) Federal Reserve district banks pay dividends on their earnings to member banks.
D) The boards of directors of the district banks are all local bankers.
Answer:
All of the following arguments are made against inflation targeting EXCEPT
A) rigid numerical targets would diminish the flexibility of monetary policy.
B) the Fed would need to depend on future forecasts of inflation since monetary policy
acts with a lag.
C) the Fed has little influence on inflation.
D) Holding the Fed accountable for low inflation may make it difficult for elected
officials to monitor whether the Fed is supporting good overall economic policy.
Answer:
If you deposit $300 in your bank and the required reserve ratio is 10%, your bank will
have
A) an increase in required reserves of $300.
B) an increase in required reserves of $270.
C) an increase in required reserves of $3000.
D) an increase in required reserves of $30 and an increase in excess reserves of $270.
Answer:
Which of the following statements is correct?
A) Dynamic open market operations are carried out to offset fluctuations in the
monetary base.
B) Defensive open market operations are carried out to change monetary policy.
C) The volume of defensive open market operations is much greater than the volume of
dynamic open market operations.
D) Defensive open market operations are usually carried out through outright purchases
or sales.
Answer:
The original Federal Reserve Act
A) specified open market operations as the Fed’s main policy tool.
B) specified open market operations as one of several Fed policy tools.
C) specified that open market operations be employed by the Fed only in circumstances
where discount loans were ineffective.
D) did not specifically mention open market operations.
Answer:
What is the name of the pension plan under which employees can make tax-deductible
contributions through regular payroll deductions?
A) 401(k) plans
B) Social Security plans
C) Early retirement plans
D) 486(b) plans
Answer:
Which agency did Congress create in the 1930s to reduce information costs in financial
markets?
A) FDIC
B) SEC
C) Federal Reserve
D) Consumer Financial Protection Agency
Answer:
The main difference between a sterilized intervention and unsterilized intervention in
the foreign exchange market is:
A) a sterilized intervention is coordinated with other nations
B) an unsterilized intervention does not change the exchange rate
C) an unsterilized intervention does not change the monetary base
D) a sterilized intervention does not change the monetary base
Answer:
A depreciating nominal exchange rate results from
A) a depreciating real exchange rate.
B) a low domestic inflation rate relative to the foreign inflation rate.
C) an appreciating real exchange rate.
D) a large government budget deficit.
Answer:
In a matched sale-purchase transaction, the Fed
A) buys securities from a dealer and the dealer agrees to buy them back.
B) sells securities to a dealer and the dealer agrees to sell them back.
C) buys securities from one dealer and sells the same dollar amount of securities to
another dealer.
D) sells securities to one dealer and buys the same dollar amount of securities from
another dealer.
Answer:
Which of the following is NOT a company that collects information on individual
borrowers and sells it to savers?
A) Moody’s Investor Service
B) Value Line
C) NASDAQ
D) Dun and Bradstreet
Answer:
One implication of the efficient markets hypothesis is that investors should
A) concentrate their investments in just a few well-chosen assets.
B) hold a diversified portfolio of assets.
C) buy stocks rather than bonds.
D) buy bonds rather than stocks.
Answer:
An increase in the corporate profits tax is likely to cause
A) the equilibrium interest rate to rise and the equilibrium price of bonds to fall.
B) the equilibrium interest rate to fall and the equilibrium price of bonds to rise.
C) the equilibrium interest rate and the equilibrium price of bonds both rise.
D) the equilibrium interest rate and the equilibrium price of bonds both fall.
Answer:
Which central bank gained the power to set interest rates independent of the
government in the late 1990s?
A) Bank of England
B) Bank of Canada
C) Bank of China
D) Federal Reserve Board
Answer:
Which of the following is NOT a financial asset?
A) a bond issued by Google
B) Wells Fargo Bank
C) a home mortgage loan
D) a certificate of deposit
Answer:
Disintermediation refers to the
A) failure of financial intermediaries due to moral hazard problems.
B) failure of financial intermediaries due to adverse selection problems.
C) movement of savers and borrowers from banks to financial markets.
D) removal of government regulations of financial intermediaries.
Answer:
Required reserves are
A) the portion of demand deposits and NOW accounts banks must hold.
B) zero on demand deposits.
C) zero on NOW accounts.
D) imposed on all deposits at commercial banks.
Answer:
Money can BEST be described as:
A) anything that is generally accepted as payment for goods and services or in the
settlement of debts.
B) paper that can be used to purchase goods and services
C) commodities that have intrinsic value
D) any form of wealth possessed by consumers
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:
An important reason why economies at an early stage of development tend to operate
inefficiently is
A) they tend to be dominated by the agricultural sector, where productivity is usually
low.
B) they tend to have authoritarian governments that stifle innovation.
C) they tend to be plagued by superstitious beliefs that stifle innovation.
D) the high transactions costs associated with barter.
Answer:
Which of the following most accurately describes the behavior of the U.S. economy
during the 2001 recession?
A) Aggregate demand fell as business investment declined while aggregate supply rose
as a result of continued productivity growth.
B) Aggregate demand fell primarily as a result of reduced consumption while aggregate
supply increased due to continued growth in productivity.
C) Aggregate demand fell due to a reduction in business investment while aggregate
supply declined due to a reduction in productivity.
D) Aggregate demand fell due to the bursting of the housing bubble while aggregate
supply fell due to slower productivity growth.
Answer:
Which of the following is NOT a form of a short-term loan in the shadow banking
system?
A) repurchase agreements
B) commercial paper
C) money market mutual fund shares
D) bank deposits
Answer:
A discount bond involves
A) interest payments from the borrower to the lender periodically during the life of the
loan.
B) payment by the borrower to the lender of the face value of the loan at maturity.
C) no payment of principal by the borrower to the lender.
D) payment of interest by the borrower to the lender every six months during the life of
the loan.
Answer:
A bank that expects interest rates to fall will
A) want the duration of its assets to be greater than the duration of its liabilitiesa
positive duration gap.
B) want the duration of its assets to be less than the duration of its liabilitiesa positive
duration gap.
C) want the duration of its assets to be greater than the duration of its liabilitiesa
negative duration gap.
D) want the duration of its assets to be less than the duration of its liabilitiesa negative
duration gap.
Answer:
The difference between a firm’s assets and its liabilities is known as:
A) limited liability
B) stock
C) equity
D) profit
Answer:
The nominal interest rate parity condition states that
A) domestic and foreign assets must have nominal returns that are identical, irrespective
of the characteristics of the assets.
B) when domestic and foreign assets have identical risk, liquidity, and information
characteristics, their nominal returns must also be identical.
C) while nominal returns are equalized across all foreign and domestic assets, real
returns may vary widely.
D) while real returns are equalized across all foreign and domestic assets, nominal
returns may vary widely.
Answer:
Which of the following is the correct expression for short-run aggregate supply in the
new classical view?
A) YP = Y + a(P – )
B) Y = YP+ a(P – )
C) YP = Y + a(P + )
D) Y = YP + a(P + )
Answer:
Individual investors can reduce transactions costs by
A) buying common stock rather than bonds.
B) combining their purchases through an intermediary.
C) common stocks directly, rather than through a mutual fund.
D) making loans directly, rather than depositing funds in a bank.
Answer:
Which of the following is NOT a reason that interest rates remained low despite high
budget deficits following the financial crisis?
A) increased demand for U.S. government bonds
B) the perceived riskiness of alternative investments such as stocks
C) low interest rates on CDs and similar short-term assets
D) increases in expected inflation
Answer:
What do many economists blame for the severity of the Great Depression?
A) The collapse of the banking system.
B) A rapid increase in the money supply.
C) The issuing of an excessively large amount of currency by the Federal Reserve.
D) The collapse of the electronic funds transfer system.
Answer:
An autonomous expenditure is one that does not depend on:
A) government policy
B) the automobile sector
C) interest rates
D) GDP
Answer:
The process in which a cycle of falling asset prices and falling prices of goods and
services can increase the severity of an economic downturn is called:
A) financial crisis
B) bank run
C) sovereign debt crisis
D) debt-deflation process
Answer: