To a bank, demand deposits are a(n)
a. asset
b. capital account
c. liability
d. none of the above
Answer:
It is likely that the inflationary bias in the U.S. economy is in part a product of
a. the McFadden Act
b. the Glass-Steagall Act
c. the Employment Act of 1946
d. the Garn-St. Germain Act
Answer:
When we move along a given aggregate demand curve, which of the following is held
constant?
a. the wealth of private citizens
b. the nation’s price level
c. both of the above
d. neither of the above
Answer:
Our current monetary system may be characterized as a:
a. representative full-bodied monetary system
b. partial gold standard system, partial fiat money system
c. commodity money system
d. fiat money system
Answer:
Monetarist economists believe that much of the economic instability in the U.S. can be
attributed to
a. monetary policy itself
b. income taxes that have been too high
c. a central bank too closely tied to the president
d. all of the above
Answer:
On the commercial bank balance sheet, which of the following is an asset?
a. transactions deposits
b. capital accounts
c. deposits with the Federal Reserve
d. all of the above
Answer:
The largest source of bank deposits is
a. correspondent balances
b. large time deposits
c. passbook savings and small time deposits
d. transactions deposits
Answer:
When cash is deposited into a checking account in a bank, then that bank
a. gains excess reserves on a dollar-for-dollar basis
b. gains required reserves on a dollar-for-dollar basis
c. gains reserves on a fractional basis
d. gains reserves on a dollar-for-dollar basis
Answer:
The principle of adverse selection implies that:
a. borrowers have an incentive to take risks not in the best interest of lenders
b. agents may be better served by investing directly than by investing via financial
intermediaries
c. those most likely to fail in business will be most aggressive in obtaining funds
d. all of the above
Answer:
In the credit view,
a. one need only look at the liability side of the bank balance sheet to predict the impact
of monetary policy
b. securities purchases by banks have less power over economic activity than new bank
loans do
c. securities purchases by banks have a stronger impact on the economy than new bank
loans do
d. none of the above is true
Answer:
Government essentially created the first S&L crisis in the early 1980s because it
a. cracked down on inflation through severe monetary constriction, which boosted
interest rates and contributed to a severe recession
b. created the inflation that led to escalating interest rates
c. earlier mandated that S&Ls specialize in granting fixed-rate mortgages
d. did all of the above
Answer:
Which of the following statements is true?
a. When the money supply rises, interest rates tend to increase.
b. When the money supply rises, adverse selection and moral hazard problems tend to
increase.
c. When the money supply rises, bank loans tend to increase.
d. All of the above are true.
Answer:
When Any Bank grants new loans in the amount of $10,000, this action leads to an
expansion of the money supply by
a. zero
b. $10,000
c. $10,000 times the initial excess reserves in the banking system
d. $10,000 times the reciprocal of the reserve requirement
Answer:
The real after-tax interest rate is always lower than the real pre-tax interest rate as long
as:
a. expected inflation is negative
b. the marginal income tax rate is zero
c. expected inflation is positive
d. the marginal income tax rate is positive
Answer:
In order to restrain economic activity, the Fed could aggressively
a. reduce the discount rate
b. raise reserve requirements
c. buy securities in the open market
d. do all of the above
Answer:
Among central banks, the Federal Reserve System is unique in that it
a. is politically independent of the executive branch
b. consists of several individual banks
c. turns its profits over to the government
d. lends to private banks
Answer:
The term “currency in circulation” refers to
a. Cb + Cp
b. Cb + Fb
c. Cp
d. Cp + Fb
Answer:
The primary source of funds for a commercial bank is
a. checking, savings, and time deposits
b. shares of stock sold to the public
c. commercial paper issued by the bank
d. premiums paid by the bank’s customers
Answer:
The aftermath of a “bubble economy” may include
a. a stock market crash
b. a recession in the economy as a whole
c. a slow decline in stock prices over a long time
d. all of the above
Answer:
The long-run path of a nation’s ____ is primarily determined by the money supply.
a. price level
b. output growth
c. unemployment rate
d. nominal GDP
Answer:
Of the following, the first country to implement an inflation-targeting regime was
a. Japan
b. New Zealand
c. the United States
d. Germany
Answer:
Higher net worth
a. reduces the moral hazard problem by lowering the prospective cost of failure to a
firm
b. reduces the moral hazard problem by raising the prospective cost of failure to a firm
c. aggravates the moral hazard problem by lowering the prospective cost of failure to a
firm
d. does none of the above
Answer:
The Bretton Woods exchange rate system collapsed
a. in the 1960s as a result of political protests concerning U.S. involvement in Vietnam
b. in the 1970s because of developments in the nature of inflation
c. in the 1980s due to the financial havoc prevailing in the U.S.
d. in the 1990s as a result of European Union developments
Answer:
Which of the following is true?
a. Only a few corporations issue commercial paper.
b. Banker’s acceptances typically are priced to sell at face value.
c. Most corporations can borrow in the federal funds market.
d. None of the above is true.
Answer:
In the 1970s, the U.S. price level doubled. In the 1970s, money served which function
very poorly?
a. means of payment
b. standard of value
c. store of value
d. unit of account
Answer:
The Fed portfolio of government and agency securities makes up approximately what
portion of the base?
a. 100 percent
b. 90 percent
c. 50 percent
d. 30 percent
Answer:
The adoption of a single currency by a group of countries is called a
a. currency board
b. customs union
c. free trade area
d. monetary union
Answer:
The collapse of the money supply during 1929-1933 can be attributed principally to
a. the decline in currency held by the public
b. the decline in excess reserves in the banking system
c. the decline in the money supply multiplier
d. the decline in the monetary base
Answer:
Typically, an asset with higher liquidity will have:
a. a lower price
b. a higher yield
c. greater risk
d. none of the above
Answer:
Bank reserves (R) may be written as
a. R = Fb + Cb
b. R = B – Cp
c. both of the above
d. neither of the above
Answer:
During the Great Depression
a. the behavior of the currency ratio triggered the increase in excess reserves
b. the behavior of the currency ratio triggered the decrease in excess reserves
c. the behavior of excess reserves triggered the increase in the currency ratio
d. the behavior of excess reserves triggered the decrease in the currency ratio
Answer: