Liabilities of commercial banks may be divided into the following categories:
a. demand deposits, time deposits, and borrowings
b. demand deposits, time deposits, and securities
c. demand deposits, time deposits, and loans
d. loans, demand deposits, and other liabilities
Answer:
Keynesians believe that money demand is relatively ____ to interest rate changes and
that the money demand function is relatively ____.
a. insensitive; steep
b. insensitive; flat
c. sensitive; steep
d. sensitive; flat
Answer:
The act which separates commercial and investment banking is known as the
a. Hawley-Smoot Act
b. Glass-Steagall Act
c. Humphrey-Hawkins Act
d. McFadden Act
Answer:
Which of the following is listed on the liabilities side of the Federal Reserve balance
sheet?
a. cash items in the process of collection
b. deposits of the U.S. Treasury
c. U.S. government securities
d. all of the above
Answer:
With respect to fiscal policy, the longest lag of policy is likely to be the
a. impact lag
b. recognition lag
c. implementation lag
d. none of the above
Answer:
Which of the following patterns of term structure occurs most frequently?
a. humped yield curve
b. ascending yield curve
c. descending yield curve
d. flat yield curve
Answer:
George’s Bank has $400 in excess reserves. Ralph Nader (a loyal customer of George’s
Bank) writes a check for $520 to purchase “Nader for President” earmuffs. When the
check clears, given an 8 percent reserve requirement,
a. George’s Bank will have to sell securities to meet its reserve requirements
b. George’s Bank will have sufficient reserves to meet its reserve requirements
c. George’s Bank will become insolvent
d. both b and c are correct
Answer:
Which of the following entities holds the largest portion of the U.S. government debt?
a. federal government agencies
b. the Federal Reserve
c. foreign buyers
d. banks and insurance companies
Answer:
The economy sinks into recession in April, with the decline in output revealed when
second-quarter GDP statistics are released in July. This is an example of the
a. impact lag
b. implementation lag
c. recognition lag
d. none of the above
Answer:
The control the Fed maintains over the multiplier stems from its ability to set
a. interest rates
b. reserve requirements
c. the size of its portfolio of securities
d. tax rates
Answer:
In the long run, aggregate demand conditions
a. influence output but not prices
b. influence output and prices
c. influence prices but not output
d. influence neither output nor prices
Answer:
The Federal Reserve has chosen a policy of
a. actively identifying and aggressively bursting stock market bubbles
b. actively identifying and leaning against stock market bubbles
c. leaving stock market bubbles to correct themselves
d. none of the above
Answer:
The rate at which one foreign currency trades for another is known as
a. the foreign exchange rate
b. the forward exchange rate
c. the foreign trade rate
d. the terms of trade
Answer:
When the Fed is expected to move toward a posture of easy money, banks ____ their
holdings of excess reserves, and the multiplier likely ____.
a. increase; increases
b. increase; decreases
c. reduce; increases
d. reduce; decreases
Answer:
Preparing for a celebration following a nail-biting victory at your school’s latest football
game, you proceed to the ATM to withdraw $50 from your checking account. This
action
a. reduces your bank’s capital accounts by $50
b. reduces your bank’s excess reserves by $50
c. reduces your bank’s liabilities by $50
d. reduces your bank’s required reserves by $50
Answer:
Which of the variables underlying the money supply multiplier is the general public
most capable of influencing?
a. rr
b. re
c. k
d. the public has no influence over any of the above
Answer:
As evidence of tight money during the Great Depression, economists point to
a. a series of reserve requirement hikes during the 1929-1933 period
b. high nominal interest rates
c. the behavior of real interest rates
d. rapid declines in the monetary base
Answer:
The largest use of bank funds today is:
a. commercial loans
b. real estate loans
c. reserves
d. Treasury securities
Answer:
As a Treasury bill approaches maturity:
a. its yield generally rises
b. its yield generally falls
c. its price generally rises
d. its price generally falls
Answer:
The discount rate used to assess stock prices may be revised downward due to
a. a decline in real interest rates
b. increases in expected inflation
c. an upward revision of the equity risk premium
d. none of the above
Answer:
In the context of our short-run model of exchange rate determination, an event that
creates expectations of a future appreciation of the U.S. dollar will
a. shift RF leftward and cause the dollar to appreciate
b. shift RF leftward and cause the dollar to depreciate
c. shift RF rightward and cause the dollar to appreciate
d. shift RF rightward and cause the dollar to depreciate
Answer:
Which of the following is not a use of the base?
a. cash held by the Treasury
b. cash held by private citizens
c. banks’ reserve accounts at the Fed
d. all of the above are uses of the base
Answer:
The amount of money in the United States (demand deposits plus currency) per person
in 2004 was approximately:
a. $800 per person
b. $2500 per person
c. $4500 per person
d. $6000 per person
Answer:
The currency ratio k tends to increase in periods of
a. war
b. financial panic
c. both of the above
d. neither of the above
Answer:
A bank’s “capital accounts”:
a. are derived from the issue of equity and retention of earnings
b. is simply another term for a bank’s net worth
c. provide a cushion against insolvency
d. all of the above
Answer:
Assume that income elasticity of demand for money is 1.0. In this case, an increase in
income works to
a. increase money demand and leave velocity unchanged
b. increase money demand and increase velocity
c. increase money demand and reduce velocity
d. do none of the above
Answer:
In an inflation targeting regime, maintaining ____ is explicitly emphasized.
a. stable output
b. low inflation
c. both of the above
d. neither of the above
Answer:
The Delors report
a. came after the Werner report and recommended that Europe adopt a single central
bank but not a single currency
b. came after the Werner report and recommended that Europe adopt a single central
bank and a single currency
c. came before the Werner report and recommended that Europe adopt a single central
bank but not a single currency
d. came before the Werner report and recommended that Europe adopt a single central
bank and a single currency
Answer:
You are planning to purchase a home five years from now and wish to invest an
unexpected inheritance to maximize your financial wealth at the time of the purchase.
Only if the ____ theory of term structure is correct will your average return from
investing in 5-year bonds necessarily exceed the returns from rolling over shorter-term
assets.
a. segmented markets
b. pure expectations
c. liquidity premium
d. none of the above
Answer:
The Fed decides to target a 3 percent federal funds rate without regard to economic
conditions. This is an example of
a. discretionary monetary policy
b. a passive monetary rule
c. an active monetary rule
d. a feedback rule
Answer:
Tobin’s q is defined as
a. the market value of firms times the replacement cost of capital
b. the market value of firms divided by the replacement cost of capital
c. the replacement cost of capital times the market value of firms
d. the replacement cost of capital divided by the market value of firms
Answer: