Today, our money is “backed”
a. by an implicit faith that our government will keep the growth of money in reasonable
moderation
b. by a combination of gold certificates and silver certificates
c. 25% by gold certificates held by the Federal Reserve
d. 40% by gold certificates held by the Federal Reserve
Answer:
Which is most correct?
a. Economists agree that the M1 measure of money is most useful today.
b. M1, M2, and M3 move together over time, with almost perfect correlation.
c. M1, M2, and M3 seem increasingly negatively correlated with each other.
d. M2 and M3 grew after 1994, while M1 fell.
Answer:
Which of the following economic variables is a flow variable?
a. wealth
b. money
c. income
d. all of the above
Answer:
In the period following passage of the National Banking Act, state banks
a. began issuing demand deposits to compete with the uniform currency issued by
national banks
b. faced high taxes on their privately issued banknotes
c. faced new regulations concerning how and where they might operate
d. did all of the above
Answer:
Other things being equal, when other liabilities and capital of the Federal Reserve
increase, then
a. other assets of the Fed increase
b. other assets of the Fed decrease
c. the monetary base increases
d. the monetary base decreases
Answer:
Bank fees for services
a. have played an increasing role in overall bank profits in recent years
b. have played a declining role in overall bank profits in recent years
c. have never been a particularly important factor in bank profits
d. none of the above is correct
Answer:
Financial intermediaries issue ____ in order to purchase ____.
a. primary claims; secondary claims
b. secondary claims; secondary claims
c. secondary claims; primary claims
d. primary claims; primary claims
Answer:
Suppose that you deposit $200 in cash into your bank checking account. Assuming a 10
percent reserve requirement, your bank can now make loans of up to
a. $180
b. $200
c. $1,800
d. $2,000
Answer:
Which of the following stock indices includes a small number of the country’s largest
stocks?
a. S&P 500
b. DJIA
c. NASDAQ
d. Russell 1000
Answer:
The simultaneous experience of accelerating inflation and recession
a. poses a dilemma for monetary policymakers
b. is known as stagflation
c. is always caused by a shifting aggregate supply curve
d. is characterized by all of the above
Answer:
Which of the following is true?
a. a solvent bank must be liquid
b. a liquid bank must be solvent
c. both a and b are true
d. neither a nor b is true
Answer:
The Fed should counter a rapid increase in government expenditures at a time of full
employment with
a. a decrease in the money supply
b. an increase in the money supply
c. no change in the money supply
d. the Fed should reduce interest rates instead of altering the money supply
Answer:
In 2004, the daily volume of activity in foreign exchange markets worldwide was
approximately
a. $100 billion
b. $400 billion
c. $1 trillion
d. $2 trillion
Answer:
If profits for a given corporation are expected to rise, ceteris paribus,
a. stock prices will tend to rise as well
b. stock prices will tend to fall
c. stock prices are not likely to be affected
d. none of the above is true
Answer:
The foreign exchange market is a(n):
a. auction market
b. debt market
c. over-the-counter market
d. all of the above
Answer:
As an economist, you determine that checking accounts have 8/10 the “moneyness” of
currency, savings accounts have 5/10 the moneyness of currency, time deposits have
4/10 the moneyness of currency, and money market mutual fund shares have 2/10 the
moneyness of currency. If currency = $1000, checkable deposits = $2000, savings
accounts = $4000, time deposits = $4000, and MMMF shares = $2000, the divisia
money supply measure would be:
a. $3,000
b. $2,600
c. $6,600
d. $13,000
Answer:
As evidence of easy money during the Great Depression, Keynesians point to
a. the behavior of nominal interest rates
b. the behavior of the price level
c. the behavior of real interest rates
d. the Fed’s aggressive open market purchases of securities
Answer:
In the Netherlands, both prostitution and drug use are legal. Given other factors, this
would lead us to expect
a. no difference in the currency ratio in Holland and the U.S.
b. a lower currency ratio in Holland than in the U.S.
c. a higher currency ratio in Holland than in the U.S.
d. there is no relationship between the currency ratio and the information given above
Answer:
Which of the following is not included in M1?
a. demand deposits
b. traveler’s checks
c. savings deposits
d. currency and coins
Answer:
In the pure expectations theory of term structure, a flat yield curve is interpreted to
mean that:
a. interest rates are expected to remain constant
b. interest rates are expected to rise
c. inflation is expected to rise
d. interest rates are expected to fall
Answer:
Short-term interest rates in Japan between 1970 and 2003
a. were always close to those prescribed by the Taylor rule
b. were always above those prescribed by the Taylor rule
c. were always below those prescribed by the Taylor rule
d. are described by none of the above
Answer:
The early Keynesian transmission mechanism depends on the ability of monetary policy
to affect
a. Tobin’s q
b. individuals’ portfolio liquidity
c. stock prices
d. interest rates
Answer:
If the public comes to fear major bank failures and a collapse of federal deposit
insurance, then
a. B will rise
b. re will fall
c. k will rise
d. all of the above will occur
Answer:
At the trough of a recession, the yield curve is typically:
a. flat
b. humped
c. descending
d. ascending
Answer:
“Presidents of many corporations make more than $5 million a year. That’s a lot of
money!” The person making this statement is confusing:
a. nominal and real income
b. money and wealth
c. money and income
d. income and wealth
Answer:
Those who advocate a strong Fed policy of “leaning against” stock market “bubbles”
tend to:
a. question traditional stock market benchmarks and believe they are no longer reliable
b. believe that ultimately the Fed does not possess the tools to affect stock market prices
c. believe the Fed is capable of recognizing stock market “bubbles” as they develop
d. believe that monetary policy is a blunt tool when dealing with stock market
“bubbles”
Answer:
Suppose that economic activity is slowing and that the Fed is worried about recession.
One thing the Fed could do in an attempt to stave off a recession is
a. decrease the reserve requirement
b. increase the discount rate
c. sell securities in the open market
d. all of the above
Answer:
Today, most economists agree that the power of monetary policy is
a. stronger than early Keynesians believed
b. stronger than early monetarists believed
c. much weaker than in the 1950s
d. characterized by none of the above
Answer:
Suppose that a nation has the following social loss function: L = 0.2(%DP – 2%) +
0.8(Y – Y*). It can be said that this society
a. cares more about controlling inflation than it does about minimizing output
fluctuations
b. cares more about controlling output fluctuations than it does about minimizing
inflation
c. cares equally about controlling output fluctuations and inflation
d. we can reach no conclusion from the information given above
Answer:
The short-run aggregate supply curve
a. is downward sloping
b. is upward sloping
c. is horizontal
d. is vertical
Answer:
Regarding the demand for excess reserves in the Great Depression, it is clear that
a. Keynesians view the curve as flat
b. monetarists view the curve as steep
c. both of the above are true
d. neither of the above is true
Answer:
The largest source of the monetary base is
a. Cp
b. Ft
c. P
d. TCu
Answer:
Suppose the Fed adopts the following version of the Taylor rule: Fed funds rate = 2% +
%DP + 0.8(%DP – 2%) + 0.3(Y – Y*)/Y. This version clearly proposes a ____
stabilization policy.
a. countercyclical
b. cyclically neutral
c. procyclical
d. highly inflationary
Answer: