Other things being equal, an increase in the minimum wage will lead to
a. greater consumer income, stimulating AD and thus reducing prices and output
b. higher costs of production, reducing AS and decreasing prices and output
c. increased input prices, shifting AS left, decreasing output, and increasing prices
d. lower corporate profitability, reducing stock prices, wealth, and AD; decreasing
prices and output
Answer:
A 30-year Treasury bond maturing in 1 month is traded in the:
a. equity market
b. money market
c. primary market
d. none of the above
Answer:
If the Fed wishes to directly increase the money multiplier, it can do so by
a. buying securities in the open market
b. raising the discount rate
c. raising the reserve requirement
d. none of the above causes the multiplier to rise
Answer:
Money supply measures were first elevated to a position of high priority as explicit
monetary policy targets in the U.S. in
a. the 1980s
b. the 1970s
c. the 1950s
d. the 1930s
Answer:
Which of the following is not likely to cause an increase in velocity?
a. reduced economic uncertainty
b. accelerating inflation
c. falling interest rates
d. increased credit card use
Answer:
The ECB is owned by
a. private shareholders who purchase stock in the ECB
b. the national central banks of the EU member nations
c. the commercial banks it oversees
d. none of the above
Answer:
Given deposits in Second Bank of $200 million and reserve requirements of 10 percent,
assume Second Bank has excess reserves of $1 million. Then its actual and required
reserves, respectively, are
a. $200 million and $20 million
b. $180 million and $20 million
c. $21 million and $20 million
d. $20 million and $21 million
Answer:
The direct credit market includes:
a. financial intermediaries and the capital market
b. financial intermediaries and the money market
c. banks and money market mutual funds
d. the money market and the capital market
Answer:
When the Federal Reserve sells $4,000 of securities to a dealer, assuming a 10 percent
reserve requirement,
a. the money supply initially contracts by $40,000
b. aggregate bank required reserves initially contract by $400
c. aggregate bank reserves will ultimately decrease by $40,000
d. aggregate bank excess reserves initially contract by $4,000
Answer:
Changes in stock prices can lead to changes in consumption via
a. the Fisher Effect
b. the cost of capital effect
c. the wealth effect
d. the bubble effect
Answer:
According to Keynes,
a. the speculative demand for money is negatively related to interest rates and is
unstable
b. the velocity of money is stable and independent of interest rates
c. people hold money only for transactions purposes
d. none of the above is true
Answer:
The political business cycle refers to a situation in which
a. consumers spend more after the presidential election because of increased consumer
confidence
b. politicians manipulate the economy for their own ends
c. a monetary policy rule is used inappropriately
d. none of the above is true
Answer:
Some states strictly outlawed branch banking, instead requiring banks to operate out of
a single office. This is known as
a. dual banking
b. free banking
c. the Glass-Steagall Act
d. unit banking
Answer:
In order for the money supply multiplier to be identical to the naive deposit multiplier,
it must be true that
a. rr is identical for all banks
b. k = 0
c. re = 0
d. all of the above are true
Answer:
Potentially, even perfect Federal Reserve control of the monetary base could still leave
the Federal Reserve unable to accurately control the money supply if there are volatile
movements in
a. rr
b. re
c. k
d. any or all of the above
Answer:
When the dollar appreciates,
a. foreign goods get more expensive
b. U.S. products look more price attractive abroad
c. both of the above
d. neither of the above
Answer:
If the dollar is rapidly appreciating in forward exchange markets, the Fed can counter
this appreciation by
a. selling bonds in the open market
b. using its stock of foreign currencies to buy existing dollars
c. buying foreign currencies with dollars
d. none of the above
Answer:
A bank manager earns $36,000 per year and is paid twice each month. If she spends all
of her income evenly throughout the year, then on average she holds enough money, on
average, to finance ____ worth of expenditures.
a. 1/2 month’s
b. 1 month’s
c. 2 months’
d. none of the above
Answer:
Reserve requirements are determined by
a. the Board of Governors
b. the Chairman of the Board of Governors
c. the FOMC
d. the New York district bank
Answer:
The packaging of loans into standardized bundles for resale is known as
a. consolidated liquidation
b. bundling
c. securitization
d. passing through
Answer:
Given other factors, which of the following events will increase the money supply
multiplier?
a. banks become more aggressive lenders, reducing re
b. the currency ratio falls as banks boost rates paid on deposits
c. the Fed reduces reserve requirements
d. all of the above
Answer:
If money demand is sensitive to interest rate changes, then
a. velocity will be stable and predictable
b. velocity will be unstable
c. both of the above are possible
d. not enough information is given to answer the question
Answer:
The $20 gold piece so common in old Western films is an example of:
a. fiat money
b. barter money
c. representative full-bodied commodity money
d. full-bodied commodity money
Answer:
A bank that finds itself with a reserve deficiency can recover reserves by
a. borrowing funds from the Fed or another bank
b. selling some of its marketable securities
c. selling off or calling in loans
d. all of the above
Answer:
During the late 1980s, pop singer Madonna became a huge international celebrity. This,
ceteris paribus, should cause the dollar to ____ in foreign exchange markets.
a. depreciate
b. appreciate
c. cannot determine whether this will cause depreciation or appreciation
d. neither depreciate nor appreciate
Answer:
Suppose that a nation has the following social loss function: L = 0.9(%DP – 2%) +
0.1(Y – Y*). It can be said that this society
a. cares equally about controlling output fluctuations and inflation
b. cares more about controlling inflation than it does about minimizing output
fluctuations
c. cares more about controlling output fluctuations than it does about minimizing
inflation
d. we can reach no conclusion about what this society cares about
Answer:
Which of the following variables is considered the most “endogenous” or most subject
to influence by economic activity?
a. net free reserves
b. the nonborrowed monetary base
c. M2
d. total reserves
Answer:
Which type of institution has exhibited the most rapid growth since the mid-1970s?
a. money market mutual funds
b. savings and loan associations
c. commercial banks
d. life insurance companies
Answer:
Most industrial nations today have banking systems that are known as
a. capital reserves banking systems
b. fractional reserves banking systems
c. required reserves banking systems
d. legal reserves banking systems
Answer:
A good indicator of the profitability of borrowing at the discount window is the spread
between
a. the long-term and short-term government securities yields
b. the government bond yield and the discount rate
c. the federal funds rate and the discount rate
d. the Baa corporate bond yield and the government bond yield
Answer:
An increase in consumer confidence will cause the nation’s price level to ____ and real
output to ____.
a. decrease; decrease
b. increase; increase
c. decrease; increase
d. increase; decrease
Answer:
If a bank is subject to a 10 percent reserve requirement, has demand deposits of $100
million, and has excess reserves of $3 million, then:
a. its reserves are $10 million
b. its reserves are $13 million
c. its required reserves are $13 million
d. none of the above is true
Answer:
Which of the following should tend to raise the velocity of M1?
a. abolition of credit cards
b. more frequent paydays
c. increased economic uncertainty
d. none of the above
Answer:
The economy overheats in July, but the overexpansion is not revealed until revised GDP
statistics are released in October. This is an example of the
a. recognition lag
b. implementation lag
c. impact lag
d. none of the above
Answer: