Automated teller machines
A. are more costly to use than human tellers, so banks discourage their use by charging
more for use of ATMs.
B. cost about the same to use as human tellers in banks, so banks discourage their use
by charging more for use of ATMs.
C. cost less than human tellers, so banks may encourage their use by charging less for
using ATMs.
D. cost nothing to use, so banks provide their services free of charge.
Answer:
When the price of a bond is ________ the equilibrium price, there is an excess demand
for bonds and price will ________.
A. above; rise
B. above; fall
C. below; fall
D. below; rise
Answer:
If the real exchange rate between the United States and Japan is ________, then it is
cheaper to buy goods in Japan than in the United States.
A. greater than 1.0
B. greater than 0.5
C. less than 0.5
D. less than 1.0
Answer:
Everything else held constant, in the market for reserves, when the federal funds rate is
3%, lowering the discount rate from 5% to 4%
A. lowers the federal funds rate.
B. raises the federal funds rate.
C. has no effect on the federal funds rate.
D. has an indeterminate effect on the federal funds rate.
Answer:
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 included
which of the following provisions to deal with conflicts of interest in the credit-rating
Industry?
Created an Office of Credit Ratings at the SEC with its own staff and the authority to
fine credit-rating agencies and to deregister an agency if it produces bad ratings.
Forced credit-rating agencies to provide reports to the SEC when their employees go to
work for a company that has been rated by them in the last twelve months.
Prohibited compliance officers from being involved in producing or selling credit
ratings.
Required the SEC to prevent issuers of asset-backed securities from choosing the
credit-rating agencies that will give them the highest rating and supported earlier
initiatives by the SEC.
Authorized investors to bring lawsuits against credit-rating agencies for a reckless
failure to get the facts when providing a credit rating.
A. 1, 2, 3, and 4.
B. 2, 3, 4, and 5.
C. none.
D. 1, 2, 3, 4, and 5.
Answer:
A permanent negative supply shock causes stock prices to ________ than they would if
the
supply shock were temporary.
A. fall more
B. fall less
C. rise more
D. rise less
Answer:
The research document given to the Federal Open Market Committee that contains
information on the state of the economy in each Federal Reserve district is called the
A. beige book.
B. green book.
C. blue book.
D. black book.
Answer:
The recognition lag is
A. the time it takes for policy makers to obtain data indicating what is happening in the
economy.
B. the time it takes for policy makers to be sure of what the data are signaling about the
future course of the economy.
C. the time it takes to pass legislation to implement a particular policy.
D. the time it takes for policy makers to change policy instruments once they have
decided on the new policy.
E. the time it takes for the policy actually to have an impact on the economy.
Answer:
If the Fed adopts a policy of pegging the interest rate, a ________ in government
spending forces the Fed to increase the money supply to prevent interest rates from
________.
A. fall; increasing
B. fall; decreasing
C. rise; decreasing
D. rise; increasing
Answer:
Tobin’s q theory suggests that monetary policy may affect investment spending through
its impact on
A. stock prices.
B. interest rates.
C. bond prices.
D. cash flow.
Answer:
________ may antagonize customers and thus can be a very costly way of acquiring
funds to meet an unexpected deposit outflow.
A. Selling securities
B. Selling loans
C. Calling in loans
D. Selling negotiable CDs
Answer:
Banks
A. provide a channel for linking those who want to save with those who want to invest.
B. produce nothing of value and are therefore a drain on society’s resources.
C. are the only financial institutions allowed to give loans.
D. hold very little of the average American’s wealth.
Answer:
If, for a $1000 premium, you buy a $100,000 put option on bond futures with a strike
price of 110, and at the expiration date the price is 114, your ________ is ________.
A. profit; $1000
B. loss; $1000
C. profit; $3000
D. loss; $3000
Answer:
The ________ describes points for which the goods market is in equilibrium.
A. LM curve
B. IS curve
C. consumption function
D. investment schedule
Answer:
The rate of inflation increases when
A. the unemployment rate equals the NAIRU.
B. the unemployment rate exceeds the NAIRU.
C. the unemployment rate is less than the NAIRU.
D. the unemployment rate increases faster than the NAIRU increases.
Answer:
The oldest central bank, having been founded in 1694, is the
A. Bank of England.
B. Deutsche Bundesbank.
C. Bank of Japan.
D. Federal Reserve System.
Answer:
When tax revenues are greater than government expenditures, the government has a
budget
A. crisis.
B. deficit.
C. surplus.
D. revision.
Answer:
For a given return on assets, the lower is bank capital
A. the lower is the return for the owners of the bank.
B. the higher is the return for the owners of the bank.
C. the lower is the credit risk for the owners of the bank.
D. the lower the possibility of bank failure.
Answer:
Mutual funds that allow shares to be redeemed at any time at a price that is tied to the
asset value of the fund are known as
A. close-end funds.
B. open-end funds.
C. asset-value funds.
D. redeemable funds.
Answer:
If a central bank does not want to see its currency fall in value, it may pursue ________
monetary policy to ________ the domestic interest rate, thereby strengthening its
currency.
A) expansionary; raise
B) contractionary; raise
C) expansionary; lower
D) contractionary; lower
Answer:
Assuming the same coupon rate and maturity length, when the interest rate on a
Treasury Inflation Indexed Security is 3 percent, and the yield on a nonindexed
Treasury bond is 8 percent, the expected rate of inflation is
A. 3 percent.
B. 5 percent.
C. 8 percent.
D. 11 percent.
Answer:
Each governor on the Board of Governors can serve
A. only one nonrenewable fourteen-year term.
B. one full nonrenewable fourteen-year term plus part of another term.
C. only one nonrenewable eight-year term.
D. one full nonrenewable eight-year term plus part of another term.
Answer:
Which of the following is not a disadvantage to inflation targeting?
A. There is a delayed signal about achievement of the target.
B. Inflation targets could impose a rigid rule on policymakers.
C. There is potential for larger output fluctuations.
D. There is a lack of transparency.
Answer:
Today the United States has a dual banking system in which banks supervised by the
________ and by the ________ operate side by side.
A. federal government; municipalities
B. state governments; municipalities
C. federal government; states
D. municipalities; states
Answer:
In the Keynesian liquidity preference framework, an increase in the interest rate causes
the demand curve for money to ________, everything else held constant.
A. shift right
B. shift left
C. stay where it is
D. invert
Answer:
A positive spending shock ________ real interest rates and ________ output in the
short run, thereby its effect on stock prices is ________.
A. raises; lowers; positive
B. raises; raises; ambiguous
C. lowers; raises; negative
D. lowers; raises; positive
Answer:
Members of the Executive Board of the European System of Central Banks are
appointed to ________ year, nonrenewable terms.
A. four
B. eight
C. ten
D. fourteen
Answer:
The risk structure of interest rates is
A. the structure of how interest rates move over time.
B. the relationship among interest rates of different bonds with the same maturity.
C. the relationship among the term to maturity of different bonds.
D. the relationship among interest rates on bonds with different maturities.
Answer:
The monetary liabilities of the Federal Reserve include
A. securities and loans to financial institutions.
B. currency in circulation and reserves.
C. securities and reserves.
D. currency in circulation and loans to financial institutions.
Answer:
The price paid for the rental of borrowed funds (usually expressed as a percentage of
the rental of $100 per year) is commonly referred to as the
A. inflation rate.
B. exchange rate.
C. interest rate.
D. aggregate price level.
Answer:
In the simple Keynesian framework, declines in planned investment spending that
produce high unemployment can be offset by raising
A. taxes.
B. government spending.
C. consumer confidence.
D. business confidence.
Answer:
When the exchange rate for the Mexican peso changes from 9 pesos to the U.S. dollar
to 10 pesos to the U.S. dollar, then the Mexican peso has ________ and the U.S. dollar
has ________.
A. appreciated; appreciated
B. depreciated; appreciated
C. appreciated; depreciated
D. depreciated; depreciated
Answer:
Elimination of minimum brokerage commission rates occurred because of
A. competition from banks.
B. demands of institution investors.
C. competition from foreign brokerage firms.
D. an action of the Securities and Exchange Commission.
Answer:
If you buy a call option on Treasury futures at 115, and at expiration the market price is
110, the ________ will ________ exercised.
A. call; be
B. put; be
C. call; not be
D. put; not be
Answer:
A decrease in the quantity of money supplied shifts the money supply curve to the
________, and the LM curve to the ________, everything else held constant.
A. right; left
B. right; right
C. left; left
D. left; right
Answer: