Money market mutual fund shares function like
A) checking accounts that pay interest.
B) bonds.
C) stocks.
D) currency.
Answer:
The Governing Council usually meets ________ times a year.
A) four
B) six
C) eight
D) twelve
Answer:
Everything else held constant, if a central bank makes an unsterilized sale of foreign
assets, then the domestic money supply will ________ and the domestic currency will
________.
A) increase; appreciate
B) increase; depreciate
C) decrease; appreciate
D) decrease; depreciate
Answer:
Assume a closed economy. Suppose that autonomous consumption equals $400,
planned investment equals $500, government expenditure equals $200, net taxes
equals $50, and the mpc equals 0.9.
In a closed economy, aggregate demand is the sum of
A) consumer expenditure, actual investment spending, and government spending.
B) consumer expenditure, planned investment spending, and government spending.
C) consumer expenditure, actual investment spending, government spending, and net
exports.
D) consumer expenditure, planned investment spending, government spending, and net
exports.
Answer:
Suppose that from a new checkable deposit, First National Bank holds two million
dollars in vault cash, one million dollars in required reserves, and faces a required
reserve ratio of ten percent. Given this information, we can say First National Bank has
________ million dollars in excess reserves.
A) one
B) two
C) nine
D) ten
Answer:
A simple deposit multiplier equal to one implies a required reserve ratio equal to
A) 100 percent.
B) 50 percent.
C) 25 percent.
D) 0 percent.
Answer:
Countries with surpluses in their balance of payments frequently do not want to see
their currencies ________ because it makes their goods ________ expensive abroad.
A) appreciate; less
B) appreciate; more
C) depreciate; less
D) depreciate; more
Answer:
A nominal variable, such as the inflation rate or the money supply, which ties down the
price level to achieve price stability is called ________ anchor.
A) a nominal
B) a real
C) an operating
D) an intermediate
Answer:
A $5 million deposit outflow from a bank has the immediate effect of
A) reducing deposits and reserves by $5 million.
B) reducing deposits and loans by $5 million.
C) reducing deposits and securities by $5 million.
D) reducing deposits and capital by $5 million.
Answer:
Overseeing who operates banks and how they are operated is called
A) prudential supervision.
B) hazard insurance.
C) regulatory interference.
D) loan loss reserves.
Answer:
The policy tool of changing reserve requirements is
A) the most widely used.
B) the preferred tool from the bank’s perspective.
C) no longer used.
D) still used, even with its disadvantages.
Answer:
The theory of purchasing power parity states that exchange rates between any two
currencies will adjust to reflect changes in
A) the trade balances of the two countries.
B) the current account balances of the two countries.
C) fiscal policies of the two countries.
D) the price levels of the two countries.
Answer:
When talking about a coupon bond, face value and ________ mean the same thing.
A) par value
B) coupon value
C) amortized value
D) discount value
Answer:
The additional incentive that the purchaser of a Treasury security requires to buy a
long-term security rather than a short-term security is called the
A) risk premium.
B) term premium.
C) tax premium.
D) market premium.
Answer:
Because Keynes assumed that the expected return on money was zero, he argued that
people would
A) never hold money.
B) never hold money as a store of wealth.
C) hold money as a store of wealth when the expected return on bonds was negative.
D) hold money as a store of wealth only when forced to by government policy.
Answer:
An increase in the money supply shifts the LM curve to the right, causing the interest
rate to ________ and output to ________, everything else held constant.
A) rise; rise
B) rise; fall
C) fall; rise
D) fall; fall
Answer:
A tax cut ________ disposable income, ________ consumption expenditure, and shifts
the IS curve to the ________, everything else held constant.
A) increases; increases; right
B) increases; decreases; right
C) decreases; increases; left
D) decreases; decreases; left
Answer:
To prevent bank runs and the consequent bank failures, the United States established the
________ in 1934 to provide deposit insurance.
A) FDIC
B) SEC
C) Federal Reserve
D) ATM
Answer:
With the creation of the Federal Deposit Insurance Corporation, member banks of the
Federal Reserve System ________ to purchase FDIC insurance for their depositors,
while non-member commercial banks ________ to buy deposit insurance.
A) could choose; were required
B) could choose; were given the option
C) were required, could choose
D) were required; were required
Answer:
Bank’s make their profits primarily by issuing
A) equity.
B) negotiable CDs.
C) loans.
D) NOW accounts.
Answer:
An increase in the quantity of money supplied shifts the money supply curve to the
________, and the equilibrium interest rate ________, everything else held constant.
A) right; falls
B) right; rises
C) left; falls
D) left; rises
Answer:
While legislation enacted in 1998 granted the Bank of Japan new powers and greater
autonomy, its critics contend that its independence is
A) limited by the Ministry of Finance’s veto power over a portion of its budget.
B) too great because it need not pursue a policy of price stability even if that is the
popular will of the people.
C) too great since the Ministry of Finance no longer has veto power over the bank’s
budget.
D) limited since the Ministry of Finance can dismiss senior bank officials.
Answer:
An increase in the domestic interest rate causes the demand for domestic assets to
________ and the domestic currency to ________, everything else held constant.
A) increase; appreciate
B) increase; depreciate
C) decrease; appreciate
D) decrease; depreciate
Answer:
The organization responsible for the conduct of monetary policy in the United States is
the
A) Comptroller of the Currency.
B) U.S. Treasury.
C) Federal Reserve System.
D) Bureau of Monetary Affairs.
Answer:
Studies of the major developed countries show that when businesses go looking for
funds to finance their activities they usually obtain these funds from
A) government agencies.
B) equities markets.
C) financial intermediaries.
D) bond markets.
Answer:
The interest rate that describes how well a lender has done in real terms after the fact is
called the
A) ex post real interest rate.
B) ex ante real interest rate.
C) ex post nominal interest rate.
D) ex ante nominal interest rate.
Answer:
The time it takes for policy makers to change policy instruments once they have
decided on the new policy is called
A) the data lag.
B) the recognition lag.
C) the legislative lag.
D) the implementation lag.
E) the effectiveness lag.
Answer:
In which of the following situations would you prefer to be the lender?
A) The interest rate is 9 percent and the expected inflation rate is 7 percent.
B) The interest rate is 4 percent and the expected inflation rate is 1 percent.
C) The interest rate is 13 percent and the expected inflation rate is 15 percent.
D) The interest rate is 25 percent and the expected inflation rate is 50 percent.
Answer:
An increase in unplanned inventory investment for the entire economy equals the
excess of
A) output over aggregate supply.
B) output over aggregate demand.
C) aggregate supply over output.
D) aggregate demand over output.
Answer:
Examples of discount bonds include
A) U.S. Treasury bills.
B) corporate bonds.
C) U.S. Treasury notes.
D) municipal bonds.
Answer:
Compared to checks, paper currency and coins have the major drawbacks that they
A) are easily stolen.
B) are hard to counterfeit.
C) are not the most liquid assets.
D) must be backed by gold.
Answer:
The M1 measure of money includes
A) small denomination time deposits.
B) traveler’s checks.
C) money market deposit accounts.
D) money market mutual fund shares.
Answer: