The Bretton Woods conference resulted in the creation of
a. the World Bank
b. the International Monetary Fund
c. the “adjustable peg” exchange rate system
d. all of the above
Answer:
Which decade was characterized by stagflation–the simultaneous existence of high
inflation and stagnant output?
a. the 1980s
b. the 1970s
c. the 1960s
d. the 1950s
Answer:
Critics of the 1980s supply-side program claim that it did not work because
a. government spending was cut, negating the effects of the tax cut
b. increased deficits reduced the funds available for investment
c. the share of output going to consumption declined
d. of all of the above reasons
Answer:
Suppose the 8s of 2004 are quoted at 105. Then:
a. the yield to maturity is 8 percent
b. a capital gain will accrue at maturity
c. the current yield is 8 percent
d. the yield to maturity is less than the current yield
Answer:
The long-run path of a nation’s price level is primarily determined by
a. aggregate supply shocks
b. growth in that nation’s money supply
c. wage behavior
d. aggregate demand shocks
Answer:
The policy tool that has the most uniform impact on all banks is the ____ tool.
a. reserve requirement
b. open market operations
c. discount window
d. none of the above
Answer:
The increase in interest rates is most pronounced in:
a. the first half of expansions
b. the second half of expansions
c. the first half of recessions
d. the second half of recessions
Answer:
The link between the money supply and aggregate expenditures is called
a. the balanced budget multiplier
b. income velocity
c. the monetary multiplier
d. the Keynesian aggregate expenditures multiplier
Answer:
Which of the following financial assets has the highest degree of liquidity?
a. a $5,000 certificate of deposit
b. municipal bonds
c. common stocks
d. money market mutual fund shares
Answer:
Suppose that an investor’s portfolio returns an average of 24% per year. The “Rule of
72″ suggests that this portfolio will double in value approximately every
a. 2 years
b. 3 years
c. 4 years
d. 24 years
Answer:
The level of a nation’s standard of living depends primarily on
a. the ability and capacity of that nation’s people to produce goods and services
b. the quantity of money that exists in that nation
c. whether that nation’s money is backed with a real commodity
d. none of the above
Answer:
Which of the following is true about stock prices and macroeconomic activity as a
whole?
a. Stock prices affect macroeconomic activity, and macroeconomic activity affects stock
prices.
b. Stock prices affect macroeconomic activity, but macroeconomic activity does not
affect stock prices.
c. Macroeconomic activity affects stock prices, but stock prices do not affect
macroeconomic activity.
d. Macroeconomic activity does not affect stock prices, and stock prices do not affect
macroeconomic activity.
Answer:
When aggregate demand increases at a time of full employment, the Fed’s ideal
response is to
a. increase interest rates to reduce aggregate demand
b. increase the money supply to reduce aggregate supply
c. increase the money supply to reduce aggregate demand
d. reduce interest rates to further increase aggregate demand
Answer:
Monetary and fiscal policy have the following in common:
a. they are perfect substitutes for one another
b. they are both implemented by Congress
c. they both impact the economy principally via the AS curve
d. they both impact the economy principally via the AD curve
Answer:
The original vision of a U.S. central bank is credited to
a. Alexander Hamilton
b. Benjamin Franklin
c. James Madison
d. Thomas Jefferson
Answer:
In the view of monetarists, monetary policy
a. turned an ordinary recession into a depression
b. was characterized by a series of mistakes by the Fed during the Great Depression
c. was extraordinarily tight during the Great Depression
d. did all of the above
Answer:
Which of the following assets is most liquid?
a. passbook savings accounts
b. 2-year Treasury bonds
c. gold bars
d. shares of common stock
Answer:
Which of the following is considered a form of nondeposit borrowing by banks?
a. borrowing federal funds
b. NOW accounts
c. negotiable CDs
d. none of the above
Answer:
The behavior of real interest rates during the Great Depression is often used to support
the ____ interpretation that money was ____.
a. monetarist; loose
b. monetarist; tight
c. Keynesian; loose
d. Keynesian; tight
Answer:
Which of the following statements is not true concerning the multiple expansion of
deposits and the money supply?
a. whenever a customer withdraws cash from his bank, the money supply immediately
falls
b. whenever a bank makes a loan or buys securities, both deposits and money are
created
c. through its open market activities, the Fed can create or destroy reserves at its
convenience
d. banks cannot create or destroy reserves; they can only pass them to one another
Answer:
The Fed decides to adopt the following scheme for implementing monetary policy:
Money growth rate = 3% – 2 x (inflation rate – 2%). This is an example of
a. discretionary monetary policy
b. a feedback rule
c. a passive monetary rule
d. none of the above
Answer:
A sharp increase in Treasury bill yields should cause
a. an increase in rr, the weighted reserve requirement
b. an increase in the desired excess reserve ratio
c. a reduction in the money supply multiplier
d. none of the above
Answer:
Suppose that in a given week, the Treasury writes $5,000 of checks on its account at the
Fed to pay employees. To neutralize the effect of these transactions, the Treasury should
a. transfer $5,000 from its tax and loan accounts to the Fed
b. transfer $5,000 from the Fed to its tax and loan accounts
c. neither of the above–it is impossible to offset the effect of these transactions
d. not enough information is given to answer the question
Answer:
Suppose your local bank experiences an inflow of $100,000 of currency from the public
into checking accounts. Assuming the reserve requirement is 20 percent, the initial,
direct effect is to
a. reduce the money supply by $100,000
b. leave the money supply unchanged
c. increase the money supply by $100,000
d. do none of the above
Answer:
Which of the following institutions is a contractual savings-type intermediary?
a. life insurance companies
b. credit unions
c. finance companies
d. all of the above
Answer:
Many inflation targeting agreements include an escape clause that allows that central
bank to ignore the target in the face of
a. high government budget deficits
b. high unemployment
c. lagging labor force productivity
d. supply shocks
Answer:
Which of the following potential intermediate monetary policy target variables scores
lowest on the criterion of importance?
a. the monetary aggregates
b. net free reserves
c. nominal short-term interest rates
d. real long-term interest rates
Answer:
A nation’s currency will appreciate in the long run if the nation exhibits which of the
following characteristics?
a. high productivity growth and increased tariffs on imports
b. high productivity growth and reduced tariffs on imports
c. high inflation and high productivity growth
d. none of the above
Answer:
When the Fed sells securities
a. bank reserves rise
b. the monetary base rises
c. interest rates rise
d. all of the above occur
Answer:
In terms of the number of bank failures, the peak year in U.S. history was
a. 1926
b. 1929
c. 1933
d. 1937
Answer:
The Governors of the ESCB
a. serve lifetime terms
b. serve eight-year nonrenewable terms
c. are nominated by ECOFIN and approved by the EU parliament
d. are the heads of the member nations’ central banks
Answer:
Suppose you have a strong feeling that the economy is poised on the brink of an
economic downturn that will be severe. As an investor, your best strategy would be to:
a. sell all your bonds and put your money in gold and silver
b. sell all your bonds and put the money in stocks
c. sell your short-term bonds and purchase long-term bonds
d. sell your long-term bonds and purchase short-term bonds
Answer:
The simple model of short-run exchange rate determination used in the text places
a. the current exchange rate on the vertical axis and the expected future exchange rate
on the horizontal axis
b. the exchange rate on the vertical axis and the expected rate of return on the horizontal
axis
c. the expected future exchange rate on the vertical axis and the current exchange rate
on the horizontal axis
d. the expected rate of return on the vertical axis and the exchange rate on the horizontal
axis
Answer:
Which of the following sources of the monetary base has shown the least variability in
recent years?
a. P
b. G
c. Ff
d. A
Answer: