Of all commercial banks, about ________ belong to the Federal Reserve System.
A. 10%
B. one half
C. one third
D. 90%
Answer:
When the policy rate hits its lower bound and inflation keeps falling, this portion of the
Monetary Policy curve is
A. downward sloping.
B. upward sloping.
C. flat.
D. undetermined.
Answer:
In pursuing a strategy of monetary targeting, the central bank announces that it will
achieve a certain value (the target) of the annual growth rate of a ________.
A. a monetary aggregate
B. a reserve aggregate
C. the monetary base
D. GDP
Answer:
Fluctuations in the demand for reserves cause the Fed to lose control over a monetary
aggregate if the Fed targets
A. a monetary aggregate.
B. the monetary base.
C. an interest rate.
D. nominal GDP.
Answer:
Everything else held constant, if a central bank makes a sterilized sale of foreign assets,
then the domestic currency will
A) appreciate.
B) depreciate.
C) either appreciate, depreciate, or remain constant.
D) not be affected.
Answer:
The Fed’s quantitative easing is to purchase ________ to affect credit spreads.
A. long-term securities
B. short-term securities
C. both long-term and short-term securities
D. private assets
Answer:
The aggregate demand curve is the total quantity of an economy’s
A. intermediate goods demanded at different inflation rates.
B. intermediate goods demanded at a particular inflation rate.
C. final goods and services demanded at a particular inflation rate.
D. final goods and services demanded at different inflation rates.
Answer:
Lack of competition in the United States banking industry can be attributed to
A) the fact that competition does not benefit consumers.
B) the fact that branching has eliminated competition.
C) recent legislation restricting competition.
D) nineteenth-century populist sentiment.
Answer:
Everything else held constant, a decrease in the required reserve ratio on checkable
deposits causes the M1 money multiplier to ________ and the money supply to
________.
a. decrease; increase
b. increase; increase
c. decrease; decrease
d. increase; decrease
Answer:
As their relative riskiness ________, the expected return on corporate bonds ________
relative to the expected return on default-free bonds, everything else held constant.
A. increases; increases
B. increases; decreases
C. decreases; decreases
D. decreases; does not change
Answer:
________ in the money supply creates excess demand for ________, causing interest
rates to ________, everything else held constant.
A. An increase; money; rise
B. An increase; bonds; fall
C. A decrease; bonds; rise
D. A decrease; money; fall
Answer:
An increase in default risk on corporate bonds ________ the demand for these bonds,
but ________ the demand for default-free bonds, everything else held constant.
A. increases; lowers
B. lowers; increases
C. does not change; greatly increases
D. moderately lowers; does not change
Answer:
Since the passage of the International Banking Act of 1978, the competitive advantage
enjoyed by foreign banks in the U.S. has been
A) reduced.
B) mildly expanded.
C) completely eliminated.
D) greatly expanded.
Answer:
Loophole mining refers to financial innovation designed to
A. hide transactions from the IRS.
B. conceal transactions from the SEC.
C. get around regulations.
D. conceal transactions from the Treasury Department.
Answer:
A central bank’s attempt to prevent an appreciation of its currency can stimulate
domestic inflation if the ________ of its currency leads to ________ international
reserves which ________ the monetary base.
A) purchase; higher; increases
B) purchase; lower; decreases
C) sale; lower; decreases
D) sale; higher; increases
Answer:
High inflation can spiral out of control when
A. expected inflation increases nominal interest rates, causing the Fed to buy bonds,
increasing the money supply and further increasing inflation.
B. expected inflation decreases nominal interest rates, causing the Fed to buy bonds,
increasing the money supply and further increasing inflation.
C. expected inflation increases nominal interest rates, causing the Fed to sell bonds,
increasing the money supply and further increasing inflation.
D. expected inflation decreases nominal interest rates, causing the Fed to sell bonds,
increasing the money supply and further increasing inflation.
Answer:
Loans made to consumers by finance companies are typically
A. only for the purchase of cars or boats.
B. at interest rates below those charged by banks for the same type of loan.
C. at interest rates above those charged by banks for the same type of loan.
D. not made for less than $10,000.
Answer:
Compared to interest rates on long-term U.S. government bonds, interest rates on
three-month Treasury bills fluctuate ________ and are ________ on average.
A. more; lower
B. less; lower
C. more; higher
D. less; higher
Answer:
________ is a process of bundling together smaller loans (like mortgages) into standard
debt securities.
A. Securitization
B. Origination
C. Debt deflation
D. Distribution
Answer:
Fisher’s quantity theory of money suggests that the demand for money is purely a
function of ________, and ________ no effect on the demand for money.
A. income; interest rates have
B. interest rates; income has
C. government spending; interest rates have
D. expectations; income has
Answer:
A shift in tastes toward foreign goods ________ net exports in the U.S. and causes the
quantity of aggregate output demanded to ________ in the U.S., everything else held
constant.
A. decreases; rise
B. decreases; fall
C. increases; rise
D. increases; fall
Answer:
Regulations designed to provide information to the marketplace so that investors can
make informed decisions are called
A. disclosure requirements.
B. efficient market requirements.
C. asset restrictions.
D. capital requirements.
Answer:
In a world with few impediments to capital mobility, the domestic interest rate equals
the sum of the foreign interest rate and the expected depreciation of the domestic
currency, a situation known as the
A. interest parity condition.
B. purchasing power parity condition.
C. exchange rate parity condition.
D. foreign asset parity condition.
Answer:
Federal deposit insurance covers deposits up to $250,000, but as part of a doctrine
called “too-big-to-fail” the FDIC sometimes ends up covering all deposits to avoid
disrupting the financial system. When the FDIC does this, it uses the
A. “payoff” method.
B. “purchase and assumption” method.
C. “inequity” method.
D. “Basel” method.
Answer:
The type of monetary policy regime that the Federal Reserve has followed From the
1980s up until the time Ben Bernanke became chair of the Federal Reserve in 2006 can
best be described as
A. monetary targeting.
B. inflation targeting.
C. policy with an implicit nominal anchor.
D. exchange-rate targeting.
Answer:
The aggregate supply curve is the total quantity of
A. raw materials offered for sale at different inflation rates.
B. final goods and services offered for sale at the current inflation rate.
C. final goods and services offered for sale at different inflation rates.
D. intermediate and final goods and service offered for sale at different inflation rates.
Answer:
The equation that represents M2 in the model of the money supply process is
a. M2 = C + D.
b. M2 = C + D + T – MMF.
c. M2 = C + D – T + MMF.
d. M2 = C + D + T + MMF.
Answer:
Which of the followings does NOT describe the money market in the ISLM model?
A. money demand function
B. investment function
C. money market equilibrium condition
D. money supply
Answer:
Everything else held constant, if aggregate output is to the ________ of the LM curve,
then there is an excess demand of money which will cause the interest rate to
________.
A. right; fall
B. right; rise
C. left; fall
D. left; rise
Answer:
In Keynes’s liquidity preference framework
A. the demand for bonds must equal the supply of money.
B. the demand for money must equal the supply of bonds.
C. an excess demand of bonds implies an excess demand for money.
D. an excess supply of bonds implies an excess demand for money.
Answer: