If interest rates rise by 5 percentage points, say from 10 to 15%, bank profits (measured using gap analysis) will A) decline by $0.5 million. B) decline by $1.5 million. C) decline by $2.5 million. D) increase by $2.0 million. ANSWER A
Date: September 10th, 2020
The monetary base consists of A) currency in circulation and Federal Reserve notes. B) currency in circulation and the U.S. Treasury’s monetary liabilities. C) currency in circulation and reserves. D) reserves and Federal Reserve Notes. ANSWER C
Date: September 10th, 2020
What are some of the issues associated with the consumer price index? What will be an ideal response? ANSWER The fixed market basket procedure creates a number of problems in the CPI over time. One problem is substitution bias. Consumers will demand various quantities of goods and services in response to changes in their […]
Date: September 10th, 2020
If a $5,000 face-value discount bond maturing in one year is selling for $5,000, then its yield to maturity is A) 0 percent. B) 5 percent. C) 10 percent. D) 20 percent. ANSWER A
Date: September 10th, 2020
The sum of the Fed’s monetary liabilities and the U.S. Treasury’s monetary liabilities is called A) the money supply. B) currency in circulation. C) bank reserves. D) the monetary base. ANSWER D
Date: September 10th, 2020
The view that expectations change relatively slowly over time in response to new information is known in economics as A) rational expectations. B) irrational expectations. C) slow-response expectations. D) adaptive expectations. ANSWER D
Date: September 10th, 2020
The combination of rising inflation and higher unemployment is called: A) recession. B) expansion. C) stagflation. D) deflation. ANSWER C
Date: September 10th, 2020
After 2003, The Federal Reserve usually keeps the discount rate A) above the target federal funds rate. B) equal to the target federal funds rate. C) below the target federal funds rate. D) equal to zero. ANSWER A
Date: September 10th, 2020
Assuming that the average duration of its assets is four years, while the average duration of its liabilities is three years, then a 5 percentage point increase in interest rates will cause the net worth of First National to ________ by ________ of the total original asset value. A) decline; 5 percent B) decline; 10 […]
Date: September 10th, 2020
Economists have focused more attention on the formation of expectations in recent years. This increase in interest can probably best be explained by the recognition that A) expectations influence the behavior of participants in the economy and thus have a major impact on economic activity. B) expectations influence only a few individuals, have little impact […]
Date: September 10th, 2020
