Everything else held constant, in the market for reserves, increases in the discount rate affect the federal funds rate A) when the funds rate is below the discount rate. B) when the funds rate equals the discount rate. C) when the demand for federal funds intersects the vertical section of the reserve supply curve. D) […]
Increased uncertainty resulting from the global financial crisis ________ the required return on investment in equity. A) raised B) lowered C) had no impact on D) decreased ANSWER A
Assuming that the average duration of its assets is five 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 decline by ________ of the total original asset value. A) 5 percent B) 10 percent C) […]
Arguments for discretionary policies include A) policy rules can be too rigid because they cannot foresee every contingency. B) the time-inconsistency problem can lead to poor economic outcomes. C) discretionary policies pursue overly expansionary monetary policies to boost employment in the short run but generate higher inflation in the long run. D) all of the […]
The long-run aggregate supply curve is influenced by: A) resources available. B) efficiency levels. C) level of technology. D) all of the above. ANSWER D
U.S. dollar deposits in foreign banks outside the U.S. or in foreign branches of U.S. banks are called A) Atlantic dollars. B) Eurodollars. C) foreign dollars. D) outside dollars. ANSWER B
Economic theory provides insights into the range of possibilities for cost relationships. Studies such as those by Blinder et al. provide insights into where, within that range, many firms operate. Thus, there is no real conflict between theory and reality, as some people might try to claim. Indicate whether the statement is true or false […]
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 $1.5 million. ANSWER B
The Sherman Antitrust Act: A) prohibits conspiracies in restraint of trade. B) allows the formation of trusts so long as they are public enterprises. C) allows a group of firms to form a trust only if it is done to take advantage of economies of scale. D) prevents the military from using armored vehicles on […]
The yield to maturity for a one-year discount bond equals the increase in price over the year, divided by the A) initial price. B) face value. C) interest rate. D) coupon rate. ANSWER A
