In the market for reserves, if the federal funds rate is above the interest rate paid on excess reserves, then an open market ________ the supply of reserves, raising the federal funds interest rate, everything else held constant. A) sale decreases B) sale increases C) purchase increases D) purchase decreases ANSWER A
Under the European System of Central Banks, the Executive Board is similar in structure to the ________ of the Federal Reserve System. A) Board of Governors B) Federal Open Market Committee C) Federal Reserve Banks D) Federal Advisory Council ANSWER A
A problem with the CPI is the presence of a substitution bias on the behalf of consumers. Indicate whether the statement is true or false ANSWER TRUE
The core rate of inflation is a measure of the relative price changes that excludes changes in energy and food prices. Indicate whether the statement is true or false ANSWER FALSE
The Fed’s policy actions of reacting to higher inflation by raising the real interest rate during 2004-2006 were A) upward movements along the monetary policy curve. B) downward movement along the monetary policy curve. C) upward shifts of the monetary policy curve. D) downward shifts of the monetary policy curve. ANSWER A
Which of the following barriers to entry can best explain the continued success of a product that has been shown to be, in some way, harmful to the health of consumers? A) Patent. B) Consumer lock-in. C) Brand loyalty. D) Ownership of an essential resource. ANSWER C
A bank’s commitment to provide a firm with loans up to pre-specified limit at an interest rate that is tied to a market interest rate is called A) an adjustable gap loan. B) an adjustable portfolio loan. C) loan commitment. D) pre-credit loan line. ANSWER C
In the generalized dividend model, a future sales price far in the future does not affect the current stock price because A) the present value cannot be computed. B) the present value is almost zero. C) the sales price does not affect the current price. D) the stock may never be sold. ANSWER B
Under the European System of Central Banks, the Governing Council is similar in structure to the ________ of the Federal Reserve System. A) Board of Governors B) Federal Open Market Committee C) Federal Reserve Banks D) Federal Advisory Council ANSWER B
The requirement that certain professionals possess a license in order to work in a particular market has the effect of reducing the supply of those services, which in turn causes: A) price and the profits of firms in the market to increase. B) price and the profits of firms in the market to decrease. C) […]
