In the one-period valuation model, the value of a share of stock today depends upon A) the present value of both the dividends and the expected sales price. B) only the present value of the future dividends. C) the actual value of the dividends and expected sales price received in one year. D) the future […]
Date: September 10th, 2020
Make the case for and against an independent Federal Reserve. What will be an ideal response? ANSWER Case for: 1. An independent Federal Reserve can shield the economy from the political business cycle, and it will be less likely to have an inflationary bias to monetary policy. 2. Control of the money supply is […]
Date: September 10th, 2020
Prices of money market instruments undergo the least price fluctuations because of A) the short terms to maturity for the securities. B) the heavy regulations in the industry. C) the price ceiling imposed by government regulators. D) the lack of competition in the market. ANSWER A
Date: September 10th, 2020
U.S. Treasury bills are considered the safest of all money market instruments because there is a low probability of A) defeat. B) default. C) desertion. D) demarcation. ANSWER B
Date: September 10th, 2020
Critics of the current system of Fed independence contend that A) the current system is undemocratic. B) voters have too much say about monetary policy. C) the president has too much control over monetary policy on a day-to-day basis. D) the Board of Governors is held responsible for policy missteps. ANSWER A
Date: September 10th, 2020
Economists consider the ________ to be the most accurate measure of interest rates. A) simple interest rate. B) current yield. C) yield to maturity. D) real interest rate. ANSWER C
Date: September 10th, 2020
The quantity of reserves demanded equals A) required reserves plus borrowed reserves. B) excess reserves plus borrowed reserves. C) required reserves plus excess reserves. D) total reserves minus excess reserves. ANSWER C
Date: September 10th, 2020
An autonomous tightening of monetary policy A) causes an upward movement along the monetary policy curve. B) causes a downward movement along the monetary policy curve. C) shifts the monetary policy curve upward. D) shifts the monetary policy curve downward. ANSWER C
Date: September 10th, 2020
The interest rate that equates the present value of payments received from a debt instrument with its value today is the A) simple interest rate. B) current yield. C) yield to maturity. D) real interest rate. ANSWER C
Date: September 10th, 2020
The monetary policy (MP) curve indicates the relationship between A) the Federal Funds Rate and the real interest rate. B) the Federal Funds Rate and the inflation rate. C) the inflation rate and the expected inflation rate. D) the real interest rate the central bank sets and the inflation rate. ANSWER D
Date: September 10th, 2020
