What is the difference between a sterilized and non-sterilized central bank intervention in the foreign exchange market? What will be an ideal response? ANSWER A sterilized central bank intervention in the foreign exchange market does not affect the domestic money supply whereas a non-sterilized intervention would affect the domestic money supply.
When yield curves are steeply upward sloping A) long-term interest rates are above short-term interest rates. B) short-term interest rates are above long-term interest rates. C) short-term interest rates are about the same as long-term interest rates. D) medium-term interest rates are above both short-term and long-term interest rates. ANSWER A
In the money market, an increase in money demand will: A) result in a rightward shift in the money demand curve increasing interest rates. B) result in a rightward shift in the money demand curve decreasing interest rates. C) result in a leftward shift in the money demand curve increasing interest rates. D) result in […]
Assume a factory that currently employs 25 workers and owns a factory with 10,000 square feet of floor space is considering doubling the size of its factory. Economists would classify this as: A) a short-run decision. B) a long-run decision. C) neither a short-run nor a long-run decision. D) both a short-run and a long-run […]
The measure of the aggregate price level that is frequently the focus of Federal Reserve officials is the A) consumer price index. B) producer price index. C) GDP deflator. D) PCE deflator. ANSWER D
Open market purchase will result in: A) increase in bank reserves and a decrease in the federal funds rate. B) increase in bank reserves and an increase in the federal funds rate. C) decrease in bank reserves and a decrease in the federal funds rate. D) decrease in bank reserves and an increase in the […]
Asset transformation can be described as A) borrowing long and lending short. B) borrowing short and lending long. C) borrowing and lending only for the short term. D) borrowing and lending for the long term. ANSWER B
When Jane Brown writes a $100 check to her nephew and he cashes the check, Ms. Brown’s bank ________ assets of $100 and ________ liabilities of $100. A) gains; gains B) gains; loses C) loses; gains D) loses; loses ANSWER D
A feature of Bitcoin, a new type of electronic money, that make it attractive as a medium of exchange is A) anonymous transactions. B) volatility of value. C) heavy regulations by the central bank. D) wide acceptance by businesses. ANSWER A
Over time Americans have chosen to cook less at home and dine out more. This change in behavior: A) increases GDP. B) reduces GDP. C) does not affect GDP. D) none of the above ANSWER A
