Question 1

The federal funds rate is determined in which of the following markets?

Accepted Answer

A)  the market for U.S.treasury securities
B)  the money market
C)  the bond market
D)  the market for central bank money
E)  none of the above

Question 2

The interest rate will increase as a result of which of the following events?

Accepted Answer

A)  an increase in income
B)  an open market purchase of bonds by the central bank
C)  a reduction in income
D)  all of the above
E)  none of the above

Question 3

Explain what effect changes in each of the following variables has on the demand for central bank money: (1)the interest rate,i; and (b)real income,Y.

Accepted Answer

Interest rate.A reduction in the interes...

Question 4

Which of the following is NOT an asset on a bank's balance sheet?

Accepted Answer

A)  reserves
B)  loans
C)  checkable deposits
D)  all of the above
E)  none of the above

Question 5

Which of the following is a component of high powered money?

Accepted Answer

A)  bonds held by banks,loans,and bank reserves
B)  currency in circulation plus bank reserves
C)  currency in circulation plus checkable deposits
D)  bonds held by banks plus checkable deposits
E)  the sum of currency in circulation,bank reserves,and checkable deposits

Question 6

Suppose a one-year discount bond offers to pay $1000 in one year and currently has a 15% interest rate.Given this information,we know that the bond's price must be

Accepted Answer

A)  $869.56.
B)  $1150.
C)  $850.
D)  $950.
E)  none of the above

Question 7

Which of the following is a component of money?

Accepted Answer

A)  bonds
B)  saving
C)  income
D)  stocks
E)  none of the above

Question 8

A reduction in the parameter c,the proportion of money individuals wish to hold as currency,will tend to cause which of the following?

Accepted Answer

A)  an increase in the monetary base (H) 
B)  a reduction in H
C)  an increase in the money multiplier
D)  a reduction in the money multiplier

Question 9

What is the difference between saving and savings?

Accepted Answer

Saving is the part of after-ta...

Question 10

A reduction in the reserve ratio,θ,will cause

Accepted Answer

A)  an increase in the monetary base (H) .
B)  a reduction in H and a reduction in the money multiplier.
C)  an increase in the money multiplier.
D)  a reduction in the money multiplier.

Question 11

An open market sale of securities will tend to cause

Accepted Answer

A)  a reduction in the supply of central bank money.
B)  a reduction in the demand for currency.
C)  a reduction in the demand for reserves.
D)  none of the above

Question 12

Suppose a one-year discount bond offers to pay $1000 in one year and currently sells for $950.Given this information,we know that the interest rate on the bond is

Accepted Answer

A)  5.3%.
B)  9.5%.
C)  10%.
D)  90%.
E)  110%.

Question 13

Which of the following will occur when the central bank pursues expansionary monetary policy?

Accepted Answer

A)  a leftward shift in the money demand curve and a leftward shift in the money supply curve
B)  a rightward shift in the money demand curve and a leftward shift in the money supply curve.
C)  a leftward shift in the money demand curve and a rightward shift in the money supply curve.
D)  a rightward shift in the money demand curve and a rightward shift in the money supply curve.
E)  none of the above

Question 14

Which of the following events will cause the interest rate to increase?

Accepted Answer

A)  an open market sale of bonds
B)  an increase in the reserve deposit ratio (i.e.,θ) 
C)  an increase in income
D)  all of the above

Question 15

Which of the following will cause an increase in the amount of money that one wishes to hold?

Accepted Answer

A)  an increase in the interest rate increase
B)  a reduction in the interest rate increase
C)  a reduction in income
D)  none of the above

Question 16

In 2006,the average U.S.household held approximately how much currency (dollar bills and coins) ?

Accepted Answer

A)  $50
B)  $100
C)  $600
D)  $1600
E)  none of the above

Question 17

If individuals do not hold currency,we know that

Accepted Answer

A)  M = D.
B)  H = R.
C)  the money multiplier is 1 / θ.
D)  all of the above

Question 18

Which of the following is an asset for both a bank and a central bank?

Accepted Answer

A)  currency
B)  deposits
C)  bonds
D)  all of the above
E)  none of the above

Question 19

Which of the following is a liability for the central bank?

Accepted Answer

A)  currency
B)  bonds
C)  savings accounts
D)  loans
E)  checkable deposits

Question 20

The demand for money is given by Md = $Y (0.3-i),where $Y = 120 and the supply of money is $30.
a.What is the equilibrium interest rate?
b.If the central bank wants to decrease i by 2%,at what level should it set the supply of money?

Accepted Answer

The answer of The demand for money is given by...

Exam 4: Financial Markets

The federal funds rate is determined in which of the following markets?

Correct AnswerverifiedShow Answer

A reduction in the reserve ratio,θ,will cause

Correct AnswerverifiedShow Answer

In 2006,the average U.S.household held approximately how much currency (dollar bills and coins) ?

Correct AnswerverifiedShow Answer

The interest rate will increase as a result of which of the following events?

Correct AnswerverifiedShow Answer

The demand for money is given by Md = $Y (0.3-i),where $Y = 120 and the supply of money is $30. a.What is the equilibrium interest rate? b.If the central bank wants to decrease i by 2%,at what level should it set the supply of money?

Correct AnswerverifiedShow Answer

Which of the following is a component of high powered money?

Correct AnswerverifiedShow Answer

What is the difference between saving and savings?

Correct AnswerverifiedSaving is the part of after-ta...View AnswerShow Answer

Suppose a one-year discount bond offers to pay $1000 in one year and currently has a 15% interest rate.Given this information,we know that the bond's price must be

Correct AnswerverifiedShow Answer

Explain what effect changes in each of the following variables has on the demand for central bank money: (1)the interest rate,i; and (b)real income,Y.

Correct AnswerverifiedInterest rate.A reduction in the interes...View AnswerShow Answer

An open market sale of securities will tend to cause

Correct AnswerverifiedShow Answer

Which of the following is a component of money?

Correct AnswerverifiedShow Answer

Which of the following events will cause the interest rate to increase?

Correct AnswerverifiedShow Answer

Which of the following will occur when the central bank pursues expansionary monetary policy?

Correct AnswerverifiedShow Answer

Suppose a one-year discount bond offers to pay $1000 in one year and currently sells for $950.Given this information,we know that the interest rate on the bond is

Correct AnswerverifiedShow Answer

If individuals do not hold currency,we know that

Correct AnswerverifiedShow Answer

Which of the following is a liability for the central bank?

Correct AnswerverifiedShow Answer

Which of the following is an asset for both a bank and a central bank?

Correct AnswerverifiedShow Answer

Which of the following will cause an increase in the amount of money that one wishes to hold?

Correct AnswerverifiedShow Answer

Which of the following is NOT an asset on a bank's balance sheet?

Correct AnswerverifiedShow Answer

A reduction in the parameter c,the proportion of money individuals wish to hold as currency,will tend to cause which of the following?

Correct AnswerverifiedShow Answer

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Saving is the part of after-ta...
View Answer

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Interest rate.A reduction in the interes...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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