Question

 

1. When it comes to financial matters, the views of Aristotle can be stated as: a. usury is nature’s way of helping each other. b. the fact that money is barren makes it the ideal medium of exchange. c. charging interest is immoral because money is not productive. d. when you lend money, it grows more money. e. interest is too high if it can’t be paid back. 

2. Since 2008, when the monetary base was about $800 billion, it has: a. fallen to about $600 billion. b. stayed constant, more or less. c. risen to about $1 trillion. d. risen to about $4 trillion. e. risen to about $14 trillion. 

3. A depository institution that is fully “loaned up” means that: a. it lacks sufficient cash required to meet requests for a depositor’s withdrawal. b. its total assets are less than its total liabilities. c. it has too many bad loans. d. it has used all of its excess reserves to make loans. e. None of the above . 

 

4. The recent purchases of large-scale assets by the Federal Reserve is called: a. quantitative easing. b. qualitative easing. c. quantity leasing. d. quotient borrowing. e. surprisingly, “large-scale asset purchases.” 

5. As described by Murphy, Austrian economists argue that when the Fed creates new money, it pushes _____ below its natural rate. a. unemployment b. inflation c. interest d. the money supply e. the national debt 

6. The reason we no longer have a gold standard is because: a. banks refused to accept gold for deposit. b. banks refused to issue gold for paper money. c. people grew tired of using gold. d. the government made it illegal to use gold as money. e. Both A and B of the above are true. 

7. During the late 1800s, what was proposed as a form of backing for paper money alongside gold? a. Silver. b. Platinum. c. Copper. d. Nickel. e. Latinum. 

8. The first central bank of the U.S., which received a federal charter of 20 years, was: a. the Bank of North America. b. the First Bank of the United States. c. the National Bank of the United States. d. the Federal Reserve Bank of the United States. e. Continental Illinois. 

9. The Federal Reserve was established in: a. 1766. b. 1836. c. 1913. d. 1936. e. 1966. 

10. Which of the following was a key feature of the changes made to the Federal Reserve in 1935? a. It doubled the number of Federal Reserve districts to twelve. b. It made the Secretary of the Treasury a member of the Board of Governors. c. It eliminated the authority of the Board of Governors to set reserve requirements. d. It increased control of the Federal Reserve System by the Board of Governors. e. All of the above. 

11. What was the significance of the Federal Reserve-Treasury Accord of 1951? a. The Fed agreed to begin purchasing government securities to keep yields on government securities low. b. The Fed agreed to purchase all government securities that the Treasury issued. c. The Fed was finally granted total independence from Congress. d. The Fed was granted only partial independence from Congress. e. The Fed’s independence from the Treasury Department was reaffirmed. 

12. The structure of the Fed includes: a. ten Federal Reserve District Banks. b. a Board of Governors located in New York City, the financial capital of America. c. budgetary control in the hands of the U.S. House of Representatives. d. the Federal Open Market Committee. e. All of the above. 

13. The largest asset on the Fed’s balance sheet consists of: a. reserves of member banks. b. loans to corporations. c. loans to banks. d. government securities. e. Federal Reserve notes. 

14. Which of the following are assets of the Federal Reserve? a. Foreign currency reserves. b. Federal Reserve notes. c. Government securities. d. All of the above. e. Only A and C of the above. 

15. Which of the following are liabilities of the Federal Reserve? a. Reserve deposits of depository institutions. b. Federal Reserve notes. c. Government securities. d. Both A and B of the above. e. Both B and C of the above. 

16. Currently, the largest form of liabilities on the Fed’s balance sheet is: a. Reserves of member banks. b. Federal Reserve notes. c. Loans to banks. d. Government securities. e. Gold certificates. 

17. The deposits of depository institutions held by the Fed: a. are a liability to the Fed but an asset to the depository institutions. b. are an asset to the Fed but a liability to the depository institutions. c. are an asset to both the Fed and the depository institutions. d. are a liability to both the Fed and the depository institutions. e. do not show up at all in the balance sheet for the Federal Reserve. 

18. The role of the Fed includes: a. holding deposits from the federal government. b. providing services to clear checks through the financial system. c. control the nation’s money supply. d. All of the above. e. Only B and C of the above. 

19. The purpose of the lender of last resort is to: a. raise bank profitability . b. make loans to insolvent but liquid banks. c. make loans to solvent but illiquid banks. d. make loans to individuals and corporations that request them. e. provide needed funding for the building of resorts. 

20. Which of the following are liabilities of the Fed? a. Federal Reserve notes. b. Bank reserve deposits. c. Discount loans. d. Gold certificates. e. Both A and B are liabilities of the Fed.

21. Under normal circumstances, when the Fed sells $100 of bonds, the monetary base falls by an amount _____ $100 and the money supply falls by an amount _____ $100. a. less than, equal to b. equal to, equal to c. equal to, greater than d. greater than, greater than e. greater than, equal to 

22. When the Fed buys securities, how much banks hold as excess reserves affects the resulting change in the: a. monetary base. b. money supply. c. money multiplier. d. All of the above. e. Only A and B of the above. 

23. If the Fed buys $100 in securities and the reserve requirement is 10%, according to the simple formula for the money multiplier, the money supply: a. falls by $100. b. falls by $1000. c. rises by $100. d. rises by $1000. e. remains unchanged, as the simple multiplier is zero. 

24. A change in the monetary base generally leads to a larger change in the money supply since: a. Reserves earn interest for the bank. b. Banks lend excess reserves, which become deposits. c. A change in the monetary base changes the currency ratio of households. d. None of the above. 

25. The required reserve ratio is 0.2, the level of deposits is $1000, the level of currency held by the public is $500, the desired level of excess reserves is $300, the level of money market funds is $500 and the level of time deposits is $1500. If the Fed lowers the monetary base by $100, what is the change in M1? a. Falls by $350. b. Falls by $244. c. Falls by $150. d. Rises by $250. e. None of the above. 

26. Which of the following is the key monetary policy tool on a day-to-day basis? a. Changing reserve requirements. b. Changing the money multiplier. c. Open market sale or purchase. d. Discount window lending. 

27. What is the key interest rate that banking institutions can lend or borrow reserves among each other, from day to day to meet reserve requirements or to fund their extensions of credit? a. The discount rate. b. The Federal Funds rate. c. The real exchange rate. d. The real interest rate. e. None of the above. 

28. Which of the following monetary policy actions would lower the equilibrium federal funds rate? a. An open market purchase. b. A discount rate increase. c. Both an open market purchase and a discount rate increase. d. Both a discount rate increase and a cut in the required reserve ratio. e. None of the above. 

29. What is not a characteristic of intermediate targets? a. Consistent with end goals b. Unmeasurable c. Frequently observable d. Controllable e. Definable 

30. Variations in real GDP relative to its long-run growth path are known as: a. expansions. b. peaks. c. business cycles. d. Natural GDP. e. Hayekian slippages.

31. What suggestion does Milton Friedman offer to eliminate economic instability? a. Increased use of discretionary policy b. Increased use of fiscal policy c. Implementation of policy rules d. All of the above e. None of the above 

32. A conservative central banker is one who: a. dislikes inflation more than unemployment and is more willing to risk a recession to keep inflation low. b. has a performance based contract with the government. c. is willing to tolerate increased inflation in order to reduce unemployment. d. likes to have more political influence in the monetary policymaking process. e. is chosen from the Republican Party. 

33. What are some of the potential intermediate target variables? a. Interest rate. b. Credit aggregates. c. Nominal GDP. d. Monetary aggregates. e. All of the above. 

34. Inflation begins to rise in the U.S. After three weeks, policymakers notice the increase and spend six weeks deciding what course of action to take. The six week time gap is known as the: a. Recognition lag. b. Foreign lag. c. Response lag. d. Transmission lag. e. Refurbishing lag. 

35. Which of the following represents the recognition lag? a. The amount of time between the realization of the desire for a policy action and the actual implementation of that policy. b. The amount of time between the desire for a policy action and the realization of that desire. c. The amount of time between the implementation of a policy action and its macroeconomic effects. d. None of the above. 

36. In an environment of discretionary monetary policymaking, lower policy credibility will likely primarily result in a: a. lower inflation rate. b. higher inflation rate. c. lower real output level. d. higher real output level. e. stable price level. 

37. Which of the following is a desirable characteristic of an intermediate target? a. It is frequently observable. b. It is definable and measurable. c. It is controllable. d. All of the above. e. None of the above. 

38. Because policymakers have limited long-term information about the economy, they typically will set: a. no targets. b. autonomous targets. c. hidden targets. d. ultimate targets. e. intermediate targets. 

39. Which of the following potential targets can the Federal Reserve observe with the greatest frequency? a. M1. b. Interest rates. c. Real GDP. d. Nominal GDP. e. Inflation.

 40. What is the term for a central bank pre-commitment to following a specific monetary policy strategy without regard to changing economic conditions? a. Policy rule. b. Discretionary policy. c. Laissez faire policy. d. Inflationary policy. e. All of the above. 

 41. A specific monetary policy strategy that departs from a pre-announced policy strategy because of changes in economic conditions is known as: a. a policy rule. b. discretionary policy. c. laissez faire policy. d. inflationary policy.

  42. Greater central bank independence has the beneficial effect of lowering which of the following: a. real GDP. b. nominal GDP. c. average inflation. d. the inherent bias of monetary policy towards lower inflation. e. All of the above. 

 43. The problem with time lags, insofar as monetary policy is concerned, is that: a. business cycles variation may be dampened. b. business cycles variation may be worsened. c. business cycles variation may be unaffected. d. inflation is generally the less serious problem our economy faces. e. unemployment never responds to monetary policy. 

 44. Making policy rules credible that inflation will be kept low is essential to making them successful. Some ways in which this may be done include: a. placing constitutional limits on discretionary monetary policy. b. keeping the Fed’s intentions secret. c. tying the Fed’s policy more closely with Congressional intent. d. tying the Fed’s policy more closely with Presidential intent. e. appointing central bankers that are unconcerned with the problems of inflation. 

 45. Which of the following can make monetary policy credible? a. The imposition of constitutional limits on monetary policy. b. The appointment of conservative policymakers. c. The willingness to react and respond to changing economic conditions. d. All of the above. e. Only A and B of the above.

 46. The Fed’s policy of selling short term securities and buying long term securities, such that their balance sheet is unaffected, was called: a. the King’s Gambit. b. Ghost Protocol. c. the Nickel Defense. d. Operation Twist. e. the Divergent Plan. 47. In a system of free banking, what serves as a day-to-day constraint on a bank’s expansion of credit? a. The trust that depositors have in the bank. b. The extent to which bank notes are used as money. c. The contribution this makes to the boom-bust cycle. d. The limited clientele of the bank. e. All of the above.

  48. In a system of free banking, credit expansion will be most magnified if: a. there is just one bank. b. there are just a few large banks. c. there are many, smaller banks. d. there are no banks. e. None of the above, as credit expansion has nothing to do with banks. 

 49. As Rothbard points out, the creation of a central bank tends to: a. hurt smaller banks that must meet new regulatory requirements. b. hurt banks by taking away their ability to print up bank notes. c. help banks by allowing them all to expand credit together. d. help banks by raising their required reserve ratio. e. help banks by constantly redeeming their notes for gold. 

 50. A bank can get more reserves from: a. the public if they can attract more deposits. b. other banks if they can borrow funds from them. c. the central bank. d. All of the above. e. None of the above. 

 51. Which of the following is false about Jay Cooke? a. He helped to lobby for Salmon Chase to become U.S. Grant’s Secretary of the Treasury. b. He helped pass the National Banking Act of 1863. c. For many years he had a monopoly on the underwriting of federal government debt. d. By 1870 he was reported to be the richest man in America. e. During the Panic of 1873 he lost virtually all his wealth. 

 52. The major way in which the Fed affects bank reserves is through: a. the federal funds market. b. cash advances to banks. c. the discount rate of interest. d. the required reserve ratio. e. the capital requirements imposed on banks.

  53. The phrase “monetize the debt” refers to a situation in which the federal government finances its spending by: a. raising taxes. b. selling bonds to the public. c. selling bonds to the central bank. d. foreign borrowing. e. All of the above. 

 54. Which of the following is true about the Bank of England? a. It was founded in the late 1700s. b. It never had to suspend specie payment. c. During its first hundred years, it faced stiff competition from the National Land Bank. d. During its first hundred years, it didn’t buy any government debt. e. Their notes didn’t become legal tender until the 1830s. 

 55. Rothbard speculates that without the Second Bank of the U.S., then we (in the U.S.): a. would have gotten off the gold standard much sooner. b. would have seen the money supply grow by exponential amounts. c. may have seen the end of inflation, perhaps forever. d. All of the above. e. None of the above. 

 56. When the Second Bank of the U.S. failed to get a 20 year extension on its life: a. it failed immediately. b. it applied for, and received, a state charter to stay in business. c. it was purchased by the Bank of England. d. the national sentiment was so negative that the Congress nearly impeached President Jackson. e. All of the above. 

 57. To decrease the political fallout from the “pet bank” controversy, President Van Buren established the: a. Independent Treasury System. b. Federal Reserve System. c. national bank charter. d. International Monetary Fund. e. None of the above. 

 58. Which of the following is not true with regard to the Suffolk System? a. Country banks were required to hold gold deposits with Suffolk. b. Suffolk would redeem country bank notes at par. c. This insulated banks in New England from the bank panic of 1837. d. Its strength led to specie redemption throughout the panic of 1837. e. It replaced the earlier Bank of Mutual Redemption. 

 59. Among the changes brought about by the American Civil War was/were: a. the creation of nationally-chartered banks. b. the creation of nationally-chartered credit unions. c. the elimination of small country banks. d. the proliferation of banks printing up their own notes. e. All of the above. 

 60. The best way to find out the current price of an investment that yields a future income stream is by calculating its: a. discounted present value. b. nominal yield. c. yield to maturity. d. current yield. e. market price. 

 61. Which concept of interest best identifies the rate of return on a bond if, once purchased, it is held until it matures? a. The capital gains rate of interest. b. The coupon return. c. The yield to maturity. d. The nominal yield. e. The current yield. 

 62. According to theory, when the Fed buys bonds, their price will _____, interest rates will _____, spending in the economy will _____ and the GDP will _____. a. rise; fall; rise; rise b. rise; rise; fall; fall c. fall; rise; fall; fall d. fall; fall; fall; fall e. rise; rise; rise; rise 

 63. Who said, “The most powerful force in the universe is compound interest.”? a. George Washington. b. Alan Greenspan. c. Warren Buffet. d. Albert Einstein. e. Murray Rothbard. 

 64. What affects the rate of interest? a. The time value of money. b. Our desire for liquidity. c. Risk. d. All of the above. e. None of the above. 

 65. The nominal yield is calculated as the: a. (coupon return)/(current market price). b. (coupon return)/(face amount of the bond). c. (coupon return)/(annual interest rate). d. (face value of the bond)/(current market price). e. (annual interest rate)/(coupon return). 

 66. Who is interested in, and/or affected by, changing interest rates? a. Savers. b. Borrowers. c. Policymakers. d. Forecasters. e. All of the above. 

 67. Suppose that a corporate bond is issued in an amount of $2,000 with a coupon return of $100 every year, then the nominal yield on the bond is: a. 0.05 percent. b. 5 percent. c. 10 percent. d. 100 percent. e. It cannot be determined from the information given. 

 68. A bond has a $2,000 face value, has a $100 annual coupon, and is now sold in the market for $1,900. From this we know that the current yield on this bond is: a. greater than 5%. b. equal to 5%. c. less than 5%. d. It cannot be determined from the information given. 

 69. When the interest rate is 5%, the present value of $1,000, that will be received in five years, is: a. greater than $1000. b. equal to $1000. c. less than $1000. d. It cannot be determined from the information given. 

 70. The interest rate at which the present value of an asset’s return is equal to its price today is the: a. principal value. b. coupon return. c. nominal yield. d. yield to maturity. e. federal funds rate minus the real rate of interest. 

 71. A simple loan that requires a principal payment of $2,000, plus $400 in interest, one year from now has a yield of: a. 2 percent. b. 20 percent. c. 200 percent. d. 40 percent. e. 400 percent. 

 72. Woods contends that contrary to what actually happened during the Great Depression we are generally told that: a. Hoover was at fault for being too laissez-faire. b. Roosevelt saved capitalism with massive government spending. c. the length of the Great Depression was due to government meddling. d. All of the above. e. Only A and B of the above. 

 73. What act laid the groundwork for today’s two-tiered system of both state and nationally chartered banks? a. National Banking Act. b. Free-Banking Act. c. Glass-Steagall Act. d. The Federal Credit Union Act. e. The New Banking Act. 

 74. The price of a bond is inversely related to: a. the time to maturity. b. the yield to maturity. c. the coupon value of the bond. d. All of the above. e. None of the above. 

 75. Which of the following factors could explain difference in yields on bonds with the same time to maturity? a. Default risk. b. Tax considerations. c. Liquidity. d. All of the above. e. None of the above. 

 76. The price of a bond is directly related to: a. the face value. b. the yield to maturity. c. the time to maturity. d. All of the above. d. None of the above. 

 77. The present value of a bond with no coupon, one year to maturity, face value $1000 and yield to maturity of 5% is: a. $952.38 b. $1,000.00 c. $1,005.00 d. $1,050.00 e. $555.00 

 78. The present value of a bond with no coupons, two years to maturity, face value of $10,000 and yield to maturity of 4% is: a. $7,142.86 b. $9,245.56 c. $9,615.38 d. $10,400.00 e. $11,312.45 

 79. A deposit of $1000 is made into an account that earns 20% per year. After three years, the (future) value will be: a. $1000. b. $1200. c. $1440. d. $1728. e. $3000. 

 80. Your rich uncle Albert gives you a savings bond that pays $500 four years from now. If the relevant interest rate for you is 2%, what is the present value of the bond? a. $461.92 b. $490.19 c. $500.00 d. $510.00 e. $541.21 

 81. A two-year coupon bond has a face value of $1000, a coupon rate of 5% and a yield to maturity of 2%. What is the price of the bond? a. $944.21 b. $1000 c. $1058.25 d. $1078.43 

 82. Eve and Cameron both buy bonds with yield to maturity of 4%, but Eve’s bond has 2 years to maturity and Cameron’s has 5. After one year, yields for these bonds rise to 7%. Which of the following is true? a. Both bonds rise in value but Eve’s rises more. b. Both bonds rise in value but Cameron’s rises more. c. Both bonds fall in value but Eve’s falls more. d. Both bonds fall in value but Cameron’s falls more. e. Neither bond will change in price as their coupons are predetermined. 

 83. Short maturity bonds have ____ interest rate risk than long maturity bonds. a. more b. less c. equal d. an undetermined amount of 

 84. The relationship between real and nominal interest rates is described in the: a. inflation relation. b. Fisher equation. c. Friedman equation. d. equation of exchange. e. None of the above. 

 85. The chance that a bond issuer won’t make promised payments is called: a. default risk. b. credit risk. c. interest rate risk. d. representation risk. e. None of the above. 

 86. Household wealth affects the equilibrium yield on bonds due to its impact on: a. the demand for bonds. b. the supply of bonds. c. both the supply and demand for bonds. d. None of the above. 

 87. If S&P upgrades a corporate bond the _____ for the bond will shift and its risk premium will _____. a. demand; rise. b. demand; fall. c. supply; rise. d. supply; fall. e. supply and demand; rise 

 88. The term structure of interest rates models the yields of bonds with: a. the length of maturity. b. the degree of default risk. c. with the degree of liquidity risk. d. All of the above. e. Only B and C of the above. 

 89. The yield curve may be used to forecast a possible future recession if it is: a. upward sloping. b. flat. c. downward sloping. d. erratic. e. Both B and C of the above. 

 90. According to Woods, bank panics in the 1800s: a. were fueled by credit expansion. b. were subject to repetition because the government would suspend the redemption of paper for gold. c. were purely market driven with no government involvement. d. Both A and B of the above. e. Both B and C of the above. 

 91. According to Woods, the main reason that the Great Depression lasted so long was that Presidents Hoover and Roosevelt: a. deregulated major utilities. b. shut down failing railroad companies. c. kept wages and prices from falling. d. promoted free trade which exported U.S. jobs. e. tried, but failed, to shut down the Federal Reserve. 

 92. What did the government do in the wake of the 1920-1921 depression? a. It balanced its budget. b. It engaged in moderate amounts of fiscal stimulus spending. c. It started many public works projects. d. It grew in size by about 15% relative to the GDP. e. All of the above. 

 93. Since the Fed was created, the value of a dollar has: a. fallen by about 95%. b. fallen by about 50%. c. fallen by about 18%. d. risen by about 25%. e. risen by about 40%. 

 94. To illustrate the problems with barter, Woods asks how someone who only owns a castle can buy: a. a pint of ale. b. new clothes. c. chickens and cattle. d. bows and arrows. e. a loaf of bread. 

 95. Among the anti-gold fallacies cited by Woods is/are: a. that the gold supply is inflexible. b. that gold is too bulky to carry around. c. it is more costly to use gold than to use fiat paper. d. there isn’t enough gold to facilitate all business transactions. e. All of the above. 

 96. Recent scholarship points to which of the following as a “primary” cause of the Great Depression? a. Unstable market economies. b. Lack of government oversight. c. Interference with the gold standard. d. All of the above. e. None of the above. 

 97. During the 1920s, which of the following was true about our economic growth? a. The source of much of our growth was commercially generated electricity. b. By the end of the 1920s, we were nearing an average of one car per household. c. Per capita income rose over this time frame by more than 10%. d. All of the above. e. None of the above. 

 98. During World War I, the marginal income tax rate (which began in 1913) on incomes over $750,000 was: a. 1%. b. 11%. c. 25%. d. 42%. e. 76%. 

 99. During the initial stages of the Great Depression, President Hoover convinced many American industrialists to: a. keep wages from falling. b. raise production by at least 5% per year. c. raise wages by at least 5% per year. d. reduce production by no more than 10% per year. e. reduce wages by at least 10% per year. 

Answer 1

Answer:- When it comes to financial matters, the views of Aristotle can be stated as:

charging interest is immoral because money is not productive

Answer:- Since 2008, when the monetary base was about $800 billion, it has:
risen to about $4 trillion

Answer:- A depository institution that is fully "loaned up" means that:

it has used all of its excess reserves to make loans

Answer:- As described by Murphy, Austrian economists argue that when the Fed creates new money, it pushes _____ below its natural rate.

Interest

Answer:- The reason we no longer have a gold standard is because:

the government made it illegal to use gold as money

Answer:- During the late 1800s, what was proposed as a form of backing for paper money alongside gold?

1. Silver

Answer:- The first central bank of the U.S., which received a federal charter of 20 years, was:
the First Bank of the United States.

Answer:- The Federal Reserve was established in:

1913

Answer:- Which of the following was a key feature of the changes made to the Federal Reserve in 1935

It increased control of the Federal Reserve System by the Board of Governors

Answer:- What was the significance of the Federal Reserve-Treasury Accord of 1951?

The Fed was granted total independence from Congress

Answer:- The structure of the Fed includes:

The Federal Open Market Committee

Answer:- The largest asset on the Fed's balance sheet consists of

government securities

Answer:- Which of the following are assets of the Federal Reserve?

Only A and C of the above

Answer:- Which of the following are liabilities of the Federal Reserve?

Both A and B of the above

Answer:- Currently, the largest form of liabilities on the Fed's balance sheet is:
Reserves of member banks.

Answer:- The deposits of depository institutions held by the Fed:
are a liability to the Fed but an asset to the depository institutions

Answer:- The purpose of the lender of last resort is to:
make loans to solvent but illiquid banks.

Answer:- Which of the following are liabilities of the Federal Reserve?
Both A and B of the above.

Answer:- 22. When the Fed buys securities, how much banks hold as excess reserves affects the resulting change in the:

money supply

Answer:- If the Fed buys $100 in securities and the reserve requirement is 10%, according to the simple formula for the money multiplier, the money supply:
rises by $1000.

Answer:- A change in the monetary base generally leads to a larger change in the money supply since:
Banks lend excess reserves, which become deposits.

Answer;- The required reserve ratio is 0.2, the level of deposits is $1000, the level of currency held by the public is $500, the level of excess reserves is $300, the level of money market funds is $500 and the level of time deposits is $1500. If the Fed lowers the monetary base by $100, what is the change in M1?
Falls by $150.

Answer:- Which of the following is the key monetary policy tool on a day-to-day basis?
Open market sale or purchase.

Answer:- What is the key interest rate that banking institutions can lend or borrow reserves among each other, from day to day to meet reserve requirements or to fund their extensions of credit?
The Federal Funds rate

Answer:- Which of the following monetary policy actions would lower the equilibrium federal funds rate?
None of the above.

Answer:- What is not a characteristic of intermediate targets?
Unmeasurable

Answer:- Variations in real GDP relative to its long-run growth path are known as:
business cycles.

Answer:- What suggestion does Milton Friedman offer to eliminate economic instability?
Implementation of policy rules

Answer:- A conservative central banker is one who:
dislikes inflation more than the average citizen and is more willing to risk a recession.

Answer:- What are some of the potential intermediate target variables?
All of the above.

Answer:- Which of the following represents the recognition lag?
The amount of time between the desire for a policy action and the realization of that desire.

37. Which of the following is a desirable characteristic of an intermediate target. d. All of the above.

39. Which of the following potential targets can the Federal Reserve observe with the greatest frequency?

a. M1

40. What is the term for a central bank pre-commitment to following a specific monetary policy strategy without regard to changing economic conditions?

a. Policy rule.

41. A specific monetary policy strategy that departs from a pre-announced policy strategy because of changes in economic conditions is known as

. b. discretionary policy.

42. Greater central bank independence has the beneficial effect of lowering which of the following

. c. average inflation

43. The problem with time lags, insofar as monetary policy is concerned, is that:

b. business cycles variation may be worsened.

44. Making policy rules credible that inflation will be kept low is essential to making them successful. Some ways in which this may be done include:

a. placing constitutional limits on discretionary monetary policy

45. Which of the following can make monetary policy credible?

. e. Only A and B of the above.

46. The Fed’s policy of selling short term securities and buying long term securities, such that their balance sheet is unaffected, was called: a. the King’s Gambit. b. Ghost Protocol. c. the Nickel Defense. d. Operation Twist. e. the Divergent Plan.

47. In a system of free banking, what serves as a day-to-day constraint on a bank’s expansion of credit?

e. All of the above.

48. In a system of free banking, credit expansion will be most magnified if:. b. there are just a few large banks

49. As Rothbard points out, the creation of a central bank tends to: a. hurt smaller banks that must meet new regulatory requirements. b. hurt banks by taking away their ability to print up bank notes. c. help banks by allowing them all to expand credit together. d. help banks by raising their required reserve ratio. e. help banks by constantly redeeming their notes for gold.

50. A bank can get more reserves from:

e. None of the above.

52. The major way in which the Fed affects bank reserves is through:

the federal funds market

53. The phrase “monetize the debt” refers to a situation in which the federal government finances its spending by

. c. selling bonds to the central bank

54. Which of the following is true about the Bank of England

During its first hundred years, it didn't buy any government debt

55. Rothbard speculates that without the Second Bank of the U.S., then we (in the U.S.):

. c. may have seen the end of inflation, perhaps forever..

56. When the Second Bank of the U.S. failed to get a 20 year extension on its life

d. the national sentiment was so negative that the Congress nearly impeached President Jackson.

57. To decrease the political fallout from the “pet bank” controversy, President Van Buren established the:

a. Independent Treasury System

58. Which of the following is not true with regard to the Suffolk System?

c. This insulated banks in New England from the bank panic of 1837.

59. Among the changes brought about by the American Civil War was/were:

a. the creation of nationally-chartered banks

.

60. The best way to find out the current price of an investment that yields a future income stream is by calculating its:

a. discounted present value

61. Which concept of interest best identifies the rate of return on a bond if, once purchased, it is held until it matures?

c. The yield to maturity.

.

62. According to theory, when the Fed buys bonds, their price will _____, interest rates will _____, spending in the economy will _____ and the GDP will _____.

rise; fall; rise; rise

63. Who said, “The most powerful force in the universe is compound interest.”?

. d. Albert Einstein.

64. What affects the rate of interest?

d. All of the above.

.

65. The nominal yield is calculated as the:

(annual interest rate)/(coupon return)

66. Who is interested in, and/or affected by, changing interest rates?

e. All of the above.

68. A bond has a $2,000 face value, has a $100 annual coupon, and is now sold in the market for $1,900. From this we know that the current yield on this bond is:

a. greater than 5

69. When the interest rate is 5%, the present value of $1,000, that will be received in five years, is:

a. greater than $1000.

.

70. The interest rate at which the present value of an asset’s return is equal to its price today is the:

d. yield to maturity.

71. A simple loan that requires a principal payment of $2,000, plus $400 in interest, one year from now has a yield of

. b. 20 percent

73. What act laid the groundwork for today’s two-tiered system of both state and nationally chartered banks?

a. National Banking Act

74. The price of a bond is inversely related to:

b. the yield to maturity

75. Which of the following factors could explain difference in yields on bonds with the same time to maturity?

d. All of the above.

.

76. The price of a bond is directly related to:

c. the time to maturity

83. Short maturity bonds have ____ interest rate risk than long maturity bonds. b. less c

84. The relationship between real and nominal interest rates is described in the: b. Fisher equation.

85. The chance that a bond issuer won’t make promised payments is called: a. default risk

86. Household wealth affects the equilibrium yield on bonds due to its impact on:

. c. both the supply and demand for bonds.

87. If S&P upgrades a corporate bond the _____ for the bond will shift and its risk premium will _____.

. b. demand; fall.

88. The term structure of interest rates models the yields of bonds with:

a. the length of maturity.

89. The yield curve may be used to forecast a possible future recession if it is:

. c. downward sloping.

93. Since the Fed was created, the value of a dollar has:

a. fallen by about 95%.

94. To illustrate the problems with barter, Woods asks how someone who only owns a castle can buy

e. a loaf of bread.

95. Among the anti-gold fallacies cited by Woods is/are:

e. All of the above.

.

98. During World War I, the marginal income tax rate (which began in 1913) on incomes over $750,000 was:

e. 76%.

99. During the initial stages of the Great Depression, President Hoover convinced many American industrialists to:

a. keep wages from falling.