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WorksheetsPrinciples of FM_Quiz 4_chap 4.5
Total questions: 25
Worksheet time: 20mins
The purchase of government securities by the Fed will
Decrease credit availability
Increase security prices
Increase interest rates.
Decrease the money supply
Deposits tend to expand whenever:
The public holds more cash.
Monetary policy “tightens”.
Reserve requirements increase.
Reserve requirements decrease.
An expansion in the U.S. money supply
Will cause U.S. exports to increase.
Will cause U.S. imports to increase.
Will cause the exchange value of the dollar to increase.
Will increase domestic interest rates
Ordinarily the money supply will decrease if:
The fed makes fewer loans at its discount window.
The fed raises reserve requirements.
The fed sells securities on the open market.
All of the above.
The discount rate is the rate that
Banks charge for loans to corporate customers
The federal reserve charges on loans to commercial banks
Banks charge to lend foreign exchange to customers
Banks charge each other on loans of excess reserves
Monetary policy only works in the long term
True
False
Real investment is encouraged by rising interest rates.
True
False
Interest rates and the money supply tend to vary inversely, at least in the short term.
True
False
A prolonged “tight” monetary policy can be associated with falling bond prices.
True
False
Increasing interest rates increase wealth and encourage spending.
True
False
An increase in the money supply should ultimately cause security prices to decrease.
True
False
There is definitely a tradeoff between stable prices and full employment.
True
False
Open market purchases by the Fed reduce total reserves in the banking system.
True
False
If wealth increases, the demand for stocks ________ and that of long-term bonds ________, everything else held constant
Decreases; decreases
Decreases; increases
Increases; increases
Increases; decreases
If wealth increases, the demand for stocks ________ and that of long-term bonds ________, everything else held constant
Decreases; increases
Decreases; decreases
Increases; decreases
Increases; increases
Everything else held constant, if the expected return on ABC stock rises from 5 to 10 percent and the expected return on CBS stock is unchanged, then the expected return of holding CBS stock ________ relative to ABC stock and the demand for CBS stock ________.
Falls; falls
Rises; rises
Falls; rises
Rises; falls
The demand for silver decreases, other things equal, when
The gold market is expected to boom.
Wealth grows rapidly
Interest rates are expected to rise.
The market for silver becomes more liquid
You would be more willing to buy AT&T bonds (holding everything else constant) if
The brokerage commissions on bond sales become cheaper.
Interest rates are expected to rise.
You expect diamonds to appreciate in value.
Your wealth has decreased.
You would be less willing to purchase U.S. Treasury bonds, other things equal, if
You inherit $1 million from your uncle Harry.
You expect interest rates to fall
Stock prices are expected to fall.
Gold becomes more liquid.
If stock prices are expected to drop dramatically, then, other things equal, the demand for stocks will ________ and that of Treasury bills will ________.
Increase; Increase
Decrease; Decrease
Increase; Decrease
Decrease; Increase
Consumption spending should increase if
financial wealth decreases
reserve requirements decrease.
interest rates increase.
credit availability decreases.
Restrictive monetary policy first impacts the market, security prices and interest rates.
money, increasing, decreasing
capital, increasing, decreasing
money, decreasing, increasing
mortgage, increasing, decreasing
If the price of gold becomes less volatile, then, other things equal, the demand for stocks will
________ and the demand for antiques will ________.
increase; increase
increase; decrease
decrease; decrease
decrease; increase
The demand for Leonardo Da Vinci paintings rises (holding everything else equal) when
stocks become easier to sell.
people expect a boom in real estate prices.
Treasury securities become riskier.
people expect gold prices to rise.
Which of the following would most likely decrease the Federal Funds rate?
decrease in the discount rate.
sale of securities by the Fed.
decrease in reserve requirements
none of the above
