FININST 4265 MT review

If GDP is $20 trillion and the money supply is $4 trillion, what is the velocity of money?

5 (20T/4T=5T)

Which of these would cause a decrease in aggregate demand?

An increase in imports

Which of these categories is the largest asset on the Federal Reserve's balance sheet - by far?

Securities

Initially, the US Federal Reserve was created by Congress for what primary function?

Serve as a lender of last resort

What do we refer to when we talk about time preference?

The rate at which we prefer to consume today instead of in the future

In 1968, Congress passed a key piece of legislation to protect consumers called the __________ Act.

Truth in Lending

Inflation is a benefit in the short run to

borrowers

Financial Markets brings together _____ and ______.

borrowers; lenders

Following the Great Depression, the power of the Fed shifted to the

Federal Open Markets Committee

Which entities, by definition, issue the legal contracts known as bonds?

Government Corporations Government agencies

Keynes suggested that what kind of spending would be necessary to move the economy out of the Depression?

Government spending of some kind

Which of the following qualies as a liability to a bank?

demand deposits

In a barter economy, the number of prices necessary will

depend on the number of goods exchanged in the economy

Commonly accepted and widely used money that has no intrinsic value is known as

flat money

Business trusts are __________ integrated ownership structures.

horizontally

The rise of Savings & Loans following World War II played a key role in the post-war __________ boom.

housing

The advantage of municipal bonds over corporate bonds increases as the federal marginal tax rate

increases

The coupon rate of a bond refers to the

interest rate to be paid to the holder of the bond

The relationship between the economy-wide price level & level of real GDP illustrated by the aggregate demand curve is

inverse

Which of these most accurately defines the possible effects of fluctuating interest rates in financial markets?

prices and levels of employment

A nancially healthy bank borrowing overnight from the Federal Reserve is known as

primary credit

The purchase of direct debt and mortgage-backed securities by the Federal Reserve in November 2008 is referred to as

quantitative easing

Currently, the power of the Federal Reserve rests with

the chair of the Federal Reserve and a board of six governors.

A major advantage that municipal bonds have over corporate bonds for investors is that

the income earned on muni bonds are not subject to federal income tax

Aggregate Demand

C + I + G + (X-M)

Financial assets include which of the following?

Money Bonds Stocks

Which of these is the most often used and the most flexible monetary tool used by the Federal Reserve?

Open market operations

The result of asymmetric information in a market is __________ selection.

adverse

The loan application process that banks require potential borrowers to go through is an attempt to deal with

adverse selection

If the market interest rate is the same as the coupon rate on a newly issued bond, then the bond will sell

at par