Reference no: EM132056066
1. Monetary policymakers could keep equity and property price bubbles from developing by:
a- lowering their interest rate target when they suspect a bubble.
b- raising their interest rate target when they suspect a bubble.
c- purchasing U.S. treasury securities to drive up their prices.
d- expanding the money supply in the economy.
2. Stock prices may rise from a reduction in interest rates because:
a- the present value of future earnings will decrease.
b- the present value of future earnings will increase.
c- financial market participants are less optimistic about future earnings.
d- stockholders will expect lower future earnings.
3. The importance of the bank-lending channel of monetary policy transmission:
a- becomes more important the more important banks are as a source of funds for firms and individuals.
b- is likely to become more important with the growth of loan brokers and asset-backed securities.
c- has become more important as technology has solved the problems of information and moral hazard.
d- none of the answers given is correct.
4. When central bankers are acting preemptively they are:
a- letting markets work and taking a wait and see approach.
b- usually focused on reducing expansionary gaps.
c- taking bold steps to stabilize the economy.
d- aggressively trying to hit a zero inflation target.
5. The balance-sheet channel of monetary policy works because it can:
a- increase a borrower's asset value but not the burden of his/her liabilities.
b- change the value of a borrower's assets and liabilities, but it can't change a borrower's net worth.
c- increase a borrower's assets and reduce the cost of his/her liabilities.
d- none of the answers given is correct.
6. Bonds must have positive yields because:
a- the banking technology does not exist to deal with negative yields.
b- people can always hold cash.
c- the U.S. treasury guarantees all bonds to have a positive yield.
d- all of the answers given are correct.
7. Which of the following statements would you say best reflects monetary policy?
a- There is certainly some science involved, a lot of understanding that is needed, but a lot of uncertainty still remains.
b- It is a lot like gambling because the outcomes are most of the time uncertain.
c- It is a hard and fast science.
d- It is a hard and fast science.