University of Missouri- Columbia

How is the burden of taxation and the benefit of subsidies divided between producers and consumers?a.Th - Answer the burden of taxation and the benefit of subsidies is determined by the relative elasticities of supply and demand. Which (if any) of the following statements are TRUE for both taxes and subsidies? I. Both create deadweight losses II. Both increase the welfare of consumers and producers. III. Both create a difference between the consumer's price paid and the producer...

All of the following help make the Fed independent of the political process EXCEPT - Answer chair of Fed receives a lifetime appointment If currency outstanding equals $500 million, checkable deposits equal $2 billion, reserves equal $200 million, and the required reserve ratio is 0.10, the money multiplier equals - Answer 3.57 If the Fed buys securities worth $10 million, then - Answer bank reserves will increase by $10 million If the Fed makes a discount loan of $2 m...

Which of the following is an asset of the Fed? - Answer discount loans to banks Everything else held constant, in the market for reserves, when the federal funds rate is 5%, lowering the discount rate from 5% to 4% - Answer lowers the federal funds rate Purchasing power parity says that - Answer Differences in inflation rates between countries will create changes in exchange rates The day after the Brexit vote, the value of the British pound relative to the U.S. dollar...

Which of the following is NOT a cause of financial crises? A) Credit booms and bursts B) High interest rates C)Asset bubbles and bursts D)Deregulation - Answer B) High interest rates The legislation that separated investment banking from commercial banking until its repeal in 1999 is known as the A)National Bank Act of 1863. B)Federal Reserve Act of 1913. C)McFadden Act. D)Glass-Steagall Act. - Answer D)Glass-Steagall Act If a bank's c...

If the required reserve ratio is one-fourth, currency in circulation is $400 billion, checkable deposits are $1,200 billion, and there is no excess reserve, then the M1 money multiplier is A: 2.0 B: 0.67 C: 2.3 D: 2.8 - Answer C Suppose FOMC revises target federal funds rate downward. If Federal Reserve wishes to meet the new target, then the appropriate action for the Federal Reserve to take is a ______ open market ______, everything else held constant. A: defensive; sale B: ...

The _______ problem helps to explain why the private production and sale of information cannot eliminate _______. A) free-rider; moral hazard B) principal-agent; moral hazard C) free-rider; adverse selection D) principal-agent; adverse selection - Answer free-rider; adverse selection According to the liquidity premium theory, a yield curve that is flat means that A) the yield curve has nothing to do with expectations of bond purchasers B) bond purchasers expect interest rates to r...

Paper currency that has been declared legal tender but is not convertible into coins or precious metals is called _______ money. A) Funny B) Electronic C)Fiat D) Commodity - Answer Fiat Other things being equal, a decrease in the default risk of corporate bonds shifts the demand curve for corporate bonds to the ________ and the demand curve for Treasury bonds to the ________. A) left; right B) Right; left C) right; right D) left; left - Answer Right; left Holding the expec...

Which of the following financial intermediaries is NOT a depository institution? A) a savings and loan association B) a credit union C) a finance company D) a commercial bank - Answer A finance company A short-term debt instrument issued by well-known corporations is called A) corporate bonds. B) commercial paper. C) municipal bonds. D) commercial mortgages. - Answer commercial paper Which of the following instruments is NOT traded in a money market? A) U.S. Tr...

expectations theory - Answer assumes that investors are certain about the future and don’t have a preference over particular maturity *Effectively, investing for longer period or investing for short periods should yield about the same return 2 investment strategies are: - Answer A) Invest in one-year bonds today with yield 2% and reinvest next year. Assume next year that one-year bond will pay 3% B) Instead of buying in 2 one-year bonds, invest today in two-year bonds, wait...

f the Fed wants to increase the value of the dollar, it will - Answer sell foreign securities and buy dollars in international currency markets When the Fed sells foreign assets and buys domestic assets at the same time - Answer the composition of its asset’s changes, but its liabilities are unaffected. A sale of foreign assets by a central bank has the same effect on the monetary base as - Answer an open market sale of government bonds. If the Fed sterilizes the pur...