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. 100. According to Smiley, one problem area of the 1920s (for the U.S.) was the brief, but severe, recession of: a. 1920-21. b. 1923-24. c. 1925-26. d. 1926-27. e. 1928. 101. Money demand is negatively related to: a. interest rates. b. income. c. consumption. d. wealth. e. All of the above. 102. In Mises' Phase I of inflation, _____ along with _____, mitigating much of the expected _____. a. money demand falls; increases in the money supply; rise in the purchasing power of money. b. money demand rises; increases in the money supply; declines in the purchasing power of money. c. money demand rises; decreases in the money supply; declines in the purchasing power of money. d. money demand falls; decreases in the money supply; declines in the purchasing power of money. e. money demand falls; decreases in the money supply; rise in the purchasing power of money. 103. In Mises' Phase III of inflation, if policymakers refuse to accommodate a depression, they will end up promoting: a. slowly rising inflation. b. slowly falling deflation. c. hyperinflation. d. hyperdeflation. e. stable prices. 104. We studied money demand based on the motive that people hold money: a. as a medium of exchange. b. as a store of value. c. as a unit of account. d. All of the above. e. Only A and B of the above. For the next three questions, consider the following scenario: Suppose that you have an annual income of $55,000, and that you always save 22% whenever you got paid (via an EFT that automatically buys bonds). But, you only get paid seven times a year. Once paid, you spend your cash at a constant rate over the next fifty-two days, until you get paid again. 105. How much cash do you start with at the beginning of each pay period? a. $6,129 b. $7,885 c. $12,044 d. $21,450 e. $42,900 106. What are your average cash holdings over the course of the year? a. $3,065 b. $3,943 c. $6,022 d. $10,725 e. $21,450 107. If a payday falls on the first of the month, and if there are thirty days in that month, how much cash will you have on the first of the next month? a. $2,593 b. $3,335 c. $3,535 d. $4,549 e. $5,095 108. If you had an annual income of $120,000 and you spent all of it uniformly over the course of the year, then we would say that your average money holdings (or, money demand) would be: a. $10,000 if you were paid twice a year. b. $10,000 if you were paid four times a year. c. $5,000 if you were paid six times a year. d. $5,000 if you were paid twelve times a year. e. $1,000 if you were paid every day. 109. The demand for money will increase if: a. real income increases. b. the real interest rate falls. c. the cost of converting bonds into cash rises. d. All of the above. e. Only A and B of the above. 110. The liquidity trap is a consequence of the theory of money demand associated with: a. Rothbard. b. Keynes. c. Friedman. d. Mises. e. All of the above. 111. If the frequency of payment of our incomes falls (say, from once a month to every other month), this will: a. reduce the money supply. b. increase the money supply. c. reduce the money demand. d. increase the money demand. e. Have uncertain effects on both the supply and demand for money. 112. Increases in the demand for money would occur due to: a. increases in the frequency of payments. b. improvements in the clearing system. c. decreased confidence in money. d. All of the above. e. None of the above. 113. In order for a government to enjoy the widespread use of paper as money, according to Rothbard, the most important thing it needs to do is: a. convince people to use to pay their taxes. b. promise to redeem it for what is being used as money (i.e., gold). c. compel some to accept it through legal tender laws. d. All of the above. e. None of the above. 114. Which of the following is the best measure of the opportunity cost of holding real money balances? a. The return on cash holdings. b. The rate of inflation. c. The market interest rate. d. The rate of growth in nominal income. e. The rate of growth in real income. 115. Why do people "buy" money? a. It is a measure of one's social status. b. It is a requirement of legal tender laws. c. They need to do if they want to buy goods and services. d. All of the above. e. None of the above. 116. Over the last four recessions (1982, 1991, 2001, 2008) the Federal Reserve has: a. lowered the federal funds rate to a low of 1% each time. b. lowered the federal funds rate more and more each time, most recently to about zero. c. lowered the federal funds rate by less and less each time and now it is about 5%. d. refused to change the federal funds rate, allowing the market to determine its value. e. always sold bonds to try and stem the forces of recession. 117. After World War I, a "gold exchange" standard developed where most countries around the world could hold this as the reserve for their own domestic currency: a. gold. b. U.S. dollars. c. U.K. pounds. d. All of the above. e. Only A and B of the above. 118. Under a gold standard, if gold flows out of a country due to a trade imbalance: a. this will lead to a contraction of their money supply. b. this will lead to deflation of prices. c. this will lead to a new balance of trade. d. the nation's central bank can try to undo the effects of this, temporarily, by raising interest rates. e. All of the above. 119. The U.S. was on a full gold standard, where our currency was freely redeemable for gold by anyone, up until: a. 1879. b. 1913. c. 1933. d. 1945. e. 1971. 120. Interest rates are determined by: a. the time value of money. b. the liquidity of the instrument. c. the default risk. d. term premiums for anticipated inflation. e. All of the above. 121. What is the most important policy-making group within the Federal Reserve? a. The Council of Economic Advisors. b. The Panel of District Bank Presidents. c. The Board of Directors. d. The Board of Governors. e. The Federal Open Market Committee. 122. Following the reorganization of the Fed during the Great Depression: a. the Treasury Secretary was no longer a member of the Board of Governors. b. the Comptroller of the Currency was no longer a member of the Board of Governors. c. The FOMC was created to conduct open market operations. d. All of the above. e. Only A and B of the above. 123. When the Federal Reserve buys and sells securities, this is called a/an: a. Treasury accommodation. b. accounting adjustment. c. credit default swap. d. money laundering scheme. e. open market operation. 124. The time it takes to realize that economic conditions have changed is called the: a. initial lag. b. recognition lag. c. transition lag. d. intermediate lag. e. Phase I lag. 125. The title of Ron Paul's book cited in class is: a. The Fed is Dead! b. End the Fed. c. Fed Up. d. Don't Fed on Me. e. Spoon Fed. 126. An inverted yield curve means: a. short-term yields are higher than long-term yields. b. long-term yields are higher than short-term yields. c. the bond market is anticipating the U.S. Treasury to default on its obligations. d. the inflation rate is expected to rise. e. yields are characterized by a hump - they are highest for middle length maturities. 127. The "dual mandate" of the Fed is to: a. maximize prices and minimize employment. b. maximize inflation and maximize unemployment. c. minimize inflation and maximize unemployment. d. minimize inflation and minimize unemployment. e. minimize inflation and minimize economic growth. 128. Discretionary monetary policy may be counterproductive if it: a. reduces the long-run trend line for economic growth. b. makes business cycles more volatile. c. creates uncertainty among economic agents. d. All of the above. e. None of the above. 129. The discounted present value of a payment is the value ___ of the payment ___. a. today; made yesterday b. tomorrow; made today c. today; made tomorrow d. tomorrow; made yesterday e. yesterday; made today 130. In 2007, the largest valued liability item on the Fed's balance sheet was: a. Bank reserve deposits. b. Treasury Department deposits. c. Federal Reserve Notes. d. Mortgage-backed securities. e. Gold certificates. 131. Which of the following is true? a. Early forms of interest arose from the lending of seeds and animals that could reproduce in order to pay off the interest. b. Ancient Egyptians used farm price supports to enable farmers to pay back loans. c. According to Brook, even payday loans should be considered ethical. d. According to Brook, moneylenders have pretty much always been looked upon as scourges of society. e. All of the above. 132. Which of the following is false? a. The Fed's FOMC holds 8 regularly scheduled meetings per year. b. At the FOMC meeting from this past September, they reiterated their policy of pursuing a goal of 4% inflation per year. c. At the last FOMC meeting, they agreed to maintain their target for the federal funds rate of interest. d. According to Rothbard, the Federal Reserve was deliberately designed as an "engine of inflation." e. The talking bears referred to the Fed Chairman as "the Ben Bernank." 133. Which of the following is not one of Bob Murphy's flawed exit strategies for the Fed? a. They might require banks to charge fees-for-service in order to reduce excess reserves. b. They might allow their U.S. Treasuries to mature without rolling them over. c. The Fed might pay banks a higher interest rate to hold onto their excess reserves. d. The Fed might raise the required reserve ratio. e. The Fed might sell off its holdings of mortgage-backed securities. 134. The term structure of interest rates: a. represents the variation in yields for similar instruments differing only in maturity. b. reflects differing tax treatment received by different instruments. c. always results in an upward-sloping yield curve. d. usually results in an inverted yield curve. e. depends upon the payment terms of the security - whether coupons are paid out every six months versus every year. 135. In "pre-urban" societies loans may be made in: a. tools. b. seed grains. c. gold. d. Both A and C of the above. e. Both A and B of the above. 136. The highest 30 year monthly mortgage rate of interest since 1971 was in: a. August of 2011. b. March of 2007. c. July of 1991. d. October of 1981. e. None of the above. 137. According to Louise Yamada, based on interest rate changes in America over the past two hundred years: a. we should expect rates to rise for the next 20-25 years. b. we see sharp upturns in rates over the many cycles since 1798. c. we see gradual downturns in rates over the many cycles since 1798. d. Both A and B of the above. e. Both A and C of the above. 138. It is up to the Board of Governors of the Federal Reserve System to decide on: a. the discount rate of interest. b. open market operations. c. the reserve requirement. d. All of the above. e. Only A and C of the above. 139. Which of the following was not reported in the last meeting of the FOMC? a. Inflation over the past year is below 2%. b. The committee expects inflation to be below 2% for the next twelve month. c. The target range of the federal funds rate was set to 1.25% to 1.5%. d. The effects of recent hurricanes will be unlikely to affect the economy over the medium term. e. Job gains have been good over the past twelve months. 140. As the Fed began to end its QE policy in 2013, Peter Klein refers to this as its: a. tapering policy. b. drawdown project. c. operation drop reserves. d. lowering the bar strategy. e. divestiture dogma. 141. Central banking generally relies on: a. the monopolization of note issue. b. the tendency to centralize the holding of gold. c. government privilege. d. All of the above. e. None of the above. 142. The Fed's policy of increasing the monetary base from 2008 to 2015 has been called: a. Easy Money. b. Quantitative Easing. c. The Goldman Sachs Gambit. d. Easy Open Market Operations. e. Money Matrix Reloaded. 143. If the Fed were to sell gold, the money supply would: a. Increase. b. Decrease. c. Stay the same. d. Cannot be determined. 144. Theories about the demand for money differ largely: a. on the motives for holding money. b. on money demand as a medium of exchange versus as a store of value. c. between the Keynesian and non-Keynesian schools of thought. d. All of the above. e. None of the above.

Part 2.

Enticket market (8 points) s. (3 points) Joe observes that the lowest stock price for Facebook in the past three months was $135 and the highest was $145. Thus he designs a strategy for the future to buy its stock whenever its price falls to below $135 and sells it whenever it approaches $145. Joe's strategy is directly against the believers of the of efficient market hypothesis (EMH). a. Weak form b. Semi-strong form c. Strong form d. Weak and semi-strong form e. Semi-strong and strong form f. Weak, semi-strong, and strong form (all three forms) 9. (3 points) If the market efficiency holds, a. There should be correlation between period returns b. Technical analysis can result in superior returns e. The market price would represent the true value of an asset. d. Security analysis would be beneficial in increasing the return on a portfolio. 10. (2 points) Growth stocks usually exhibit price-to-book ratios and price-to-earnings ratios a low, low b, low: high c. high; low d. high: high* Question 6 An incomplete cost of goods manufactured schedule is presented below. Complete the cost of goods manufactured schedule for Hobbit Company. HOBBIT COMPANY Cost of Goods Manufactured Schedule Work in process (1/1) $211,000 Direct materials Raw materials inventory (1/1) Add: Raw materials purchases 159,000 Total raw materials available for use Less: Raw materials inventory (12/31) 22,100 Direct materials used $181,000 Direct labor Manufacturing overhead Indirect labor 18,100 Factory depreciation 36,100 Factory utilities 68, 100 Total overhead 122,300 Total manufacturing costs Total cost of work in process Less: Work in process (12/31) 81,100 Cost of goods manufactured $541,000