UMUC ECON 430 Quiz 3 with Answers / 2020
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ECON 430 Quiz 3 Answers / Technology in Banking/Finance
Question 1
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1 / 1 point
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An increase in which of the following factors (from the perspective of the domestic country) would cause an appreciation of the domestic currency in the long run?
Question options:
expected future exchange rate
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relative import demand
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relative productivity
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all of the above
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Question 2
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1 / 1 point
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An increase in a country’s trade barriers will cause the _____ for its currency to shift to the
Question options:
demand, left.
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supply, left.
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supply, right.
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demand, right
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Question 3
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1 / 1 point
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Most currency trading takes place
Question options:
between central banks.
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via over the counter trading
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on a centralized exchange
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none of the above
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Question 4
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1 / 1 point
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A rise in the real interest rate in a country causes its currency to
Question options:
cannot be determined
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remain unchanged
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appreciate
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depreciate
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Question 5
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1 / 1 point
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In practice, the primary tool used by the Federal Reserve to control the money supply is
Question options:
buying commercial paper
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open market operations
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discount lending
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the reserve requirement
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Question 6
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0 / 1 point
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A change in which of the following tools shifts the demand for reserves?
Question options:
discount lending
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the reserve requirement
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open market operations
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all of the above
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Question 7
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1 / 1 point
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The goal of quantitative easing is to _____.
Question options:
increase the prices of (increase the yields of) Treasury bonds in order to control inflation
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increase the prices of (decrease the yields of) Treasury bonds and increase the money supply directly
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decrease the prices of (increase the yields of) Treasury bonds and decrease the money supply directly
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decrease the prices of (increase the yields of) Treasury bonds in order to control inflation
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Question 8
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1 / 1 point
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In practice, discount lending is used
Question options:
to control the money supply
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to control the foreign exchange rate
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to ease a financial panic
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set a minimum for the federal funds rate
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Question 9
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1 / 1 point
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Central banks make money from interest on
Question options:
reserves
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loans
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the multiplier
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notes
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Question 10
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1 / 1 point
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Which of the following is a liability of the Fed?
Question options:
they are all liabilities of the Fed
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bank reserves
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discount loans
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bonds
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Question 11
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1 / 1 point
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If the Fed sells $50 in securities and the reserve requirement is 25%, according to the simple formula for the money multiplier, the money supply
Question options:
falls by $50
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falls by $200
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rises by $200
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rises by $50
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Question 12
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0 / 1 point
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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
Question options:
falls by $100
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rises by $1,000
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rises by $100
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falls by $1,000
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Question 13
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1 / 1 point
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Which of the following is a difference between Keynes liquidity preference theory and the modern quantity theory of money?
Question options:
The modern quantity theory predicts that interest rate changes have little effect on money demand unlike the liquidity preference theory.
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The liquidity preference theory assumes velocity to be constant, unlike the modern quantity theory of money.
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The modern quantity theory of money specifies 1 asset instead of 3 assets like the liquidity preference theory.
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The liquidity preference theory assumes the return on money to be 1, unlike the modern quantity theory of money.
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Question 14
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1 / 1 point
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A liquidity trap occurs when
Question options:
money demand falls
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inflation is zero
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nominal interest rates are zero
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all of the above
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Question 15
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1 / 1 point
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Which of the following is equivalent to velocity?
Question options:
MV/PY
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YP/M
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MP/Y
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none of the above
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Question 16
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1 / 1 point
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People holding money in anticipation that bond yields will rise is an example of
Question options:
money demand for transactions
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precautionary demand
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speculative demand
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outsourcing
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Question 17
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1 / 1 point
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In Keynes’s model, a(n) _____ in interest rates can decrease the _____ demand for money.
Question options:
increase, transactions
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decrease, transactions
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decrease, speculative
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increase, speculative
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Question 18
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1 / 1 point
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Which of the following is an asset of the Fed?
Question options:
Federal Reserve notes
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bank reserves
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gold
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they are all liabilities of the Fed
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Question 19
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1 / 1 point
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Exchange rates are determined in
Question options:
the capital market
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the foreign exchange market
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the stock market
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the money market
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Question 20
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1 / 1 point
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When the Fed raises the reserve requirement, the _____ of reserves shifts
Question options:
demand, right
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demand, left
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supply, left
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supply, right
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