If a security held by a bank falls in market value, that loss
A) must be recorded by the bank, no matter what.
B) will be recorded by the bank only if the security is of the type they hold to maturity.
C) will be recorded by the bank only if the security is of the type they often sell before maturity.
D) will be recorded by the bank only if it sells the security.
C
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The rational expectations hypothesis is based on the assumption that
A) individuals combine effects of past policy actions with their own judgment about future policy effects and changes when forming their expectations. B) individuals adapt in response to past policy actions and changes without looking ahead when forming their expectations. C) firms pay above equilibrium wages to their employees. D) most firms operate in a less than competitive environment.
If nominal wage rates increase by 5 percent per year and the price level increases by 3 percent per year, which of the following is correct?
a. Real wages will increase by 2 percent per year. b. Real wages will increase by 3 percent per year. c. Real wages will decrease by 3 percent per year. d. Real wages will decrease by 2 percent per year. e. Real wages will remain constant.
A single bank is limited in its ability to create money because
a. loan recipients usually take the proceeds of the loan in cash. b. the FDIC will not permit it to create money unless the loans are guaranteed by the federal government. c. the money loaned will probably be deposited in another bank. d. federal legislation prohibits banks from creating money except to finance international trade.
According to liquidity preference theory, the money-supply curve would shift if the Fed
a. engaged in open-market operations. b. increased money demand. c. increased the real income. d. did any of the above.