1. All of the following are advantages of open market operations (OMO), EXCEPT:
A. OMO are flexible in regard to amounts bought and sold
B. OMO are easily reversible
C. OMO are slow to impact bank reserves
D. The Fed has complete control over OMO.
2. Intermediate targets of monetary policy are:
A. under the direct control of the Fed.
B. Are not under the direct control of the Fed but are affected by operating instruments.
C. are always a monetary target.
D. are the goals of monetary policy.
3. If an individual is concerned only about the time value of money, which of the follow options would s/he prefer?
A. $1000 today.
B. $2000 in 5 years, assuming an annual interest rate of 10%.
C. $2500 in 7 years, assuming an annual interest rate of 10%.
D. $1200 in one year, assuming an annual interest rate of 5%.
4. A business is considering buying a machine with an upfront cost of $10,000, but with an annual revenue stream of $2,000. In order to have a positive IRR, this machine would need to be in use for
A. over 5 five years.
B. between 2 and five years.
C. less than 2 years.
D. at least 10 years.
