1) The ________ interest rate is adjusted for expected changes in the price level
A) ex ante real
B) ex post real
C) ex post nominal
D) ex ante nominal
2) If additional information is not used when forming an optimal forecast because it is
not available at that time, then expectations are
A) obviously formed irrationally
B) still considered to be formed rationally
C) formed adaptively
D) formed equivalently
3) The monetary base declines when
A) the Fed extends discount loans
B) Treasury deposits at the Fed decrease
C) float increases
D) the Fed sells securities
4) A decrease in ________ increases the money supply since it causes the ________ to
rise
A) reserve requirements; monetary base
B) reserve requirements; money multiplier
C) margin requirements; monetary base
D) margin requirements; money multiplier
5) People have a strong incentive to form rational expectations because
A) they are guaranteed of success in the stock market
B) it is costly not to do so
C) it is costly to do so
D) everyone wants to be rational
6) Everything else held constant, an increase in government spending ________
aggregate ________
A) increases; demand
B) decreases; demand
C) decreases; supply
D) increases; supply
7) ________ markets transfer funds from people who have an excess of available funds
to people who have a shortage
A) Commodity
B) Fund-available
C) Financial
D) Derivative exchange
8) The duration of a coupon bond increases
A) the longer is the bond’s term to maturity
B) when interest rates increase
C) the higher the coupon rate on the bond
D) the higher the bond price
9) Currently, Fannie Mae and Freddie Mac are
A) privately owned government-sponsored enterprises
B) privately owned enterprises with no government sponsorship
C) government agencies
D) government departments
10) Suppose on any given day there is an excess demand of reserves in the federal
funds market If the Federal Reserve wishes to keep the federal funds rate at its current
level, then the appropriate action for the Federal Reserve to take is a ________ open
market ________, everything else held constant
A) defensive; sale
B) defensive; purchase
C) dynamic; sale
D) dynamic; purchase
11) A stockholder’s ownership of a company’s stock gives her the right to
A) vote and be the primary claimant of all cash flows
B) vote and be the residual claimant of all cash flows
C) manage and assume responsibility for all liabilities
D) vote and assume responsibility for all liabilities
12) The account that shows international transactions involving financial transactions
(stocks, bonds, bank loans, etc) is called the
A) trade balance
B) current account
C) balance of payments
D) capital account