Which of the followings is NOT true about the word “autonomous” that economists
use?
A) Changes in autonomous components are associated with shifts of a curve.
B) The autonomous component of a variable is exogenous.
C) The autonomous component of a variable is independent of other variables in the
model.
D) The autonomous component of a variable is induced by other variables in the model.
The decline in traditional banking internationally can be attributed to
A) increased regulation.
B) improved information technology.
C) increasing monopoly power of banks over depositors.
D) increased protection from competition.
Commercial and farm mortgages, in which property is pledged as collateral, account for
A) one-quarter of borrowing by nonfinancial businesses.
B) one-half of borrowing by nonfinancial businesses.
C) one-twentieth of borrowing by nonfinancial businesses.
D) two-thirds of borrowing by nonfinancial businesses.
American farmers who sell beef to Europe benefit most from
A) a decrease in the dollar price of euros.
B) an increase in the dollar price of euros.
C) a constant dollar price for euros.
D) a European ban on imports of American beef.
Keynes believed that changes in autonomous spending were dominated by changes in
A) consumer expenditure.
B) autonomous consumer expenditure.
C) investment spending.
D) taxes.
E) none of the above.
Having interest rate stability
A) allows for less uncertainty about future planning.
B) leads to demands to curtail the Fed’s power.
C) guarantees full employment.
D) leads to problems in financial markets.
The U-shaped yield curve in the figure above indicates that the inflation rate is expected
to
A) remain constant in the near-term and fall later on.
B) fall sharply in the near-term and rise later on.
C) rise moderately in the near-term and fall later on.
D) remain constant in the near-term and rise later on.
Depositors lack of information about the quality of bank assets can lead to
A) bank panics.
B) bank booms.
C) sequencing.
D) asset transformation.
According to the segmented markets theory of the term structure
A) bonds of one maturity are close substitutes for bonds of other maturities, therefore,
interest rates on bonds of different maturities move together over time.
B) the interest rate for each maturity bond is determined by supply and demand for that
maturity bond.
C) investors’ strong preferences for short-term relative to long-term bonds explains why
yield curves typically slope downward.
D) because of the positive term premium, the yield curve will not be observed to be
downward-sloping.
An option allowing the holder to buy an asset in the future is a
A) put option.
B) call option.
C) swap.
D) forward contract.
If investors expect interest rates to fall significantly in the future, the yield curve will be
inverted. This means that the yield curve has a ________ slope.
A) steep upward
B) slight upward
C) flat
D) downward
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.
The aggregate demand curve is downward sloping because a higher inflation rate leads
the central bank to raise ________ interest rates, thereby ________ the level of
equilibrium aggregate output., everything else held constant.
A) real; lowering
B) real; raising
C) nominal; lowering
D) nominal; raising
If an individual moves money from currency to a demand deposit account
A) M1 decreases and M2 stays the same.
B) M1 stays the same and M2 increases.
C) M1 stays the same and M2 stays the same.
D) M1 increases and M2 stays the same.
Although ________ currency is lighter than coins made of metals, a disadvantage
arising from modern technology is the ease of ________.
A) paper; transport
B) commodity; counterfeiting
C) fiat; transport
D) paper; counterfeiting
China is trying to move its banking system from being strictly ________ owned by
having them issue shares overseas.
A) state
B) domestic investor
C) depositor
D) domestic corporate
A rise in the price level causes the demand for money to ________ and the interest rate
to ________, everything else held constant.
A) decrease; decrease
B) decrease; increase
C) increase; decrease
D) increase; increase
During a recession, output declines result in
A) lower unemployment in the economy.
B) higher unemployment in the economy.
C) no impact on the unemployment in the economy.
D) higher wages for the workers.
The Federal Reserve will engage in a repurchase agreement when it wants to ________
reserves ________ in the banking system.
A) increase; permanently
B) increase; temporarily
C) decrease; temporarily
D) decrease; permanently
If the economy is on the LM curve, but is to the right of the IS curve, aggregate output
will ________ and the interest rate will ________.
A) rise; rise
B) rise; fall
C) fall; rise
D) fall; fall
In the late 1990s, M2 velocity ________, suggesting a ________ normal relationship
between M2 and macroeconomic variables.
A) stabilized; less
B) stabilized; more
C) slowed; less
D) slowed; more
Which of the following bank assets is the most liquid?
A) consumer loans
B) reserves
C) state and local government securities
D) U.S. government securities
When the price level ________, the demand curve for money shifts to the ________
and the interest rate ________, everything else held constant.
A) falls; right; rises
B) rises; right; falls
C) falls; left; rises
D) rises; right; rises
Everything else held constant, if aggregate output is to the left of the IS curve, then
there is an excess ________ of goods which will cause aggregate output to ________.
A) supply; fall
B) supply; rise
C) demand; fall
D) demand; rise
Members of the Executive Board of the European System of Central Banks are
appointed to ________ year, nonrenewable terms.
A) four
B) eight
C) ten
D) fourteen
Assuming initially that the required reserve ratio = 15%, the currency-deposit ratio =
40%, and the excess reserve ratio = 5%, a decrease in the excess reserve ratio to 0%
causes the M1 money multiplier to ________, everything else held constant.
A) increase from 2.33 to 2.55
B) decrease from 2.55 to 2.33
C) increase from 1.67 to 1.82
D) decrease from 1.82 to 1.67
Everything else held constant, if aggregate output is to the ________ of the IS curve,
then there is an excess ________ of goods which will cause aggregate output to fall.
A) right; supply
B) right; demand
C) left; supply
D) left; demand
Prior to 1980, the Fed set an interest rate ________, a maximum limit, on the interest
rate that could be paid on time deposits.
A) floor
B) ceiling
C) wall
D) window
When gold production was low in the 1870s and 1880s, the money supply grew
________ causing ________.
A) rapidly; inflation
B) rapidly; disinflation
C) slowly; deflation
D) slowly; disinflation
Suppose that from a new checkable deposit, First National Bank holds two million
dollars in vault cash, eight million dollars on deposit with the Federal Reserve, and nine
million dollars in excess reserves. Given this information, we can say First National
Bank faces a required reserve ratio of ________ percent.
A) ten
B) twenty
C) eighty
D) ninety