________ is the field of study that applies concepts from social sciences such as
psychology and sociology to help understand the behavior of securities prices.
A) Behavioral finance
B) Strategical finance
C) Methodical finance
D) Procedural finance
Answer:
FIRREA increased the core-capital leverage requirement for thrift institutions from 3%
to
A) 8%.
B) 5%
C) 10%
D) 25%
Answer:
A bank will want to hold more excess reserves (everything else equal) when
A) it expects to have deposit inflows in the near future.
B) brokerage commissions on selling bonds increase.
C) the cost of selling loans falls.
D) the discount rate decreases.
Answer:
When the value of the British pound changes from $1.25 to $1.50, the pound has
________ and the U.S. dollar has ________.
A) appreciated; appreciated
B) depreciated; appreciated
C) appreciated; depreciated
D) depreciated; depreciated
Answer:
Suppose the U.S. economy is producing at the natural rate of output. A depreciation of
the U.S. dollar will cause ________ in real GDP in the short run and ________ in
inflation in the long run, everything else held constant. (Assume the depreciation causes
no effects in the supply side of the economy.)
A) an increase; an increase
B) a decrease; a decrease
C) no change; an increase
D) no change; a decrease
Answer:
To eliminate the abuses of the state-chartered banks, the ________ created a new
banking system of federally chartered banks, supervised by the ________.
A) National Bank Act of 1863; Office of the Comptroller of the Currency
B) Federal Reserve Act of 1863; Office of the Comptroller of the Currency
C) National Bank Act of 1863; Office of Thrift Supervision
D) Federal Reserve Act of 1863; Office of Thrift Supervision
Answer:
Arguments for adopting a policy rule include
A) the time-inconsistency problem can lead to poor economic outcomes.
B) discretionary policies pursue overly expansionary monetary policies to boost
employment in the short run but generate higher inflation in the long run.
C) policy makers and politicians cannot be trusted.
D) all of the above.
Answer:
Which of the following statements accurately describes the two measures of the money
supply?
A) The two measures do not move together, so they cannot be used interchangeably by
policymakers.
B) The two measures’ movements closely parallel each other, even on a
month-to-month basis.
C) Short-run movements in the money supply are extremely reliable.
D) M2 is the narrowest measure the Fed reports.
Answer:
Which of the following are generally true of all bonds?
A) The longer a bond’s maturity, the greater is the rate of return that occurs as a result of
the increase in the interest rate.
B) Even though a bond has a substantial initial interest rate, its return can turn out to be
negative if interest rates rise.
C) Prices and returns for short-term bonds are more volatile than those for longer term
bonds.
D) A fall in interest rates results in capital losses for bonds whose terms to maturity are
longer than the holding period.
Answer:
Assume a closed economy. Suppose that autonomous consumption equals $400,
planned investment equals $500, government expenditure equals $200, net taxes
equals $50, and the mpc equals 0.9.
Using the information in situation 20-2, if government increases their spending by $50
and increases net taxes by 50, then equilibrium aggregate output will change by
A) -$100.
B) -$50.
C) $50.
D) $100.
Answer:
The Dow reached a peak of over 11,000 before the collapse of the ________ bubble in
2000.
A) housing
B) manufacturing
C) high-tech
D) banking
Answer:
According to aggregate demand and supply analysis, the favorable supply shock of
1995-1999 had the effect of
A) increasing aggregate output, lowering unemployment, and raising inflation.
B) decreasing aggregate output, raising unemployment, and raising inflation.
C) increasing aggregate output, lowering unemployment, and lowering inflation.
D) decreasing aggregate output, raising unemployment, and lowering inflation.
Answer:
A particularly attractive feature of the ________ is that it tells you what the market is
predicting about future short-term interest rates by just looking at the slope of the yield
curve.
A) segmented markets theory
B) expectations theory
C) liquidity premium theory
D) separable markets theory
Answer:
Currency includes
A) paper money and coins.
B) paper money, coins, and checks.
C) paper money and checks.
D) paper money, coins, checks, and savings deposits.
Answer:
It is possible that when the money supply rises, interest rates may ________ if the
________ effect is more than offset by changes in income, the price level, and expected
inflation.
A) fall; liquidity
B) fall; risk
C) rise; liquidity
D) rise; risk
Answer:
An increase in ________ reduces the money supply since it causes the ________ to fall.
A) reserve requirements; monetary base
B) reserve requirements; money multiplier
C) margin requirements; monetary base
D) margin requirements; money multiplier
Answer:
Countries with balance of payments deficits do not want to see their currencies
________ because it makes foreign goods ________ expensive for domestic
consumers.
A) appreciate; less
B) appreciate; more
C) depreciate; less
D) depreciate; more
Answer:
Economists define investment as the purchase of
A) a new physical asset such as a new machine or a new house.
B) any physical asset, whether new or not, used by business to increase production.
C) any physical asset used by business to increase production and the repurchase of
common stock.
D) business spending on capital and household spending on durable goods.
Answer:
Since they require less monitoring of firms, ________ contracts are used more
frequently than ________ contracts to raise capital.
A) debt; equity
B) equity; debt
C) debt; loan
D) equity; stock
Answer:
In the equation of exchange, the concept that provides the link between M and PY is
called
A) the velocity of money.
B) aggregate demand.
C) aggregate supply.
D) the money multiplier.
Answer:
When the economy suffers a permanent negative supply shock and the central bank
responds by changing the autonomous component of monetary policy to keep inflation
at the target inflation rate, then
A) aggregate demand curve shifts leftward.
B) aggregate demand curve shifts rightward.
C) output will be unchanged.
D) both A and C.
Answer:
In the Keynesian cross diagram, an increase in autonomous consumer expenditure
causes the aggregate demand function to shift ________, the equilibrium level of
aggregate output to rise, and the IS curve to shift to the ________, everything else held
constant.
A) up; left
B) up; right
C) down; left
D) down; right
Answer:
The “lemons problem” exists because of
A) transactions costs.
B) economies of scale.
C) rational expectations.
D) asymmetric information.
Answer:
Which of the followings is not a current duty of the Board of Governors of the Federal
Reserve System?
A) Setting margin requirements, the fraction of the purchase price of the securities that
has to be paid for with cash.
B) Setting the maximum interest rates payable on certain types of time deposits under
Regulation Q.
C) Approving the discount rate “established” by the Federal Reserve banks.
D) Representing the United States in negotiations with foreign governments on
economic matters.
Answer:
A bank’s commitment to provide a firm with loans up to pre-specified limit at an
interest rate that is tied to a market interest rate is called
A) an adjustable gap loan.
B) an adjustable portfolio loan.
C) loan commitment.
D) pre-credit loan line.
Answer:
Everything else held constant, if total consumption increases from $600 to $800
because of an increase of disposable income of $400, then the mpc is equal to
A) 0.2
B) 0.4
C) 0.5
D) 0.6
Answer:
The speculative motive for holding money is closely tied to what function of money?
A) Store of wealth
B) Unit of account
C) Medium of exchange
D) Standard of deferred payment
Answer:
An increase in the money supply, other things equal, shifts the ________ curve to the
________.
A) IS; right
B) IS; left
C) LM; left
D) LM; right
Answer:
On January 25, 2009, one U.S. dollar traded on the foreign exchange market for about
3.33 Romanian new lei. Therefore, one Romanian new lei would have purchased about
________ U.S. dollars.
A) 0.30
B) 1.86
C) 2.86
D) 3.33
Answer:
If there is an excess supply of money
A) individuals sell bonds, causing the interest rate to rise.
B) individuals sell bonds, causing the interest rate to fall.
C) individuals buy bonds, causing interest rates to fall.
D) individuals buy bonds, causing interest rates to rise.
Answer:
Financial institutions that accept deposits and make loans are called
A) exchanges.
B) banks.
C) over-the-counter markets.
D) finance companies.
Answer:
Regulations that reduced competition between banks included
A) branching restrictions.
B) bank reserve requirements.
C) the dual system of granting bank charters.
D) interest-rate ceilings.
Answer: