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1) Which of the following is not a disadvantage of of the Fed's "just do it" approach to
monetary policy?
A) There is low transparency of policy
B) There is low accountability for central bankers
C) This type of policy relies on the policy-makers in charge
D) It relies on a stable money-inflation relationship
2) Risk that is related to the uncertainty about interest rate movements is called
A) default risk
B) interest-rate risk
C) the problem of moral hazard
D) security risk
3) Everything else held constant, aggregate demand increases when
A) net exports decrease
B) taxes increase
C) planned investment spending increases
D) the money supply decreases
4) In the 1990s Japan had the lowest interest rates in the world due to a combination of
A) inflation and recession
B) deflation and expansion
C) inflation and expansion
D) deflation and recession
5) Everything else held constant, when prices in the art market become more uncertain,
A) the demand curve for bonds shifts to the left and the interest rate rises
B) the demand curve for bonds shifts to the left and the interest rate falls
C) the demand curve for bonds shifts to the right and the interest rate falls
D) the supply curve for bonds shifts to the right and the interest rate falls
6) Equity instruments are traded in the ________ market
A) money
B) bond
C) capital
D) commodities
7) In the market for reserves, if the federal funds rate is above the interest rate paid on
excess reserves, an open market sale ________ the supply of reserves causing the
federal funds rate to ________, everything else held constant
A) decreases; decrease
B) increases; decrease
C) increases; increase
D) decreases; increase
8) Which of the following is a contractual savings institution?
A) A life insurance company
B) A credit union
C) A savings and loan association
D) A mutual fund
9) Which of the following does not shift the IS curve?
A) An increase in autonomous consumption
B) An increase in government spending
C) A decline in government spending
D) A fall in the interest rate
10) Professional athletes often have contract clauses prohibiting risky activities such as
skiing and motorcycle riding These clauses are
A) limited-liability clauses
B) risk insurance
C) restrictive covenants
D) illegal
11) In a business cycle expansion, the ________ of bonds increases and the ________
curve shifts to the ________ as business investments are expected to be more profitable
A) supply; supply; right
B) supply; supply; left
C) demand; demand; right
D) demand; demand; left
12) Using the information in Situation 20-1, the equilibrium level of aggregate output is
A) $900
B) $8,000
C) $9,000
D) $10,000
