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1) Looking at the Net Interest Margin indicates that the poor bank performance in the
late 1980s
A) was not the result of interest-rate movements
B) was not the result of risky loans made in the early 1980s
C) resulted from a narrowing of the gap between interest earned on assets and inters
paid on liabilities
D) resulted from a huge decrease in provisions for loan losses
2) As interest rates rise, the expected absolute return of money ________, money's
expected return relative to bonds ________
A) does not change; decrease
B) rises; decrease
C) does not change; increase
D) falls; decrease
3) The total amount of reserves in the banking system is equal to the ________ required
reserves and excess reserves
A) sum of
B) difference between
C) product of
D) ratio between
4) ________ in the expected future domestic exchange rate causes the demand for
domestic assets to shift to the left and the domestic currency to ________, everything
else held constant
A) An increase; appreciate
B) An increase; depreciate
C) A decrease; appreciate
D) A decrease; depreciate
5) If young business professionals in America suddenly decide that driving
German-made cars is an important status symbol, net exports will tend to ________
causing aggregate demand to ________, everything else held constant
A) fall; fall
B) fall; rise
C) rise; fall
D) rise; rise
6) Suppose the US economy is operating at potential output A negative supply shock
that is accommodated by an open market purchase by the Federal Reserve will cause
________ in real GDP in the long run and ________ in inflation in the long run,
everything else held constant
A) no change; an increase
B) no change; a decrease
C) an increase; an increase
D) a decrease; a decrease
7) In the Keynesian framework, as long as output is ________ the equilibrium level,
unplanned inventory investment will remain ________, firms will continue to lower
production, and output will continue to fall
A) below; negative
B) above; negative
C) below; positive
D) above; positive
8) Everything else held constant, if a factor increases the demand for ________ goods
relative to ________ goods, the domestic currency will appreciate
A) foreign; domestic
B) foreign; foreign
C) domestic; domestic
D) domestic; foreign
9) Nationwide banking might reduce bank failures due to
A) reduced competition
B) reduced lending to small businesses
C) diversification of loan portfolios across state lines
D) elimination of community banks
10) Using the information in Situation 20-2, if taxes increase by $10, then the
equilibrium aggregate output will change by
A) -$90
B) -$10
C) $10
D) $90
11) Everything else held constant, an autonomous tightening of monetary policy will
cause
A) the quantity of aggregate demand to increase
B) the quantity of aggregate demand to decrease
C) aggregate demand to increase
D) aggregate demand to decrease
12) If the current account balance shows a surplus, and the capital account also shows a
surplus, then the official reserve transactions balance
A) must be positive
B) must be negative
C) must be zero
D) can either be positive, negative, or zero
13) If net exports increase by 250 and the mpc is 075, equilibrium aggregate output
increases by
A) 250
B) 500
C) 750
D) 1000
