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1) Loophole mining refers to financial innovation designed to
A) hide transactions from the IRS
B) conceal transactions from the SEC
C) get around regulations
D) conceal transactions from the Treasury Department
2) If workers do not believe that policymakers are serious about fighting inflation, they
are most likely to push for higher wages, which will ________ aggregate ________ and
lead to unemployment or inflation or both, everything else held constant
A) decrease; demand
B) increase; demand
C) decrease; supply
D) increase; supply
3) Which of the following is not a goal of financial regulation?
A) Ensuring the soundness of the financial system
B) Reducing moral hazard
C) Reducing adverse selection
D) Ensuring that investors never suffer losses
4) Everything else held constant, if aggregate output is to the ________ of the LM
curve, then there is an excess ________ of money which will cause the interest rate to
fall
A) right; supply
B) right; demand
C) left; supply
D) left; demand
5) The sum of the current yield and the rate of capital gain is called the
A) rate of return
B) discount yield
C) pertuity yield
D) par value
6) Which of the following is not one of the eight basic puzzles about financial
structure?
A) Debt contracts are typically extremely complicated legal documents that place
substantial restrictions on the behavior of the borrower
B) Indirect finance, which involves the activities of financial intermediaries, is many
times more important than direct finance, in which businesses raise funds directly from
lenders in financial markets
C) Collateral is a prevalent feature of debt contracts for both households and business
D) There is very little regulation of the financial system
7) Approaches to establishing central bank credibility include
A) continued success at keeping inflation under control
B) central bank independence
C) appointment of a more conservative central banker
D) all of the above
8) A decrease in autonomous planned investment spending, other things equal, shifts the
________ curve to the ________
A) IS; right
B) IS; left
C) LM; left
D) LM; right
9) Which of the following is not a contractual savings institution?
A) A life insurance company
B) A pension fund
C) A savings and loan association
D) A fire and casualty insurance company
10) Keynes believed that changes in autonomous spending were dominated by unstable
fluctuations in ________, which are influenced by emotional waves of optimism and
pessimismfactors he referred to as "animal spirits"
A) unplanned investment spending
B) actual investment spending
C) planned investment spending
D) autonomous consumer expenditures
11) Asset transformation can be described as
A) borrowing long and lending short
B) borrowing short and lending long
C) borrowing and lending only for the short term
D) borrowing and lending for the long term
12) Using the Gordon growth model, a stock's price will increase if
A) the dividend growth rate increases
B) the growth rate of dividends falls
C) the required rate of return on equity rises
D) the expected sales price rises
13) All of the following are operating expenses for a bank except
A) service charges on deposit accounts
B) salaries and employee benefits
C) rent on buildings
D) servicing costs of equipment such as computers
14) The Fed operating procedures employed between 1979 and 1982 resulted in
________ swings in the federal funds rate and ________ swings in the M1 growth rate
A) increased; increased
B) increased; decreased
C) decreased; decreased
D) decreased; increased
