1) The growth of the subprime mortgage market led to
A) increased demand for houses and helped fuel the boom in housing prices
B) a decline in the housing industry because of higher default risk
C) a decrease in home ownership as investors chose other assets over housing
D) decreased demand for houses as the less credit-worthy borrowers could not obtain
residential mortgages
2) When the Federal Reserve extends a discount loan to a bank, the monetary base
________ and reserves ________
A) remains unchanged; decrease
B) remains unchanged; increase
C) increases; increase
D) increases; remain unchanged
3) The federal agencies that examine banks include
A) the Federal Reserve System
B) the Internal Revenue Service
C) the SEC
D) the US Treasury
4) Starting in 1974, the conventional M1 money demand function began to severely
________ the demand for money Stephen Goldfeld labeled this phenomenon “the case
of the missing ________”
A) underpredict; velocity
B) overpredict; velocity
C) underpredict; money
D) overpredict; money
5) The ________ is the final amount that will be paid to the holder of a coupon bond
A) discount value
B) coupon value
C) face value
D) present value
6) The World Bank is an international organization that:
A) promotes the growth of trade by setting rules for how tariffs and quotas are set by
countries
B) makes loans to countries to finance projects such as dams and roads
C) makes loans to countries with balance of payment difficulties
D) helps developing countries that have been having difficulties in repaying their loans
to come to terms with lenders in the West
7) Money is defined as
A) bills of exchange
B) anything that is generally accepted in payment for goods and services or in the
repayment of debt
C) a risk-free repository of spending power
D) the unrecognized liability of governments
8) Fisher’s quantity theory of money suggests that the demand for money is purely a
function of ________, and ________ no effect on the demand for money
A) income; interest rates have
B) interest rates; income has
C) government spending; interest rates have
D) expectations; income has
9) 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
10) Higher tariffs and quotas cause a country’s currency to ________ in the ________
run, everything else held constant
A) depreciate; short
B) appreciate; short
C) depreciate; long
D) appreciate; long
11) In the Keynesian framework, as long as output is below the equilibrium level,
unplanned inventory investment will remain negative, firms will continue to ________
production, and output will continue to ________
A) lower; fall
B) lower; rise
C) raise; fall
D) raise; rise
12) Measuring the sensitivity of bank profits to changes in interest rates by multiplying
the gap for several maturity subintervals times the change in the interest rate is called
A) basic gap analysis
B) the maturity bucket approach to gap analysis
C) the segmented maturity approach to gap analysis
D) the segmented maturity approach to interest-exposure analysis
13) The combination of a successful wage push by workers and the government’s
commitment to high employment leads to
A) demand-pull inflation
B) supply-side inflation
C) supply-shock inflation
D) cost-push inflation