Parties who have sold a futures contract and thereby agreed to ________ (deliver) the
bonds are said to have taken a ________ position.
A. sell; short
B. buy; short
C. sell; long
D. buy; long
Answer:
Loss aversion can explain why very little ________ actually takes place in the securities
market.
A. short selling
B. bargaining
C. bartering
D. negotiating
Answer:
The risk of a well-diversified portfolio depends only on the ________ risk of the assets
in the portfolio.
A. systematic
B. nonsystematic
C. portfolio
D. investment
Answer:
Foreign exchange rate stability is important because a decline in the value of the
domestic currency will ________ the inflation rate, and an increase in the value of the
domestic currency makes domestic industries ________ competitive with competing
foreign industries.
A. increase; more
B. increase; less
C. decrease; more
D. decrease; less
Answer:
A return to the gold standard, that is, using gold for money will ________ the ________
for gold, ________ its price, everything else held constant.
A. increase; demand; increasing
B. decrease; demand; decreasing
C. increase; supply; increasing
D. decrease; supply; increasing
Answer:
Clauses in life insurance policies that eliminate death benefits if the insured person
commits suicide is an example of a
A. restrictive provision.
B. restrictive covenant.
C. anti-fraud exclusion.
D. risk-based deductible.
Answer:
The price of a barrel of oil doubled between 2007 and the middle of To make matters
worse, a financial crisis hit the U.S. economy starting in August of 2007. Which of the
following is TRUE of the Chinese experience?
A. The worldwide decline in demand led to a collapse of Chinese exports.
B. Instead of relying solely on the economy’s self-correcting mechanism, much more
aggressive fiscal expansions than those of the U.S. (in addition to a substantial
monetary easing) served to shift the AD curve back to general equilibrium relatively
quickly.
C. The Chinese economy was better able than the U.S. economy to weather the
financial crisis with output growth starting to grow earlier and more quickly than that of
the U.S.
D. All of the above.
E. None of the above.
Answer:
Aggregate demand in an economy with no government or foreign trade is
A. consumer expenditure plus actual investment.
B. consumer expenditure plus planned investment.
C. consumer expenditure plus inventory investment.
D. consumer expenditure plus fixed investment.
Answer:
When the value of the dollar changes from £0.75 to £0.5, then the British pound has
________ and the U.S. dollar has ________.
A. appreciated; appreciated
B. depreciated; appreciated
C. appreciated; depreciated
D. depreciated; depreciated
Answer:
When good weather speeds the check-clearing process, float tends to ________ causing
the Fed to initiate ________ open market ________.
A. decrease; defensive; sales
B. decrease; dynamic; sales
C. decrease; defensive; purchases
D. increase; dynamic; purchases
Answer:
In deriving the aggregate demand curve a ________ inflation rate leads the central bank
to ________ real interest rates, thereby ________ the level of equilibrium aggregate
output.
A. higher; raise; lowering
B. lower; raise; lowering
C. higher; lower; lowering
D. higher; lower; raising
Answer:
If the amount payable in two years is $2420 for a simple loan at 10 percent interest, the
loan amount is
A. $1000.
B. $1210.
C. $2000.
D. $2200.
Answer:
If housing prices are expected to increase, then, other things equal, the demand for
houses will ________ and that of Treasury bills will ________.
A. increase; increase
B. increase; decrease
C. decrease; decrease
D. decrease; increase
Answer:
If the liquidity effect is smaller than the other effects, and the adjustment to expected
inflation is slow, then the
A. interest rate will fall.
B. interest rate will rise.
C. interest rate will initially fall but eventually climb above the initial level in response
to an increase in money growth.
D. interest rate will initially rise but eventually fall below the initial level in response to
an increase in money growth.
Answer:
Everything else held constant, when a country’s currency appreciates, the country’s
goods abroad become ________ expensive and foreign goods in that country become
________ expensive.
A. more; less
B. more; more
C. less; less
D. less; more
Answer:
________ in the domestic interest rate causes the demand for domestic assets to shift to
the ________ and the domestic currency to appreciate, everything else held constant.
A. An increase; right
B. An increase; left
C. A decrease; right
D. A decrease; left
Answer:
Municipal bonds have default risk, yet their interest rates are lower than the rates on
default-free Treasury bonds. This suggests that
A. the benefit from the tax-exempt status of municipal bonds is less than their default
risk.
B. the benefit from the tax-exempt status of municipal bonds equals their default risk.
C. the benefit from the tax-exempt status of municipal bonds exceeds their default risk.
D. Treasury bonds are not default-free.
Answer:
________ examines whether one variable affects another by using data to build a model
that explains the channels through which this variable affects the other.
A. Indirect-model evidence
B. Organizational-model evidence
C. Reduced-form evidence
D. Structural-model evidence
Answer:
The regulatory agency that sets reserve requirements for all banks is
A. the Federal Reserve System.
B. the Federal Deposit Insurance Corporation.
C. the Office of Thrift Supervision.
D. the Securities and Exchange Commission.
Answer:
If a pension fund has sufficient contributions and earnings to pay benefits, it is said to
be
A. underfunded.
B. at par.
C. fully funded.
D. over par.
Answer:
A bank failure occurs whenever
A. a bank cannot satisfy its obligations to pay its depositors and other creditors.
B. a bank suffers a large deposit outflow.
C. a bank has to call in a large volume of loans.
D. a bank refuses to make new loans.
Answer:
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.
Answer:
An autonomous increase in money demand, other things equal, shifts the ________
curve to the ________.
A. IS; right
B. IS; left
C. LM; left
D. LM; right
Answer:
Traders working for banks are subject to the
A. principal-agent problem.
B. free-rider problem.
C. double-jeopardy problem.
D. exchange-risk problem.
Answer:
A movement along the bond demand or supply curve occurs when ________ changes.
A. bond price
B. income
C. wealth
D. expected return
Answer:
Because of an expected rise in interest rates in the future, a banker will likely
A. make long-term rather than short-term loans.
B. buy short-term rather than long-term bonds.
C. buy long-term rather than short-term bonds.
D. make either short or long-term loans; expectations of future interest rates are
irrelevant.
Answer:
The declining trend in the currency-deposit ratio during 2007-2014 can be explained by
a. the increased holdings of U.S. currency by foreigners.
b. bank panics.
c. a drop in the rate of interest paid on checking deposits.
d. the increasing use of debit cards.
Answer:
A swap that involves the exchange of a set of payments in one currency for a set of
payments in another currency is
A. an interest-rate swap.
B. a currency swap.
C. a swaption.
D. an international swap.
Answer:
In recent years, bank regulatory authorities have
A. encouraged banks to enter the insurance field.
B. discouraged banks from entering the insurance field.
C. asked Congress to write new legislation that would make it illegal for banks to enter
the insurance field.
D. asked Congress to write new legislation that would make it legal for banks to enter
the insurance field.
Answer:
When the economy suffers a temporary negative supply shock and the monetary policy
makers try to stabilize economic activity in the short run, then
A. aggregate demand curve shifts rightward.
B. output will be at its potential.
C. inflation rate will be higher.
D. all of the above.
E. both A and B.
Answer:
Keynes was especially concerned with explaining the ________ level of output and
employment during the ________.
A. low; 1920s
B. low; 1930s
C. high; 1920s
D. high; 1930s
Answer:
When gold production was low in the 1870s and 1880s, the money supply grew
________ causing ________.
A) rapidly; inflation
B) rapidly; disinflation
C) slowly; deflation
D) slowly; disinflation
Answer:
The problem created by asymmetric information before the transaction occurs is called
________, while the problem created after the transaction occurs is called ________.
A. adverse selection; moral hazard
B. moral hazard; adverse selection
C. costly state verification; free-riding
D. free-riding; costly state verification
Answer: