An autonomous depreciation of the U.S. dollar makes American goods ________
relative to foreign goods and results in a ________ in U.S. net exports, everything else
held constant.
A. cheaper; decline
B. cheaper; rise
C. more expensive; decline
D. more expensive; rise
Answer:
In the market for reserves, a lower interest rate paid on excess reserves
A. decreases the supply of reserves.
B. increases the supply of reserves.
C. decreases the effective floor for the federal funds rate.
D. increases the effective floor for the federal funds rate.
Answer:
The evidence on the interest sensitivity of the demand for money suggests that the
demand for money is ________ to interest rates, and there is ________ evidence that a
liquidity trap exists.
A. sensitive; substantial
B. sensitive; little
C. insensitive; substantial
D. insensitive; little
Answer:
The major provisions of the Competitive Equality Banking Act of 1987 include
A. expanding the responsibilities of the FDIC, which is now the sole administrator of
the federal deposit insurance system.
B. the establishment of the Resolution Trust Corporation to manage and resolve
insolvent thrifts placed in conservatorship or receivership.
C. directing the Federal Home Loan Bank Board to continue to pursue regulatory
forbearance.
D. prompt corrective action when a bank gets in trouble.
Answer:
Individuals that lend funds to a bank by opening a checking account are called
A. policyholders.
B. partners.
C. depositors.
D. debt holders.
Answer:
Factors that led to worsening conditions in Mexico’s 1994-1995 financial markets
include
A. failure of the Mexican oil monopoly.
B. the ratification of the North American Free Trade Agreement.
C. increased uncertainty from political shocks.
D. decline in interest rates.
Answer:
Secondary markets make financial instruments more
A. solid.
B. vapid.
C. liquid.
D. risky.
Answer:
Everything else held constant, abolishing the individual income tax will
A. increase the interest rate on corporate bonds.
B. reduce the interest rate on municipal bonds.
C. increase the interest rate on municipal bonds.
D. increase the interest rate on Treasury bonds.
Answer:
Under a fixed exchange rate regime, if the domestic currency is initially ________, that
is, ________ par, the central bank must intervene to sell the domestic currency by
purchasing foreign assets.
A) overvalued; below
B) overvalued; above
C) undervalued; below
D) undervalued; above
Answer:
Everything else held constant, changes in the interest rate affect planned investment
spending and hence the equilibrium level of output, but this change in investment
spending
A. merely causes a movement along the IS curve and not a shift.
B. is crowded out by higher taxes.
C. is crowded out by higher government spending.
D. is crowded out by lower consumer expenditures.
Answer:
If the consumption function is expressed as C = a + mpc × YD, then “a” represents
A. autonomous consumer expenditure.
B. the marginal propensity to consume.
C. the expenditure multiplier.
D. disposable income.
Answer:
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.
Answer:
With a 10 percent interest rate on dollar deposits, and an expected appreciation of 7
percent over the coming year, the expected return on dollar deposits in terms of the
dollar is
A. 3 percent.
B. 10 percent.
C. 13.5 percent.
D. 17 percent.
Answer:
Everything else held constant, if aggregate output is to the right of the IS curve, then
there is an excess ________ of goods which will cause aggregate output to ________.
A. supply; fall
B. supply; rise
C. demand; fall
D. demand; rise
Answer:
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 did not
prohibit companies issuing securities from paying the credit-rating agencies to rate
them. This is an example of which remedy of conflicts of interest?
A. regulate for transparency
B. supervisory oversight
C. leave it to the market
D. socialization of information production
Answer:
The S&L Crisis can be analyzed as a principal-agent problem. The agents in this case,
the ________, did not have the same incentive to minimize cost to the economy as the
principals, the ________.
A. politicians/regulators; taxpayers
B. taxpayers; politician/regulators
C. taxpayers; bank managers
D. bank managers; politicians/regulators
Answer:
The efficient markets hypothesis implies that prices in the stock market
A. follow a definite pattern.
B. are more likely to go up than down.
C. always undervalue the true assets of a corporation.
D. are unpredictable.
Answer:
Although the FDIC was created to prevent bank failures, its existence encourages banks
to
A. take too much risk.
B. hold too much capital.
C. open too many branches.
D. buy too much stock.
Answer:
Everything else held constant, an increase in net exports ________ aggregate
________.
A. increases; demand
B. decreases; demand
C. decreases; supply
D. increases; supply
Answer:
The exchange rate is
A. the price of one currency relative to gold.
B. the value of a currency relative to inflation.
C. the change in the value of money over time.
D. the price of one currency relative to another.
Answer:
According to the liquidity premium theory, a yield curve that is flat means that
A. bond purchasers expect interest rates to rise in the future.
B. bond purchasers expect interest rates to stay the same.
C. bond purchasers expect interest rates to fall in the future.
D. the yield curve has nothing to do with expectations of bond purchasers.
Answer:
In the figure above, a factor that could cause the supply of bonds to shift to the right is
A. a decrease in government budget deficits.
B. a decrease in expected inflation.
C. a recession.
D. a business cycle expansion.
Answer:
Suppose the U.S. economy is producing at the natural rate of output. An appreciation of
the U.S. dollar will cause ________ in real GDP in the short run and ________ in
inflation in the short run, everything else held constant. (Assume the appreciation
causes no effects in the supply side of the economy.)
A. an increase; an increase
B. a decrease; a decrease
C. no change; an increase
D. no change; a decrease
Answer:
If the price of a euro (the European currency) increases from $1.00 to $1.10, then,
everything else held constant
A. a European vacation becomes less expensive.
B. a European vacation becomes more expensive.
C. the cost of a European vacation is not affected.
D. foreign travel becomes impossible.
Answer:
Which of the following statements is TRUE?
A. State and local governments cannot default on their bonds.
B. Bonds issued by state and local governments are called municipal bonds.
C. All government issued bondslocal, state, and federalare federal income tax exempt.
D. The coupon payment on municipal bonds is usually higher than the coupon payment
on Treasury bonds.
Answer:
Patrick places his pocket change into his savings bank on his desk each evening. By his
actions, Patrick indicates that he believes that money is a
A. medium of exchange.
B. unit of account.
C. store of value.
D. unit of specialization.
Answer:
A bank has excess reserves of $10,000 and demand deposit liabilities of $100,000 when
the required reserve ratio is 20 percent. If the reserve ratio is raised to 25 percent, the
bank’s excess reserves will be
A. -$5,000.
B. -$1,000.
C. $1,000.
D. $5,000.
Answer:
In the early 1930s, the currency-deposit ratio rose, as did the level of excess reserves.
Money supply analysis predicts that, everything else held constant, the money supply
should have
a. risen.
b. fallen.
c. remain unchanged.
d. either risen, fallen, or remain unchanged.
Answer:
Keynes’s model of the demand for money suggests that velocity is
A. constant.
B. positively related to interest rates.
C. negatively related to interest rates.
D. positively related to bond values.
Answer:
The economist Irving Fisher, after whom the Fisher effect is named, explained why
interest rates ________ as the expected rate of inflation ________, everything else held
constant.
A. rise; increases
B. rise; stabilizes
C. fall; stabilizes
D. fall; increases
Answer: