Although the Fed professed employment of ________ targeting during the 1970s, its
behavior suggests that it emphasized ________ targeting.
A. free-reserve; interest-rate
B. interest-rate; monetary aggregate
C. monetary aggregate; interest-rate
D. free reserve; monetary aggregate
Answer:
A disadvantage of ________made from precious metals is that it is very heavy and hard
to transport from one place to another.
A. commodity money
B. fiat money
C. electronic money
D. paper money
Answer:
Suppose the economy is producing at the natural rate of output. A decrease in consumer
and business confidence will cause ________ in real GDP in the short run and
________ in inflation in the short run, everything else held constant.
A. an increase; an increase
B. a decrease; a decrease
C. no change; an increase
D. no change; a decrease
Answer:
Asymmetric information is a universal problem. This would suggest that financial
regulations
A. in industrial countries are an unqualified failure.
B. differ significantly around the world.
C. in industrialized nations are similar.
D. are unnecessary.
Answer:
Severe fiscal imbalances can directly trigger a currency crisis since
A. investors fear that the government may not be able to pay back the debt and so begin
to sell domestic currency.
B. the government may stop printing money.
C. the government may have to cut back on spending.
D. the currency must surely increase in value.
Answer:
According to Tobin’s q theory, when equity prices are low the market price of existing
capital is ________ relative to new capital, so expenditure on fixed investment is
________.
A. cheap; low
B. dear; low
C. cheap; high
D. dear; high
Answer:
Risk premiums on corporate bonds tend to ________ during business cycle expansions
and ________ during recessions, everything else held constant.
A. increase; increase
B. increase; decrease
C. decrease; increase
D. decrease; decrease
Answer:
When the total value of final goods and services is calculated using current prices, the
resulting measure is referred to as
A. real GDP.
B. the GDP deflator.
C. nominal GDP.
D. the index of leading indicators.
Answer:
If the consumption function is C = 20 + 0.5YD, then an increase in disposable income
by $100 will result in an increase in consumer expenditure by
A. $25.
B. $70.
C. $50.
D. $100.
Answer:
The yield to maturity for a perpetuity is a useful approximation for the yield to maturity
on long-term coupon bonds. It is called the ________ when approximating the yield for
a coupon bond.
A. current yield
B. discount yield
C. future yield
D. star yield
Answer:
The more willing monetary policymakers are to raise interest rates when faced with
inflation, the ________ the AD curve is, and the ________ responsive equilibrium
output is to the inflation rate.
A. steeper; more
B. steeper; less
C. flatter; more
D. flatter; less
Answer:
Macroeconomic equilibrium requires
A. equilibrium in the goods market.
B. equilibrium in the money market.
C. equilibrium in both the goods and money markets.
D. equilibrium in neither the goods nor the money market.
Answer:
Fraudulent practices and other abuses of private pension funds led Congress to enact the
A. FDIC Act.
B. Federal Reserve Act.
C. FHLBS.
D. Employee Retirement Income Security Act.
Answer:
The ability to use one resource to provide different products and services is
A) economies of scale.
B) economies of scope.
C) diversification.
D) vertical integration.
Answer:
A(n) ________ in the riskiness of corporate bonds will ________ the price of corporate
bonds and ________ the yield on corporate bonds, all else equal.
A. increase; increase; increase
B. increase; decrease; increase
C. decrease; increase; increase
D. decrease; decrease;decrease
Answer:
Using the information in Situation 20-1, the equilibrium level of aggregate output is
A. $900
B. $8,000
C. $9,000
D. $10,000
Answer:
Everything else held constant, a decrease in net taxes ________ aggregate ________.
A. increases; demand
B. decreases; demand
C. decreases; supply
D. increases; supply
Answer:
U.S. dollar deposits in foreign banks outside the U.S. or in foreign branches of U.S.
banks are called
A. Atlantic dollars.
B. Eurodollars.
C. foreign dollars.
D. outside dollars.
Answer:
The Keynesian demand for real balances can be expressed as
A. Md = f(i,Y).
B. Md/P = f(i).
C. Md/P = f(Y).
D. Md/P = f(i,Y).
Answer:
The Lucas critique is an attack on the usefulness of
A. conventional econometric models as forecasting tools.
B. conventional econometric models as indicators of the potential impacts on the
economy of particular policies.
C. rational expectations models of macroeconomic activity.
D. the relationship between the quantity theory of money and aggregate demand.
Answer:
American companies can borrow funds
A. only in U.S. financial markets.
B. only in foreign financial markets.
C. in both U.S. and foreign financial markets.
D. only from the U.S. government.
Answer:
Everything else held constant, if disposable income increases by 200 and consumption
expenditure increases by 150, the mpc is
A. 0.
B. 0.15.
C. 0.5.
D. 0.75.
Answer:
Suppose that from a new checkable deposit, First National Bank holds two million
dollars in vault cash, nine million dollars in excess reserves, and faces a required
reserve ratio of ten percent. Given this information, we can say First National Bank has
________ million dollars in required reserves.
A. one
B. two
C. eight
D. ten
Answer:
When a lender refuses to make a loan, although borrowers are willing to pay the stated
interest rate or even a higher rate, the bank is said to engage in
A. coercive bargaining.
B. strategic holding out.
C. credit rationing.
D. collusive behavior.
Answer:
The FDIC must take steps to close down banks whose equity capital is less than
________ of assets.
A. 4%
B. 3%
C. 2%
D. 1%
Answer:
A put option gives the seller the
A. right to sell the underlying security.
B. obligation to sell the underlying security.
C. right to buy the underlying security.
D. obligation to buy the underlying security.
Answer:
Thrift institutions include
A) commercial banks.
B) brokerage firms
C) insurance companies.
D) mutual savings banks.
Answer:
Evidence from the United States during the period 1973-2002 indicates that the value of
the dollar and the measure of the ________ interest rate rose and fell together.
A. real
B. nominal
C. expected
D. actual
Answer:
When good weather speeds the check-clearing process, float tends to ________ causing
the Fed to initiate defensive open market ________.
A. decrease; sales
B. decrease; purchases
C. increase; sales
D. increase; purchases
Answer:
A bond that is bought at a price below its face value and the face value is repaid at a
maturity date is called a
A. simple loan.
B. fixed-payment loan.
C. coupon bond.
D. discount bond.
Answer:
If the economy is on the IS curve, but is to the right of the LM curve, aggregate output
will ________ and the interest rate will ________.
A. rise; rise
B. rise; fall
C. fall; rise
D. fall; fall
Answer:
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
Answer:
A credit market instrument that provides the borrower with an amount of funds that
must be repaid at the maturity date along with an interest payment is known as a
A. simple loan.
B. fixed-payment loan.
C. coupon bond.
D. discount bond.
Answer:
The primary reason for the recent reduction in the number of banks is
A) bank failures.
B) re-regulation of banking.
C) restrictions on interstate branching.
D) bank consolidation.
Answer: