If you sell a $100,000 interest-rate futures contract for 110, and the price of the
Treasury securities on the expiration date is 106, your ________ is ________.
A. profit; $4000
B. loss; $4000
C. profit; $6000
D. loss; $6000
Answer:
Privatization of Social Security involves
A. tax reductions.
B. benefit reductions.
C. increasing the retirement age.
D. investing portions of the trust fund in corporate securities.
Answer:
In the long-run ISLM model and with everything else held constant, the long-run effect
of a contractionary fiscal policy is to ________ real output and ________ the interest
rate.
A. not change; not change
B. decrease; decrease
C. decrease; not change
D. not change; decrease
Answer:
The European System of Central Banks signals the stance of its monetary policy by
setting a target for the
A. federal funds rate.
B. overnight cash rate.
C. lombard rate.
D. reserve rate.
Answer:
If an economy experiences high interest rates and high unemployment, the ISLM
framework predicts that ________ policy has been too ________.
A. fiscal; expansionary
B. fiscal; contractionary
C. monetary; expansionary
D. monetary; contractionary
Answer:
Which of the followings is NOT true about the word “autonomous” that economists
use?
A. Changes in autonomous components are associated with shifts of a curve.
B. The autonomous component of a variable is exogenous.
C. The autonomous component of a variable is independent of other variables in the
model.
D. The autonomous component of a variable is induced by other variables in the model.
Answer:
In developing countries, it can be expensive and time-consuming for the poor to
legalize their property ownership. Without legal title, the property cannot be used as
________ to borrow funds.
A) collateral
B) points
C) interest
D) restrictive covenants
Answer:
Compared to an economy that uses a medium of exchange, in a barter economy
A. transaction costs are higher.
B. transaction costs are lower.
C. liquidity costs are higher.
D. liquidity costs are lower.
Answer:
One way for banks to reduce the principal-agent problems associated with trading
activities is to
A. set limits on the total amount of a traders’ transactions.
B. make sure that the person conducting the trades is also the person responsible for
recording the transactions.
C. encourage traders to take on more risk if the potential rewards are higher.
D. reduce the regulations on the traders so that they have more flexibility in conducting
trades.
Answer:
When the Treasury bond market becomes less liquid, other things equal, the demand
curve for corporate bonds shifts to the ________ and the demand curve for Treasury
bonds shifts to the ________.
A. right; right
B. right; left
C. left; right
D. left; left
Answer:
A venture capital firm protects its equity investment from moral hazard through which
of the following means?
A) It places people on the board of directors to better monitor the borrowing firm’s
activities.
B) It writes contracts that prohibit the sale of an equity investment to the venture capital
firm.
C) It prohibits the borrowing firm from replacing its management.
D) It requires a 50% stake in the company.
Answer:
When the exchange rate for the British pound changes from $1.80 per pound to $1.60
per pound, then, holding everything else constant, the pound has ________ and
________ expensive.
A. appreciated; British cars sold in the United States become more
B. appreciated; British cars sold in the United States become less
C. depreciated; American wheat sold in Britain becomes more
D. depreciated; American wheat sold in Britain becomes less
Answer:
Which of the following is a part of the Global Legal Settlement of 2002?
A. The establishment of a Public Company Accounting Oversight Board (PCAOB) to
supervise accounting firms and thus insure that audits are independent and controlled
for quality.
B. Increased penalties for white-collar crime and obstruction of official investigations.
C. Requires a CEO and CFO to certify that periodic financial statements and disclosure
of the firm are accurate.
D. Requires investment banks to make public their analysts’ recommendations.
Answer:
Which of the following can be described as direct finance?
A. You take out a mortgage from your local bank.
B. You borrow $2500 from a friend.
C. You buy shares of common stock in the secondary market.
D. You buy shares in a mutual fund.
Answer:
Of the following assets, the least liquid is
A. stocks.
B. traveler’s checks.
C. checking deposits.
D. a house.
Answer:
To lower long-term interest rates, in 2010 the Fed started its new open market operation
program to purchase
A. mortgage-backed securities.
B. commercial papers.
C. long-term Treasuries.
D. Treasury bills and Treasury notes.
Answer:
Since it does not have to be converted into anything else to make purchases, ________
is the most liquid asset.
A. money
B. stock
C. artwork
D. gold
Answer:
Which of the following is a depository institution?
A. a life insurance company
B. a credit union
C. a pension fund
D. a mutual fund
Answer:
A feature of debt markets in emerging-market countries is that debt contracts are
typically
A. very short term.
B. long term.
C. intermediate term.
D. perpetual.
Answer:
Everything else held constant, an increase in net taxes ________ aggregate ________.
A. increases; demand
B. decreases; demand
C. decreases; supply
D) increases; supply
Answer:
A decrease in the riskiness of corporate bonds will ________ the price of corporate
bonds and ________ the price of Treasury bonds, everything else held constant.
A. increase; increase
B. reduce; reduce
C. reduce; increase
D. increase; reduce
Answer:
Both ________ and ________ are Federal Reserve assets.
A. currency in circulation; reserves
B. currency in circulation; securities
C. securities; loans to financial institutions
D. securities; reserves
Answer:
Keynes mentioned two factors that influenced planned investment spending
A. interest rates and disposable income.
B. interest rates and business expectations about the future.
C. disposable income and business expectations about the future.
D. interest rates and business expectations about inflation.
Answer:
An option allowing the owner to sell an asset at a future date is a
A. put option.
B. call option.
C. futures contract.
D. forward contract.
Answer:
The three largest Federal Reserve banks (New York, Chicago, and San Francisco)
combined hold more than ________ percent of the assets of the Federal Reserve
System.
A. 25
B. 33
C. 50
D. 67
Answer:
Banks and other financial institutions engage in financial intermediation, which
A. can hurt the performance of the economy.
B. can benefit economic performance.
C. has no effect on economic performance.
D. involves borrowing from investors and lending to savers.
Answer:
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.
Answer:
If the consumption function is C = 20 + 0.8YD, then an increase in disposable income
by $100 will result in an increase in consumer expenditure by
A. $58.
B. $64.
C. $80.
D. $100.
Answer:
Under the Exchange Rate Mechanism of the European Monetary System, when the
British pound depreciated below its lower limit against the German mark, the Bank of
England was required to buy ________ and sell ________, thereby ________
international reserves.
A) pounds; marks; losing
B) pounds; marks; gaining
C) marks; pounds; gaining
D) marks; pounds; losing
Answer:
If real estate prices are expected to drop, all else equal, the demand for bonds ________
and the interest rate_______.
A. increases; rises
B. increases; falls
C. decreases; rises
D. decreases; falls
Answer: