If sales of a firm exactly equals investor expectations, stock price of the firm
a. is expected to increase.
b. is expected to decrease.
c. is expected to remain the same.
d. can increase or decrease depending on the volume of stocks being traded.
Answer:
Investors can lock in a real interest rate and thus avoid most of the risk of unexpected
inflation by buying
a. corporate bonds.
b. inflation-indexed securities.
c. stock.
d. mortgage-backed securities.
Answer:
Which of the following statements is true?
a. A coupon bond is a debt security with only one payment.
b. The amount invested in a financial security is referred to as perpetuity.
c. A coupon bond is a debt security that pays interest forever and never repays principal.
d. The present value of a perpetuity varies directly with the annual repayments.
Answer:
If money is a legal tender, it implies that a _________must accept___________ in the
repayment of debts, by law.
a. lender; only non-monetary payments
b. borrower; money
c. borrower; only non-monetary payments
d. lender; money
Answer:
Consider a one-year coupon bond that has a present value of $2,000. If the annual rate
of discount is 5 percent, and the payment made at the end of each year is $140, the
principal amount to be repaid at the end of one year is
a. $1,234.65.
b. $1,363.32.
c. $1,960.00.
d. $2,000.00.
Answer:
According to the Truth-in-Savings Act, the interest rate that banks are required to report
when you deposit money in an account is known as
a. capital-gains yield.
b. annual percentage yield.
c. current yield.
d. total return.
Answer:
DSGE models that contain households and firms that are identical are known as
a. heterogeneous-agent models.
b. homogeneous-agent models.
c. dynamic models.
d. multi-layered models.
Answer:
The Dodd-Frank act was passed into law in
a. 2010.
b. 1999.
c. 1933.
d. 1913.
Answer:
Consider the following production function
Y= A×Ka×L1−a.If a = 0.4, over the past year output grew 4 percent, total factor
productivity grew 2 percent, and capital grew 3 percent, labor grew by
a. 1.33 percent
b. 2.5 percent
c. 3.2 percent
d. 3.88 percent
Answer:
In the United States, coins are produced by and distributed around the country by .
a. the U.S. Mint; the Federal Reserve.
b. the Bureau of Engraving and Printing; the Treasury Department.
c. the U.S. Mint; the Treasury Department.
d. the Bureau of Engraving and Printing; the Federal Reserve.
Answer:
Most U.S. currency is held by
a. U.S. citizens.
b. banks.
c. the Federal Reserve.
d. foreigners.
Answer:
Suppose that a risk-neutral investor has a choice between buying a one-year bond
paying 5 percent today, a two- year bond paying 4 percent today, a three-year bond
paying 8 percent today, or a four-year bond paying 2 percent today, if a one-year bond
purchased one year from now is expected to have an interest rate of 6 percent, a
one-year bond purchased two years from now is expected to have an interest rate of 7
percent, and a one-year bond purchased three years from now is expected to have an
interest rate of 8 percent. Explain with the help of suitable calculations, which of the
following would the investor decide to do?
a. The investor will purchase a one-year bond today, followed by three successive
one-year bonds.
b. The investor will purchase a two-year bond today, followed by two successive
one-year bonds.
c. The investor will purchase a three-year bond today, followed by a one-year bond.
d. The investor will purchase a four-year bond today.
Answer:
Country Z is passing through a recession. Which group of economists is likely to
believe that a shift of the aggregate demand curve has caused the recession?
a. Keynesians
b. Monetarists
c. Real Business Cycle theorists
d. Neoclassicists
Answer:
If the velocity of money in an economy is 5, money supply is $350 billion, and the price
level is 5, the real output is worth
a. $1,750 billion
b. $1,200 billion
c. $2625 billion
d. $5250 billion
Answer:
Consider the following production function
Y= A×Ka×L1−a.
If a = 0.3, and over the past year total factor productivity (TFP) grew 2.3 percent,
capital grew 2 percent, and output grew 5 percent, what was the growth rate of labor?
a. 2 percent
b. 3 percent
c. 4 percent
d. 5 percent
Answer:
Publications of the Federal Reserve Bank such as the economicrevieware available
a. to the public for free.
b. only to the President of the United States.
c. only to members of the Federal Reserve Bank.
d. to all individuals willing to pay a fixed annual subscription charge.
Answer:
In the two-period model, suppose a household’s income in the first period is $30,000,
income in the second period is
$60,000, and the real interest rate is 30 percent. What is the household’s maximum
spending in the second period, if it decides to save the entire amount in the first period?
a. $40,000
b. $50,000
c. $80,000
d. $99,000
Answer:
In the liquidity-preference model, if the nominal interest rate is lower than the
equilibrium interest rate
a. both bond prices and nominal interest rate will eventually fall further.
b. both bond prices and nominal interest rate will eventually rise.
c. bond prices will fall and nominal interest rate will eventually rise.
d. bond prices will rise and nominal interest rate will eventually fall further.
Answer:
Consider a one-year discount bond that pays $1,000 at maturity. If the annual rate of
discount is 7 percent, the present value of the bond is
a. $930.00.
b. $934.58.
c. $993.00.
d. $993.46.
Answer:
Which of the following is true of debt securities?
a. The periodic payment on a debt security is known as dividend.
b. A debt security specifies a particular maturity date.
c. The original amount invested in a referred to as interest.
d. The amount of payment on a debt security depends on the company’s profits.
Answer:
In which of the following periods was unemployment the highest in the U.S. economy?
a. Great Depression
b. Economic liftoff period
c. Long boom period
d. Reorganization period
Answer:
A country has a total population of 100 million. Out of this, 60 million people are of
working age. Out of this 60 million people, 2 million people are employed and 8
million are unemployed. The unemployment rate in the country is .
a. 10 percent
b. 16.67 percent
c. 8 percent
d. 13.3 percent
Answer:
Fundamental value is the____________ value of expected earnings of a company or of
all companies in the stockmarket as a whole.
a. past
b. future
c. expected
d. present value of expected earnings of a company or of all companies in the stock
Answer:
Third Bank has reserves of $12.3 million and transaction accounts of $115 million. If
required reserves are 10 percent of transactions accounts, Third Bank has excess
reserves of
a. −$0.8 million.
b. $0.
c. $0.8 million
d. $0.08 million
Answer:
Which of the following is recorded under the asset side of a bank’s balance sheet?
a. Transaction deposits
b. Equity capital
c. Borrowings
d. Reserves
Answer:
You are planning to buy a stock, the risk on which is dependent on two factors: (1) the
change in the inflation rate over the last year and (2) the spread between ten-year
Treasury bonds and three-month Treasury bills. Suppose the average risk-free interest
rate is 3 percent. The beta coefficients of the stock associated with the change in
inflation rate and the spread between ten-year Treasury bonds and three-month Treasury
bills are -2 and 4 respectively. If you expect the inflation rate to rise 6 percentage point
and you think the spread will be 8 percentage XOAXOA. What is the expected return to
this stock? Use the arbitrage-pricing theory.
a. 11 percent
b. 12 percent
c. 18 percent
d. 23 percent
Answer:
A sharp upward sloping yield curve indicates that
a. an economic expansion has just begun.
b. an economic expansion has been going on for several years.
c. a recession is about to begin.
d. an economic expansion is nearly over.
Answer:
The price of a certain amount of goods and services a year back was $200. If price
increased by 4 percent during the year, how much money is ____required to buy the
same amount of goods today?
a. $208
b. $204
c. $400
d. $404
Answer:
In case of business cycles, if output falls below the trend line
a. unemployment and inflation both rise.
b. unemployment and inflation both fall.
c. unemployment rises and inflation falls.
d. unemployment falls and inflation rises.
Answer:
Dividing the amount of U.S. currency in circulation by the number of people in the
United States shows that, on an average, each person holds almost $3,000 in cash. The
most important explanation for this remarkably large sum is that
a. the underground economy in the United States is huge, with many dollar transactions.
b. huge amounts of cash have been lost over time.
c. most of the cash is circulating in foreign countries.
d. banks keep huge amounts of cash in their ATMs and bank vaults.
Answer: