Everything else held constant, a decrease in autonomous consumer spending will cause
the IS curve to shift to the ________ and aggregate demand will ________.
A) right; increase
B) right; decrease
C) left; increase
D) left; decrease
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
“Bureaucratic gambling” refers to
A) the strategy of thrift managers that they would not be audited by thrift regulators in
the 1980s due to the relatively weak bureaucratic power of thrift regulators.
B) the risk that thrift regulators took in publicizing the plight of the S&L industry in the
early 1980s.
C) the strategy adopted by thrift regulators of lowering capital requirements and
pursuing regulatory forbearance in the 1980s in the hope that conditions in the S&L
industry would improve.
D) the risk that regulators took in going to Congress to ask for additional funds.
The National Bank Act of 1863, and subsequent amendments to it
A) created a banking system of state-chartered banks.
B) established the Office of the Comptroller of the Currency.
C) broadened the regulatory powers of the Federal Reserve.
D) created insurance on deposit accounts.
________ flexible wages and prices imply that the short-run aggregate supply curve is
________.
A) More; flatter
B) Less; steeper
C) less; vertical
D) More; steeper
A ________ is bought at a price below its face value, and the ________ value is repaid
at the maturity date.
A) coupon bond; discount
B) discount bond; discount
C) coupon bond; face
D) discount bond; face
When a country forgoes its own currency and starts using another country’s currency as
its own, we say that this country has
A) created a currency board.
B) undergone dollarization.
C) adopted a managed exchange system.
D) adopted an exchange rate monetary system.
Because inflation was not a serious problem during the Great Depression, Keynes’s
analysis assumed
A) that unemployment also was not a problem.
B) that the money supply was fixed.
C) that the price level was fixed.
D) that monetary policy is not effective.
If the required reserve ratio is 10 percent, currency in circulation is $400 billion,
checkable deposits are $800 billion, and excess reserves total $0.8 billion, then the
currency-deposit ratio is
A) 0.25.
B) 0.50.
C) 0.40.
D) 0.05.
A rising stock market index due to higher share prices
A) increases people’s wealth, but is unlikely to increase their willingness to spend.
B) increases people’s wealth and as a result may increase their willingness to spend.
C) decreases the amount of funds that business firms can raise by selling newly-issued
stock.
D) decreases people’s wealth, but is unlikely to increase their willingness to spend.
If a bank has ________ rate-sensitive assets than liabilities, a ________ in interest rates
will reduce bank profits, while a ________ in interest rates will raise bank profits.
A) more; rise; decline
B) more; decline; rise
C) fewer; decline; decline
D) fewer; rise; rise
A fall in the level of prices
A) does not affect the value of money.
B) has an uncertain effect on the value of money.
C) increases the value of money.
D) reduces the value of money.
Of money’s three functions, the one that distinguishes money from other assets is its
function as a
A) store of value.
B) unit of account.
C) standard of deferred payment.
D) medium of exchange.
An increase in the expected inflation rate causes the supply of bonds to ________ and
the supply curve to shift to the ________, everything else held constant.
A) increase; left
B) increase; right
C) decrease; left
D) decrease; right
The specialty of Lloyd’s of London is
A) annuities.
B) hedge funds.
C) mutual funds.
D) reinsurance.
The immediate (two-day) exchange of one currency for another is a
A) forward transaction.
B) spot transaction.
C) money transaction.
D) exchange transaction.
Modern liability management has resulted in
A) increased sales of negotiable CDs to raise funds.
B) increase importance of deposits as a source of funds.
C) reduced borrowing by banks in the overnight loan market.
D) failure by banks to coordinate management of assets and liabilities.
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.
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.
Countries with balance of payments deficits do not want to see their currencies
________ because it makes foreign goods ________ expensive for domestic
consumers.
A) appreciate; less
B) appreciate; more
C) depreciate; less
D) depreciate; more
Using a unified analytic framework to present the information in the text keeps the
knowledge
A) focused on theories that have little to do with actual behavior.
B) theoretical and uninteresting.
C) abstract and not applicable to real life.
D) from becoming obsolete.
As interest rates rise, the opportunity cost of holding money ________ and the demand
for money ________.
A) rises; rises
B) rises; falls
C) falls; rises
D) falls; falls
It is possible that when the money supply rises, interest rates may ________ if the
________ effect is more than offset by changes in income, the price level, and expected
inflation.
A) fall; liquidity
B) fall; risk
C) rise; liquidity
D) rise; risk
The primary assets of credit unions are
A) municipal bonds.
B) business loans.
C) consumer loans.
D) mortgages.
Which of the following is most likely to result from a stronger dollar?
A) U.S. goods exported aboard will cost less in foreign countries, and so foreigners will
buy more of them.
B) U.S. goods exported aboard will cost more in foreign countries and so foreigners
will buy more of them.
C) U.S. goods exported abroad will cost more in foreign countries, and so foreigners
will buy fewer of them.
D) Americans will purchase fewer foreign goods.
Financial institutions that accept deposits and make loans are called
A) exchanges.
B) banks.
C) over-the-counter markets.
D) finance companies.
When the price of a bond is above the equilibrium price, there is an excess ________
bonds and price will ________.
A) demand for; rise
B) demand for; fall
C) supply of; fall
D) supply of; rise
The advantage of a “buy-and-hold strategy” is that
A) net profits will tend to be higher because there will be fewer brokerage
commissions.
B) losses will eventually be eliminated.
C) the longer a stock is held, the higher will be its price.
D) profits are guaranteed.
An increase in the expected future domestic exchange rate causes the demand for
domestic assets to ________ and the domestic currency to ________, everything else
held constant.
A) increase; appreciate
B) increase; depreciate
C) decrease; appreciate
D) decrease; depreciate
In response to banks entering into the insurance business, insurance companies have
started to supply ________ insurance.
A) debt
B) credit
C) equity
D) currency