The ex ante real interest rate is __________, while the ex post real rate is __________.
A) the nominal interest rate minus expected inflation; the nominal interest rate minus
actual inflation
B) the nominal interest rate minus actual inflation; the nominal interest rate minus
expected inflation
C) the real interest rate plus expected inflation; the real interest rate plus actual inflation
D) the real interest rate plus actual inflation; the real interest rate plus expected inflation
We would expect the euro to appreciate when there is a __________ shift in the euro
demand curve or a __________ shift in the euro supply curve.
A) rightward; rightward
B) rightward; leftward
C) leftward; rightward
D) leftward; leftward
If an individual received a total of $400 in simple interest payments on a $1,000 loan
over four years, the annual simple interest rate was
A) 15 percent.
B) 5 percent.
C) 4 percent.
D) 10 percent.
When investment bankers underwrite new stock, they
A) sell them on one of the stock exchanges.
B) auction them off to the public.
C) sell them to commercial banks who in turn find buyers.
D) place them with ultimate investors and some intermediaries throughout the country.
Lenders must be concerned that borrowers may do risky unauthorized things with the
funds they are lent. This is the __________ problem.
A) moral hazard
B) nondivisibility
C) adverse selection
D) None of the above.
The quantity of money demanded increases at every combination of GDP and interest
rate. If the Fed holds to an unchanged interest rate target, the interest rate __________
and GDP __________.
A) rises; falls
B) rises; remains unchanged
C) remains unchanged; remains unchanged
D) remains unchanged; falls
Assume a consumption function of the following form: C = 500 + .9Y. If income rises
by $100, consumption will increase by
A) $90.
B) $550.
C) $590.
D) $600.
Stocks and bonds issued in banking-oriented systems are rather __________ because
they are traded __________.
A) liquid; frequently
B) liquid; infrequently if at all
C) illiquid; frequently
D) illiquid; infrequently if at all
Suppose a share of stock is expected to pay an annual dividend of $10 forever. At a
discount rate of 5 percent, the share’s market price should be
A) $188.24.
B) $200.00.
C) $29.60.
D) $10.80.
Assets on the balance sheet of a money market mutual fund typically include
A) commercial mortgages.
B) high-grade commercial paper.
C) U.S. Treasury bonds.
D) municipal bonds.
In the view of the Classical economists, a increase in aggregate demand leads to
A) lower output levels.
B) a higher price level.
C) higher output levels.
D) a lower price level.
A rise in six-month LIBOR is good news to __________ in a swap contract.
A) the fixed-rate payer
B) the floating-rate payer
C) both payers
D) neither payer
The FOMC directive contains a target growth rate for
A) nominal GDP.
B) real GDP.
C) the inflation rate.
D) M2.
If the Federal Reserve sells $20 million worth of government securities and the M1
multiplier is 2.5. Bank reserves will
A) fall by $20 million.
B) fall by $50 million.
C) fall by $16 million.
D) fall by $8 million.
A ten-year $1,000,000-face-value zero-coupon Treasury bond has a market price of
__________ when the interest rate is 9.62%.
A) $399,119
B) $674,844
C) $903,800
D) $962,000
In a world of rational expectations,
A) an unanticipated increase in money supply leads immediately to lower nominal
interest rates.
B) an unanticipated increase in money supply leads immediately to higher nominal
interest rates.
C) an anticipated increase in money supply leads immediately to lower nominal interest
rates.
D) an anticipated decrease in money supply leads immediately to higher nominal
interest rates.
A lower price level causes us to
A) move up along the aggregate demand curve.
B) move down along the aggregate demand curve.
C) shift the aggregate demand curve to the right.
D) shift the aggregate demand curve to the left.
Say’s law
A) explains the role of money.
B) deals with interest rates, employment, and production.
C) was accepted and praised by John Maynard Keynes.
D) None of the above.