A tradeoff between inflation and unemployment is shown directly by the __________
curve.
A) Fisher
B) Phillips
C) Friedman
D) aggregate demand
Suppose that IS and LM intersect at full-employment output. A leftward shift of IS will
be followed by a __________ price level that shifts LM to the __________ in a return
to full employment.
A) rising; right
B) rising; left
C) falling; right
D) falling; left
When a bank pays a check drawn on a customer’s account to another bank, the bank
loses
A) capital equal to the amount of the check.
B) capital equal to the required reserve ratio times the amount of the check.
C) reserves equal to the amount of the check.
D) reserves equal to the required reserve ratio times the amount of the check.
A Keynesian econometric model is likely to emphasize that monetary policy affects
economic activity through changes in
A) the money supply.
B) reserve requirements.
C) interest rates.
D) currency holding by the public.
Along an LM curve at higher interest rates there is __________ money demanded, so
income must be higher to __________ the demand for transactions balances if the total
demand for money is to equal the fixed supply.
A) less; decrease
B) less; increase
C) more; decrease
D) more; increase
The yield to maturity of a zero-coupon bond is determined by the bo face value and its
A) purchase price.
B) current yield.
C) coupon rate.
D) real rate.
In the Classical view, falling interest rates increase
A) government spending.
B) saving.
C) velocity.
D) investment.
In the simple Keynesian framework, the price level
A) is fixed.
B) varies directly with unemployment.
C) varies inversely with wages.
D) is indeterminate.
The two types of financial systems tend to treat
A) small firms alike.
B) large firms alike.
C) both small and large firms alike.
D) neither small nor large firms alike.
A bank with excess reserves
A) cannot make new loans.
B) must make new loans.
C) may choose to make new loans equal to the amount of excess reserves.
D) can lend an amount equal to the amount of excess reserves multiplied by the inverse
of the required reserve ratio.
The slope of the LM curve will be flatter the __________ is the income-sensitivity of
the demand for money and the __________ is the interest-sensitivity of the demand for
money.
A) less; less
B) less; greater
C) greater; less
D) greater; greater
The precise terms of each futures contract are
A) negotiated by the long and the short.
B) set by the short position.
C) set by the long position.
D) established by the exchange on which the trade takes place.
If a Fed __________ other than bank reserves falls and there are no offsetting entries
elsewhere on the Fed’s balance sheet, then bank reserves must __________.
A) asset; fall
B) asset; rise
C) liability; fall
D) liability; rise
A relatively steep LM curve implies that wide fluctuations in the goods sector cause
A) wide fluctuations in real output.
B) wide fluctuations in the price level.
C) wide fluctuations in the interest rate.
D) crowding out of private investment.
Bank __________ must be held in the form of vault cash and deposits with the central
bank.
A) assets
B) liabilities
C) capital
D) reserves
The FDIC handles most bank failures by the __________ method.
A) payoff
B) nationalization
C) purchase and assumption
D) share transfer
__________ will cause a movement up along the demand for loanable funds curve.
A) A rise in interest rates
B) A decline in interest rates
C) An increase in business borrowing
D) A decrease in business borrowing
When yields are expected to __________ in the future, investors prefer __________
long-term securities.
A) rise; hold
B) rise; not to hold
C) fall; not to hold
D) None of the above
Hyperinflation is most likely when it is fueled by
A) ever-increasing levels of government spending.
B) declines in the velocity of money.
C) continuously rising money demand.
D) continuous increases in the money supply in ever-increasing volume.
A swap contract __________ be resold, which is particularly important for the
__________ in swaps.
A) can; speculator
B) can; hedger
C) cannot; speculator
D) cannot; hedger
In a simple Keynesian model, an increase in income leads to an increase in
A) savings.
B) investment.
C) the price level.
D) the money supply.
The interrelationship between similar securities is not a focus of the
A) expectations approach to term structure.
B) supply and demand approach to term structure.
C) equilibrium approach to term structure.
D) liquidity premium approach to term structure.
According to rational expectations,
A) the Fed should focus its policies on interest rates.
B) the Fed should focus its policies on inflation.
C) the Fed should focus its policies on unemployment.
D) the Fed is unable to influence real economic activity.
It takes __________ consecutive monthly changes in the LEI before a change in
economic activity is being foreshadowed.
A) two
B) three
C) four
D) six
Conflict resolution of the stockholder-lender conflict in smaller market-oriented firms is
most effectively accomplished by
A) financial intermediation (monitoring).
B) financial intermediation (ownership consolidation).
C) rating agencies.
D) managerial compensation.