The lag that arises because the random nature of economic data may make it difficult
for policy makers to fully understand the state of the economy is referred to as the___
lag.
a. implementation
b. recognition
c. effectiveness
d. decision
Answer:
The difference between the present value of a perpetuity that pays $250 every year and
a perpetuity that pays $500 every year when the annual rate of discount is 5% is
a. $500.
b. $750.
c. $5,000.
d. $7,500.
Answer:
If the nominal interest rate is 3 percent and the cost of going to the ATM is $1.50,
someone who has a 12 percent probability of having his cash lost or stolen and has a
total cost of holding cash equal to (547.50/T) + (0.375 × T) spends____ daily. Assume
that the individual visits the ATM once in every T days.
a. $20
b. $15
c. $10
d. $5
Answer:
In the liquidity-preference model, an increase in the money supply causes
a. the nominal interest rate to increase and the equilibrium quantity of money to
decrease.
b. the nominal interest rate to increase and the equilibrium quantity of money to remain
unchanged.
c. the nominal interest rate to decrease and the equilibrium quantity of money to remain
unchanged.
d. the nominal interest rate to decrease and the equilibrium quantity of money to
increase.
Answer:
When savers buy securities from borrowers without the assistance of any third-party,
they are using
a. direct finance.
b. indirect finance.
c. a secondary market.
d. a financial intermediary.
Answer:
An increase in interest rates
a. decreases the M2 money multiplier.
b. decreases the ratio of excess reserves to transaction accounts held by banks
c. increases the money supply for a given amount of monetary base.
d. increases the ratio of excess reserves to transaction accounts held by banks
Answer:
In the one-period present-value equation, P=F/(1 + i), the term 1 + i is referred to as
a. future value.
b. present value.
c. the rate of discount.
d. the discount factor.
Answer:
Which of the following statements is true?
a. Both expansionary and contractionary monetary policy has the drawback of
increasing unemployment.
b. Both expansionary and contractionary monetary policy has the drawback of
increasing inflation.
c. Expansionary monetary policy has the drawback of increasing unemployment, while
contractionary monetary policy has the drawback of increasing inflation.
d. Expansionary monetary policy has the drawback of increasing inflation, while
contractionary monetary policy has the drawback of increasing unemployment.
Answer:
A general-equilibrium model is a model in which
a. all key macroeconomic variables are endogenous.
b. more than one key macroeconomic variable is exogenous.
c. only one macroeconomic variable is exogenous.
d. none of the key macroeconomic variables are endogenous.
Answer:
The unemployment rate reflecting normal job turnover is called
a. the natural rate of unemployment.
b. the non-accelerating investment rate of unemployment (NAIRU).
c. frictional unemployment.
d. structural unemployment.
Answer:
Everything else remaining unchanged, a decrease in the supply of security A and a
decrease in the demand for security B will cause the price of security A to_____ and the
price of security B to_____ .
a. fall; fall
b. fall; rise
c. rise; fall
d. rise; rise
Answer:
If output grew 3.9 percent last year and hours worked grew 1.3 percent,then by how
much did labor productivity grow over the year?
a. 0.3 percent
b. 2.6 percent
c. 3.0 percent
d. 5.2 percent
Answer:
Compensation of workers per hour in the U.S. grew the fastest in the
a. long boom.
b. economic liftoff period.
c. Great Depression.
d. reorganization period.
Answer:
A bank’s spread equals
a. the bank’s average profit per dollar of assets.
b. the bank’s return on equity.
c. the average interest rate on all the bank’s investments minus the inflation rate.
d. the average interest rate on the bank’s assets minus the average interest rate on its
liabilities.
Answer:
In the two-period model, a lower real interest rate
a. reduces the present value of income.
b. causes the budget constraint to rotate in a clockwise direction.
c. makes households that had initially planned to save better off.
d. makes households that had initially planned to borrow better off.
Answer:
The difference between labor productivity growth and growth in compensation per hour
has been the greatest in the
a. long boom period.
b. economic liftoff period.
c. Great Depression period.
d. reorganization period.
Answer:
If the present value of $3,000 to be received after a year is $2,795, the annual rate of
discount must be
a. 5.65%.
b. 7.33%.
c. 9%.
d. 11.11%.
Answer:
Business cycle refers to the
a. rise and fall of firms in a particular industry.
b. rise and fall of industries in the economy.
c. short-run fluctuation of international trade as a proportion of GDP.
d. short-term movement of output and other key economic variables around their
long-term trends.
Answer:
A variable that is determined within a model is called
a. a dynamic variable.
b. a static variable.
c. an endogenous variable.
d. an exogenous variable.
Answer:
One of the debatable assumptions on which the ATM model for the demand for cash is
based on is that
a. money supply is constant.
b. individuals spend the same amount of money every day.
c. the ongoing rate of inflation is always greater than 10%.
d. cash held in banks do not attract interest.
Answer:
In the United States, the average annual real return on short-term Treasury securities
since 1960 to 2012 has been approximately
a. 5 percent.
b. 4 percent.
c. 25 percent.
d. 10 percent.
Answer:
A key failure of large structural macroeconomic models, according to the theory of
rational expectations, is that the models assumed that expected inflation is independent
of
a. monetary policy.
b. past inflation.
c. interest rates.
d. aggregate demand.
Answer:
Consider a five-year fixed-payment security that has a present value of $1,500. If the
annual rate of discount is 2 percent, the payment made at the end of each year is
a. $231.77.
b. $288.24.
c. $300.00.
d. $310.00.
Answer:
Four friends- Phillips, Eliza, John, and Jacob are associated with Redhood Ltd. in
different ways. Phillips is the CEO of Redhood Ltd., Melissa works as an accountant
while John owns some shares of Redhood Ltd. and Jacob has some debt securities
issued by the company. Who is likely to be paid last in case of a bankruptcy?
a. John
b. Jacob
c. Phillips
d. Melissa
Answer:
The economic liftoff period in the U.S. occurred from
a. 1929−1949.
b. 1950−1970.
c. 1970−1982.
d. 1982−present.
Answer:
The S&L crisis in the late 1970s and early 1980s was made much worse by
a. moral hazard, when regulators failed to close bankrupt S&Ls, which in turn caused a
credit crunch.
b. adverse selection, when commercial banks were allowed to buy financially sound
S&Ls but did not buy bankrupt S&Ls.
c. asymmetric information, because the government did not realize the bad financial
condition of the S&Ls.
d. the regulatory dialectic.
Answer:
One of the reasons that led to the inconsistency of the large structural macroeconomic
models was
a. that endogenous variables such as foreign output were treated as exogenous.
b. that all equations were estimated together to test their interrelations with one another.
c. that individual equations were estimated in isolation with one another.
d. that exogenous variables such as level of technology were treated as endogenous.
Answer:
Which of the following statements correctly identifies a disadvantage of fiat money?
a. It is very expensive to manufacture.
b. It cannot be used for international transactions.
c. It is possible to create counterfeit fiat money.
d. It can be created only in the private sector.
Answer:
Taylor originally picked____ as the equilibrium real federal funds rate, which was equal
to its historical average.
a. 1 percent
b. 2 percent
c. 3 percent
d. 4 percent
Answer:
If the volume of domestic investment is $32 billion, net exports is $10 billion, and
budget deficit is $5 billion, what is
the volume of domestic savings?
a. $47 billion
b. $38 billion
c. $29 billion
d. $16 billion
Answer: