The expenditure multiplier is greatest when the
A) LM curve is positively sloped.
B) LM curve is horizontal.
C) IS curve is vertical.
D) LM curve is vertical.
An unexpected fall in durable goods orders should send bond prices __________ and
stock prices __________.
A) up; up
B) up; down
C) down; up
D) down; down
From the Keynesians’ perspective, a short-run Phillips Curve exists because
A) wages and prices are perfectly flexible.
B) money demand is unstable.
C) investment is unstable.
D) wages change more slowly than the price level.
Luther Schwarz currently has a balance of $838.55 in his savings account. __________
years ago, Luther deposited $500 in his savings account, which pays an annual interest
rate of 9 percent, compounded annually.
A) 8
B) 7
C) 6
D) 5
The country in which two of the categories of banks are clearing banks and merchant
banks is
A) the United Kingdom.
B) the United States.
C) Japan.
D) Germany.
When taxes paid by a check are deposited in tax and loan accounts,
A) bank reserves and the money supply are unaffected.
B) bank reserves fall but the money supply is unaffected.
C) bank reserves are unaffected but the money supply falls.
D) bank reserves and the money supply fall.
There is __________ problem with deposit insurance as the insurer shares
disproportionately in the __________ risk of banking.
A) an adverse selection; upside
B) an adverse selection; downside
C) a moral hazard; upside
D) a moral hazard; downside
The fact that yields on short-term securities fluctuate more over the course of the
business cycle supports which theory of the term structure?
A) Pure expectations
B) Preferred habitat
C) Supply and demand
D) Liquidity premium
Suppose the marginal propensity to consume is 0.75. A $150 billion increase in
government spending shifts the IS curve
A) to the right by $50 billion.
B) to the left by $50 billion.
C) to the left by $600 billion.
D) to the right by $600 billion.
In the IS-LM model, the expenditure multiplier is [1/(1-b)] when the
A) LM curve is horizontal.
B) LM curve is upward-sloping.
C) LM curve is vertical.
D) IS curve is vertical.
A __________ in the balance of payments means that we are paying out more money
abroad than we are taking in, resulting in a(n) __________ of foreign exchange value
relative to the dollar.
A) deficit; depreciation
B) surplus; appreciation
C) surplus; depreciation
D) deficit; appreciation
According to Classical interest rate theory, which of the following will increase the
equilibrium interest rate?
A) A decrease in investment
B) A decrease in saving
C) An increase in money demand
D) A decrease in money demand
__________ buy or sell futures contracts to reduce their exposure to the risk of future
price movements in the underlying asset.
A) Hedgers
B) Speculators
C) Arbitrageurs
D) None of the above.
Bond prices are
A) equal to the face value of the bond.
B) equal to the real interest rate.
C) equal to the nominal interest rate.
D) inversely related to the interest rate.
Bankers have an advantage in developing a relationship with their business borrowers
because
A) banks provide a menu of services which allows them to learn about a company.
B) banks have access to higher quality credit reports.
C) banks are better at getting owners to pledge collateral than are other lenders.
D) loans to small businesses are usually less than 5 years thus allowing encouraging
borrowers to return more frequently for evaluation.
A(n) __________ is a standardized agreement that calls for the delivery of a specific
underlying commodity or security at some future date at a currently agreed-upon price.
A) option contract
B) swap
C) futures contract
D) forward contract
Swaps are __________ agreements involving the exchange of interest payments
__________.
A) standardized; against a bundle of Treasury securities
B) standardized; on a stated notional principal amount
C) customized; against a bundle of Treasury securities
D) customized; on a stated notional principal amount