Adaptive expectations are “__________” according to the New Classical economists
because they __________ information it is possible to use in making a forecast.
A) rational; include all
B) rational; exclude some
C) irrational; include all
D) irrational; exclude some
When the LM curve is vertically sloped, the __________ in income due to a change in
the money supply will be __________ when the LM curve is positively sloped, but not
vertical.
A) decrease; greater
B) decrease; smaller
C) increase; greater
D) increase; smaller
Which of the following futures contracts is available on the Chicago Board of Trade?
A) New York Stock Exchange Composite Index futures
B) Foreign currency futures
C) U.S. Treasury bonds
D) Value Line Market Index futures
A few U.S. commercial banks are allowed to have ‘section 20 affiliates” that can
A) underwrite corporate debt and equity.
B) operate in foreign markets.
C) branch nationwide regardless of state laws.
D) own majority shares in other banks.
If wages instantaneously adjust to reflect expected inflation that is based on an
anticipated increase in the money supply,
A) the aggregate demand and positively sloped aggregate supply curve shift to the right
at the same time.
B) the positively sloping aggregate supply curve shifts to the left after the aggregate
demand curve shifts to the right.
C) the positively sloping aggregate supply curve shifts to the left before the aggregate
demand curve shifts to the right.
D) the positively sloping aggregate supply curve does not shift to the right at the same
time as the aggregate demand curve shifts to the left.
In an economy with no taxes, an income level of $400 billion, consumption of $300
billion, and government spending of $25 billion, saving is equal to
A) $25 billion.
B) $100 billion.
C) $275 billion.
D) $375 billion.
In the long run, the yield curve tends to be
A) positively sloped.
B) negatively sloped.
C) nearly vertical.
D) nearly horizontal.
Liquidity preference theory indicates that at lower interest rates
A) investment is greater.
B) money demand is greater.
C) consumption is greater.
D) money supply is greater.
In order to reduce market risk associated with bonds held in inventory, a dealer can
A) take a long position in bond futures.
B) take a short position in bond futures.
C) purchase bonds at the mark-to-market settlement price.
D) use settlement by offset procedures.
A surplus in our balance of payments causes the dollar to __________, which causes
the surplus to __________.
A) appreciate; increase
B) appreciate; decrease
C) depreciate; increase
D) depreciate; decrease
Monetarists argue that government deficits financed by monetary expansion cause(s)
A) velocity to increase.
B) aggregate demand to increase.
C) aggregate demand to decrease.
D) no change in aggregate demand or aggregate supply.
Trading in collateralized mortgage obligations (CMOs) takes place in the __________
market between __________.
A) primary; specialists
B) organized exchange; dealers
C) over-the-counter; dealers
D) primary; Ginnie Mae and Freddie Mac
Financing accounts receivable and inventory is known as
A) capital financing.
B) working capital financing.
C) long-term financing.
D) equity financing.
The flatter is the LM curve
A) the more effective is fiscal policy.
B) the less effective is fiscal policy.
C) the less is the interest sensitivity of saving.
D) the less is the interest sensitivity of the money supply.
If it is easy to uncover buy and sell orders above and below current transactions prices,
a market is said to
A) be primary.
B) lack breadth.
C) be deep.
D) be resilient.
When a bank borrows from the Federal Reserve the bank
A) receives a new deposit of legal reserves at the Federal Reserve.
B) creates a new checkable deposit payable to the Federal Reserve.
C) normally will do so because it has excess reserves.
D) loses reserves equal to the amount of the loan.
A falling GDP causes __________ the money demand curve.
A) downward movement along
B) upward movement along
C) a rightward shift of
D) a leftward shift of
A one-year Treasury bill with a face value of $1,000 and an annual yield of 5 percent
sells for approximately
A) $1,005.
B) $995.
C) $952.
D) $948.
Any increase in autonomous spending will
A) shift the IS curve to the left.
B) shift the IS curve to the right.
C) cause a movement down along an IS curve.
D) cause a movement up along an IS curve.
If a bank buys securities, its
A) net worth increases.
B) net worth decreases.
C) reserves increase.
D) reserves decrease.
Unlike the Classical economists, Keynes believed that money could affect real
economic activity through its effects on
A) the price level.
B) the interest rate.
C) savings.
D) velocity.
A relatively flat aggregate demand curve indicates that
A) velocity is relatively constant.
B) the economy is near full employment.
C) inflation is relatively low.
D) spending is sensitive to changes in the price level.
In the simple Keynesian model which has no taxes and a saving function which is in the
form S = -80 + .20Y, a $200 increase in desired investment leads to an increase in
equilibrium income of
A) $40.
B) $100.
C) $400.
D) $1000.