A decrease in aggregate demand in the Classical model leads to
A) lower prices and lower output.
B) lower prices and higher output.
C) lower prices and unchanged output.
D) unchanged prices and output.
Portfolio diversification is ineffective when
A) assets in the portfolio have precisely the same pattern of returns.
B) assets in the portfolio have negative correlations.
C) assets in the portfolio are uncorrelated.
D) Portfolio diversification is ineffective in each of the above scenarios.
In the Classical model, an increase in saving will result in saving being __________
than investment which will cause the interest rate to __________.
A) greater; rise
B) greater; fall
C) less; rise
D) less; fall
The relationship between money and spending is
A) very reliable.
B) very unreliable.
C) not important.
D) None of the above.
In the Classical model, aggregate demand determines the
A) level of real output.
B) the level of employment.
C) the price level.
D) the velocity of money.
Mortgages carry an uncertain flow of cash because
A) borrowers often default on home loans.
B) mortgages are short-term debt instruments.
C) homeowners often prepay their mortgage loans.
D) lenders cannot legally fix interest rates.
With velocity constant, an increase in the money supply multiplied by velocity yields
the increase in equilibrium
A) interest rates.
B) money demand.
C) price level.
D) income.
A market in which stock prices are rising is called a
A) bull market.
B) bear market.
C) pig market.
D) primary market.
The Comptroller of the Currency
A) serves as Chairman of the Board of Governors.
B) serves as a member of the Board of Governors.
C) serves as an alternate member of the Board of Governors.
D) does not serve on the Board of Governors.
The two major types of finance company are
A) captive and specialty.
B) public and private.
C) consumer and commercial.
D) insured and uninsured.
In the Keynesian model, portfolio decisions of individuals determine the
A) inflation rate.
B) money supply.
C) interest rate.
D) GDP.
__________ are issued with an original maturity of between one and ten years.
A) Treasury bills
B) Treasury notes
C) Treasury bonds
D) None of the above.
For term life insurance, the policy holder pays
A) premiums based on current interest rates.
B) a constant premium.
C) premiums that vary with mortality risk.
D) constantly declining premiums.
If the MPC is 0.9, then an increase in taxes of $100 can be expected to __________
consumption by the amount of __________.
A) increase; $90
B) decrease; $90
C) increase; $100
D) decrease; $100
A horizontal LM curve implies that the expenditure multiplier, when compared with the
simple Keynesian expenditure multiplier, is
A) smaller.
B) larger.
C) equal.
D) equal to the inverse of the simple multiplier.
M3 is an example of a Federal Reserve
A) directive.
B) tool.
C) intermediate target.
D) operating target.