In the liquidity-preference model, a decline in prices causes the
a. money supply curve to shift to the right.
b. money supply curve to shift to the left.
c. money demand curve to shift to the left.
d. money demand curve to shift to the right.
Answer:
Suppose the quantity demanded for a security is
BD= 150 − 1b,
and the quantity supplied of the security is
BS= 50 + 1b,
where bis the price of the security in dollars. The equilibrium quantity of the security is
a. $50.
b. $125.
c. $250.
d. $500.
Answer:
Labor productivity is calculated as
a. output minus net exports.
b. the average product of labor minus the marginal product of labor.
c. total factor productivity divided by the amount of capital.
d. output produced by labor divided by hours worked.
Answer:
Andy keeps his savings in a money market mutual fund, Ben keeps his savings invested
in U.S. savings bonds, Charlie keeps his in a bank, and Beth uses her savings to buy the
stocks of a company. Given this information, who among the following individuals is
using direct finance?
a. Andy
b. Ben
c. Charlie
d. Beth
Answer:
Which of the following statements is true?
a. Systematic risk is also referred to as idiosyncratic risk, while unsystematic risk is also
referred to as implicit risk.
b. Unsystematic risk is also referred to as implicit risk, while systematic risk is also
referred to as idiosyncratic risk.
c. Systematic risk can be reduced by diversification, while unsystematic risk cannot be
reduced by diversification.
d. Unsystematic risk can be reduced by diversification, while systematic risk cannot be
reduced by diversification.
Answer:
Suppose the Fed follows the Taylor rule. Which of the following is likely to happen if
the Fed overestimates potential
output?
a. The inflation rate will rise.
b. The federal funds rate will fall.
c. The money supply will decrease.
d. The income tax rates will increase.
Answer:
Risk is the amount of uncertainty relating to the_____ a security.
a. maturity of
b. principal of
c. liquidity of
d. return on
Answer:
A bank in poor condition may take out a loan under close Fed scrutiny. Such a loan is
known as
a. a secondary credit discount loan.
b. a haircut.
c. a covenant.
d. a primary credit discount loan.
Answer:
The law states that a lender must accept money in the repayment of debts. This means
that money is a
a. unit of account.
b. medium of exchange.
c. facilitator of barter exchange.
d. legal tender.
Answer:
An enterprise that either take deposits or make loans but do not perform both the
activities together, and therefore is not subject to the same restrictions as banks is
known as
a. nongovernmental organizations.
b. corporations.
c. nonbanks.
d. business firms.
Answer:
When a household borrows to buy a home, the resulting security is referred to as
a. a discount bond.
b. a Treasury bill.
c. mortgage debt.
d. consumer credit.
Answer:
Which of the following statements is true?
a. If the Fed wants to decrease money supply, it sells government securities.
b. If the Fed wants to increase money supply, it sells government securities.
c. If the Fed wants to decrease money demand, it sells government securities.
d. If the Fed wants to increase money demand, it sells government securities.
Answer:
Assume that the bond market is in equilibrium. The current interest rate on one-year
bonds is 5 percent, the interest rate on one-year bonds, one year from now is 6 percent,
and in two years the interest rate on one-year bonds will be 6.5 percent. Assume that
there is no term premium on a one-year bond. If the term premium equals 0.5 percent ×
the number of years to maturity, for two-year bonds and three-year bonds. The interest
rate today on the two-year bond is and the interest rate today on a three-year
bond is .
a. 5.5 percent; 5.8 percent
b. 6.0 percent; 6.3 percent
c. 6.2 percent; 6.8 percent
d. 6.5 percent; 7.3 percent
Answer:
A system in which the central bank attempts to achieve a certain rate of change in the
overall price level within some period is referred to as
a. disinflation equilibrium.
b. deflation.
c. inflation targeting.
d. rational expectations trapping.
Answer:
Maturity is
a. the time until borrowed funds are repaid.
b. the total interest accumulated on a financial security.
c. a situation in which equity becomes worthless.
d. the principal amount invested in a financial security.
Answer:
A nonmarketable security is one that
a. is not widely advertised.
b. has a present value of zero.
c. cannot be resold in a secondary market.
d. has only a current yield and not a capital-gains yield.
Answer:
When money is used as a value in which prices are denoted, money is serving the role
of a
a. medium of exchange.
b. unit of account.
c. store of value.
d. standard of deferred payment.
Answer:
If the velocity of money is 8.2, the money supply is $223 billion, and real output is
$958 billion, what is the price level?
a. 0.5
b. 0.8
c. 1.7
d. 1.9
Answer:
In order to manipulate the money supply, the Fed can change the interest rate that it
pays on reserves in comparison to the ____ rate.
a. federal funds
b. prime
c. 30-year fixed mortgage
d. credit card interest
Answer: