Since 1970 there has been a clear increase in the proportion of the banking industry
assets made up of
A) mortgage loans.
B) state and local government securities.
C) cash.
D) business loans.
A President who favors the use of government spending and taxes as tools to offset
instability in the economy is likely to have advisers who are oriented toward
A) Keynesian economics.
B) Monetarist economics.
C) rational expectations.
D) the policies advocated by Milton Friedman.
If the LM function is vertical, then __________ is constant.
A) the price level
B) the interest rate
C) velocity
D) investment
In an IS-LM model with an upward-sloping LM curve and a downward-sloping IS, how
does the expenditure multiplier compare to [1/(1-b)]?
A) It is equal to it.
B) It is greater.
C) It is smaller.
D) Cannot be answered with the information given.
Fluctuating interest rates tend to cause large changes in real output when the
A) IS curve is flat.
B) IS curve is steep.
C) LM curve is flat.
D) LM curve is steep.
A necessary but not sufficient condition for the continuation of inflation is
A) an expanding money supply.
B) increasing government deficits.
C) rising interest rates.
D) decreasing velocity.
When examining the causes of unemployment, Keynes focused on
A) financial markets.
B) inflationary expectations.
C) changes in technology.
D) aggregate demand.
The supply of reserves __________ when the federal funds rate __________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) does not change; changes
Which of the following banks is similar to a U.S. investment bank?
A) City banks
B) Grossbanken
C) Merchant banks
D) Cooperative banks
Which of the following is an interest rate determined by the supply and demand for
loans among commercial banks?
A) The discount rate
B) The federal funds rate
C) The prime rate
D) The commercial paper rate
If the Japanese buy more Cadillacs, they __________ more yen and __________ more
dollars in the foreign exchange market.
A) supply; supply
B) supply; demand
C) demand; supply
D) demand; demand
For an individual LM curve, the money supply is assumed to
A) be constant.
B) grow at a rate equal to the interest rate.
C) grow at a rate equal to the growth rate in income.
D) grow at a rate equal to the marginal propensity to consume.
Under the IMF fixed exchange rate system, a nation running a balance of payments
deficit would have an excess __________ its currency in the foreign exchange market
and that nation’s central bank would have to __________ some of its currency to
maintain the fixed exchange rate.
A) supply of; buy
B) supply of; sell
C) demand for; buy
D) demand for; sell
Suppose that during a given month 200,000 persons who had been self-employed leave
their business and get jobs working for other businesses. This might give __________
bias to the __________ indicator.
A) an optimistic; unemployment rate
B) a pessimistic; unemployment rate
C) an optimistic; payroll employment
D) a pessimistic; payroll employment
Besides differences in maturities, the characteristic that distinguishes financial assets in
the capital market from those in the money market is the level of
A) activity.
B) liquidity.
C) velocity.
D) intermediation.
During the expansion phase of the business cycle
A) the demand for loanable funds tends to fall.
B) interest rates tend to rise.
C) bond prices tend to rise.
D) inflationary expectations tend to fall.