Another name for the expected real interest rate is the
a. securitized real interest rate.
b. realized real interest rate.
c. ex-post real interest rate.
d. ex-ante real interest rate.
Answer:
Someone who has an average cash balance of $45 and spends $15 per day will visit the
ATM once in every____ days.
a. 4
b. 5
c. 6
d. 7
Answer:
A benefit to policymakers of following rules rather than discretion is
a. they could employ a larger staff of economists.
b. they will contribute to the formation of an expectations trap.
c. they would not be able to pursue time-inconsistent policies.
d. they would gain flexibility in case the economy’s structure changed.
Answer:
The periodic payments on equity securities are called
a. interest payments.
b. dividends.
c. equity shares.
d. stock repurchases.
Answer:
In the ATM model of the demand for cash
a. both the nominal interest rate and the cost of going to an ATM are endogenous
variables.
b. both the nominal interest rate and the cost of going to an ATM are exogenous
variables.
c. the nominal interest rate is an exogenous variable while the average cash balances is
an endogenous variable.
d. the nominal interest rate is an endogenous variable while the cost of going to an ATM
is an exogenous variable.
Answer:
Suppose you buy an inflation-indexed bond that will adjust with inflation and thus pay
you $1,500 in real (inflation- adjusted) terms each year for the next five years, plus your
real principal of $75,000 at the end of the fifth year. The nominal interest rate is 5
percent and the expected inflation rate is 3 percent. What is the present value of the
bond? (Round off your answer to the nearest thousand dollars and pick the answer
closest to the one you calculate.)
a. $65,000
b. $70,000
c. $74,000
d. $75,000
Answer:
One of the advantages of holding real estate over stocks is that
a. real estate assets are more liquid than stocks.
b. monetary return on real estate is always greater than the monetary return on stocks.
c. part of the returns on real estate are not subject to tax payments, while all returns on
stocks are subject to tax payments.
d. principal amount required for investing in real estate is often smaller than the
principal amount required to invest in stocks.
Answer:
A U.S. government savings bond is an example of a
a. marketable security.
b. nonmarketable security.
c. secondary security.
d. primary security.
Answer:
Consider the returns on four investment options: A, B, C, and D. All four investment
options require the same principal amount, and the returns on the investments are
considered over the same time frame. The present value of the return on investment A is
greater than the present value of the return on investment B, which is greater than the
present value of the return on investment C. The present value of the return on
investment D is the lowest. A rational investor will choose to invest in:
a. option A.
b. option B.
c. option C.
d. option D.
Answer:
New Zealand was the first country to implement a system of
a. disinflation.
b. deflation.
c. inflation targeting.
d. expectations traps.
Answer:
In some sophisticated macroeconomic models, if monetary policy is used to combat
recession, the real interest rate, whereas the real interest rate if fiscal policy is used.
a. increases; decreases
b. decreases; increases
c. remains unchanged; increases
d. decreases; remains unchanged
Answer:
In which decade did the number of failures (of commercial banks and thrifts) per year
average more than 100?
a. 1930s
b. 1960s
c. 1980s
d. 1950s
Answer:
Aaron takes $100 out of his checking account and puts it in his savings account while
Biff withdraws $200 from his money-market mutual fund in the form of cash. The total
effect is that M1 and M2 .
a. is unchanged; falls by $100
b. is unchanged; is unchanged
c. rises by $100; falls by $100
d. rises by $100; is unchanged
Answer:
Which of the following statements is true?
a. Assets counted in M1 are more liquid than assets counted in M2.
b. M2 is a part of M1.
c. Credit card spending is counted as part of M1.
d. Savings deposits are included in M1.
Answer:
You buy a bond for $1,000 today that promises interest of $50 in one year plus the
return of your principal.
However, the probability that the company will default and not pay you either interest
nor repay your principal is 1 percent. The expected return on the bond is___ percent.
a. 3.95
b. 4.00
c. 4.95
d. 5.00
Answer:
During the 2000s, banks became complacent about making mortgage loans because
a. there was not a single bank failure in the decade.
b. bank stocks performed better than the rest of the stock market.
c. the banks counted on housing prices to keep appreciating.
d. the government eliminated the FDIC.
Answer:
With the price level on the vertical axis and output on the horizontal axis, the short-run
aggregate-supply curve
a. is vertical.
b. is downward-sloping.
c. is horizontal.
d. is upward-sloping.
Answer:
The time it takes from when a policy is enacted to when it affects the economy is
known as the____ lag.
a. implementation
b. recognition
c. effectiveness
d. decision
Answer:
If the annual rate of interest in a market is 12%, the monthly rate of discount will equal
a. 1%.
b. 12%.
c. 24%.
d. 144%.
Answer:
A national bank is supervised by all of the following agencies EXCEPT
a. the Federal Deposit Insurance Corporation.
b. the Federal Reserve.
c. the Office of the Comptroller of the Currency.
d. the National Credit Union Administration.
Answer:
Consider the following production function
Y= A×Ka×L1−a.
If a = 0.4, and over the past year output grew 4 percent, capital grew 2 percent, and
labor grew 1 percent, what was the growth rate of total factor productivity (TFP)?
a. 1.0 percent
b. 2.0 percent
c. 2.4 percent
d. 2.6 percent
Answer:
Earning interest on the interest that was earned in prior years is referred to as
a. discounting.
b. compounding.
c. present valuing.
d. bonding.
Answer:
The long boom period in the U.S. occurred from
a. 1929−1949.
b. 1949−1970.
c. 1970−1982.
d. 1983−2007.
Answer:
If people form their expectations using all the information available to them, they are
said to have
a. informed expectations.
b. rational expectations.
c. irrational forecasts.
d. an information set.
Answer:
Describe the difference between inside money and outside money, and explain whether
each of the following items represent inside money or outside money:
a. Checking accounts
b. Coins
c. Travelers checks
d. Money-market mutual funds
e. $100 bills
Answer:
A type of inside money that allows a shopper to prepay some amount and then spend it
at her will is a card.
a. debit
b. credit
c. commodity
d. stored-value
Answer:
In the CAPM, if a stock has a large beta coefficient, then
a. the stock’s return is less volatile than the market’s average return.
b. the stock’s return is about as volatile as the market’s average return.
c. the stock’s return is more volatile than the market’s average return.
d. the stock’s risk is greater than its expected return.
Answer:
From which of the following agencies does a national bank obtain its charter?
a. The Federal Deposit Insurance corporation
b. The Federal Reserve
c. The Office of the Comptroller of the Currency
d. National Credit Union Administration
Answer:
In the two-period model, a decrease in income in period 2 causes the budget constraint
to
a. shift to the left in a parallel fashion.
b. shift to the right in a parallel fashion.
c. rotate in a clockwise direction along the horizontal axis.
d. rotate in a counterclockwise direction along the vertical axis.
Answer:
Under which of the following options does the Fed offer reserves to banks through a
competitive auction process?
a. Term deposit facility
b. Discount lending
c. Quantitative easing
d. Safety vault facility
Answer:
Which of the following causes an upward shift in aggregate demand?
a. An increase in the aggregate price level
b. An increase in government spending
c. A sudden fall in productivity
d. A rise in the demand for money
Answer:
Central banks that use inflation targeting usually communicate their goals and plans in a
document known as the
a. directive.
b. inflation report.
c. target analysis.
d. communique.
Answer:
Which of the following measures by the Federal Reserve led to an increase in bank
reserves between 2009 and 2013?
a. Moral Suasion
b. Open market operations
c. Haircut
d. Quantitative easing
Answer:
Which of the following is an error made by commercial banks in 1920s that caused
depositors to lose money and
forced regulators to impose restrictions?
a. Banks sold securities in the primary market.
b. Smaller banks merged to form larger banks.
c. Banks issued loans to a number of firms that went bankrupt during the Great
depression.
d. Banks did not diversify their activities and were engaged only in banking activities.
Answer: