Monetarists assume that there is a powerful direct link between aggregate demand and
A) velocity.
B) real money balances.
C) wage rates.
D) interest rates.
In actual financial markets, securities are __________ divisible, which __________ a
type of market imperfection.
A) perfectly, is
B) perfectly, is not
C) imperfectly, is
D) imperfectly, is not
Life insurance companies, because of the __________-term nature of their liabilities,
prefer to hold __________-term assets.
A) long; long
B) long; short
C) short; long
D) short; short
The IS curve shows a series of equilibrium points in the goods market for various levels
of
A) investment and interest rates.
B) investment and money supply.
C) income and interest rates.
D) inflation and unemployment.
Along an IS curve as interest rates __________, income must be __________ so that
saving, which is a positive function of income, can be lower to equal the smaller level
of investment.
A) decline; lower
B) decline; higher
C) increase; lower
D) increase; higher
Banking regulation in the United States is strongly influenced by the large amount of
__________ deposits and __________ assets banks hold.
A) time; illiquid
B) time; liquid
C) checkable; illiquid
D) checkable; liquid
When the LM curve is horizontal,
A) fiscal policy has no impact on equilibrium income.
B) fiscal policy has no impact on the equilibrium interest rate.
C) the economy is at full employment.
D) monetary policy has no impact on equilibrium income.
Suppose an individual pays $4,000 for a $5,000 face-value, coupon-bearing bond that
pays $400 per year in interest and will be held until it matures in ten years. The coupon
rate on this bond is
A) 10 percent.
B) 8 percent.
C) 6 percent.
D) 5 percent.
One of the major weaknesses of the Federal Reserve Bank of St. Louis econometric
model was that it
A) was large and cumbersome.
B) was limited to analyzing an economy with substantial unemployment.
C) did not specify the categories of private spending that were affected by monetary
policy.
D) included a government spending multiplier that was clearly too high.
The price of reserves that are borrowed from the Federal Reserve is called the
A) discount rate.
B) federal funds rate.
C) LIBOR.
D) prime rate.
The relationship between yield and maturity of the same type of security is known as
the
A) term structure of interest rates.
B) risk-reward structure of interest rates.
C) asset duration structure of interest rates.
D) market structure of interest rates.
A rising GDP causes __________ the money demand curve.
A) downward movement along
B) upward movement along
C) a rightward shift of
D) a leftward shift of
In the United States, currency is
A) backed by gold.
B) backed by silver.
C) backed by nothing tangible.
D) a liability on the books of commercial banks.
When the LM curve is vertical,
A) fiscal policy has no impact on equilibrium income.
B) fiscal policy has no impact on the equilibrium interest rate.
C) the economy is at full employment.
D) monetary policy has no impact on equilibrium income.
Unlike Germany, Japan has
A) a suppressed corporate debt market.
B) laws against banks holding corporate stock.
C) a large stock market.
D) close ties between a firm and a single bank.
In the ISLM framework, a rising price level causes
A) the equilibrium interest rate to rise.
B) the equilibrium level of income to fall.
C) desired saving to rise.
D) the LM curve to shift to the right.
Germany and __________ are two major banking-oriented systems.
A) the United Kingdom
B) Japan
C) France
D) the United States
The “corporate takeover market” plays a part in handling the conflict between
management and __________ in __________-oriented financial systems.
A) bankers; markets
B) bankers; banking
C) stockholders; markets
D) stockholders; banking
To Keynesians, a vertical aggregate supply curve
A) is nonsensical.
B) holds in the short run but not the long run.
C) holds in the long run but not the short run.
D) will only be encountered at the full-capacity output of the economy.