According to monetarists, the main source of fluctuations in economic activity is
a. changes in the amount of money in the economy.
b. waves of optimism and pessimism that cause business investment in capital goods to
fluctuate.
c. changes in the prices of oil and other resources.
d. changes in productivity.
Answer:
Total spending divided by the money supply equals
a. the reserve requirement.
b. the transactions demand for money.
c. the money multiplier.
d. the velocity of money.
Answer:
In the aggregate demand-aggregate supply model, everything else remaining
unchanged, an increase in capital stock shifts the to the .
a. long-run aggregate supply; right
b. aggregate demand; right
c. short-run aggregate supply; left
d. aggregate demand; left
Answer:
According to Gresham’s law
a. the product of the money supply and velocity of money is always equal to the
transactions demand for money.
b. increases in interest rates increases the speculative demand for money.
c. whenever there are two different types of money circulating, people hoard the good
one, and use the bad one as a medium of exchange.
d. as an economy grows, the inequality in the distribution of income in the economy
initially increases, then reaches a maximum, after which it eventually decreases.
Answer:
In which of the following periods was labor productivity growth the slowest in the U.S.
economy?
a. Long boom
b. Economic liftoff period
c. 1995−2005
d. Reorganization period
Answer:
The equation for the Phillips curve in an economy is
π = πe− 5(U− 5),
If the inflation rate is 2 percent and the expected inflation rate is 4 percent, the
unemployment rate in the economy must be
a. 3.0 percent.
b. 4.5 percent.
c. 8.0 percent.
d. 9.0 percent.
Answer:
The end of an expansion when output, income, and employment begin to decline is
referred to as
a. a depression.
b. an inflationary period.
c. a peak.
d. a trough.
Answer:
In the Federal Open Market Committee,
a. the Federal Reserve Bank of Kansas City always votes.
b. the Federal Reserve Bank of Washington always votes.
c. the Federal Reserve Bank of San Francisco always votes.
d. the Federal Reserve Bank of New York always votes.
Answer:
The lockin effect
a. allows stocks to be priced efficiently.
b. will be smaller in magnitude if tax rates are lower.
c. is likely to reduce the volume of stocks being traded in a market.
d. states that when stock prices rise, they will continue to do so for prolonged time
periods.
Answer:
The government as a lender of last resort
a. will make loans to anyone, regardless of their level of wealth or income.
b. does not discriminate in loan markets.
c. guarantees to supply funds to solvent but illiquid banks.
d. gives money to banks with negative equity capital.
Answer:
A bank has currency and coins equal to $20 million in its vaults. It has securities worth
$10 million, has borrowings equal to $5 million, and has given out loans equal to $2
million. It also has deposits with the Federal Reserve equal to $4 million. The total
reserves of the bank equals
a. $12 million.
b. $22 million.
c. $24 million.
d. $36 million.
Answer:
If the haricut charged by the Fed is very large
a. banks will be discouraged from borrowing.
b. transaction accounts held by banks increase.
c. the Fed loses a lot of money if banks default on their loans.
d. the Fed’s discount rate rises.
Answer:
The tradeoff in the data between unemployment and inflation is represented by the
a. Taylor rule.
b. Say’s law.
c. Okun’s law.
d. Phillips curve.
Answer:
The S&P 500 stock index is an index of
a. all the companies whose shares trade at a price more than $500.
b. all the companies whose shares trade on the New York Stock Exchange.
c. 500 major companies whose shares trade in U.S. markets.
d. the largest 500 companies in the world.
Answer:
An investor expects earnings from a stock to grow at a constant rate of 2% over time
and the investors’ rate of discount is constant at 5%. If earnings last year were $37, then
the fundamental value of the stock would be
a. $74.
b. $111.
c. $1,258.
d. $11,100.
Answer:
Suppose three banks in a banking market have market shares of 42 percent, 33 percent,
and 25 percent. Calculate the HHI of the banking industry.
a. 100
b. 1,356
c. 3,478
d. 4,320
Answer:
According to , people use all available information in making their economic decisions.
a. Keynesian theory
b. monetarist theory
c. the Lucas critique
d. the theory of rational expectations
Answer:
If your after-tax expected real interest rate is 3 percent and your expected inflation rate
is 2 percent, what was the nominal interest rate on your one-year bond if you faced a
tax rate of 20 percent?
a. 5.0 percent
b. 5.75 percent
c. 6.0 percent
d. 6.25 percent
Answer:
An index fund is
a. a mutual fund that mimics a stock index.
b. an investment company that pools the funds of many investors and buys government
bonds.
c. a mutual fund that buys mortgage-backed securities (MBSs).
d. a company that rates companies in terms of their financial strength.
Answer:
The liquidity effect is the
a. direct relationship between money supply and the real interest rate.
b. proportional relationship between money supply and money demand.
c. direct relationship between nominal money supply and the real money supply.
d. inverse relationship between money supply and the nominal interest rate.
Answer:
The reorganization period in the U.S. occurred from
a. 1929−1949.
b. 1949−1970.
c. 1971−1982.
d. 1982−present.
Answer:
The main source of the U.S. coin shortage in 1999 was
a. increased demand for coins from foreign countries.
b. a new law allowing coins to be melted for their metal content.
c. the introduction of the state quarter program.
d. the introduction of the Sacagawea golden dollar.
Answer:
The Fed document that shows different policy options is called the
a. Beigebook.
b. Greenbook.
c. Bluebook.
d. Redbook.
Answer:
A partial-equilibrium model is a model in which
a. all key macroeconomic variables are endogenous.
b. some key macroeconomic variables are exogenous.
c. all key macroeconomic variables are discrete random variables.
d. none of the key macroeconomic variables are endogenous.
Answer:
Suppose you are an investor with a choice between three securities that are identical in
every way except in terms of their rates of return and risk. Which investment provides
the highest expected return?
Investment A: Total return = 10 percent with probability 50 percent
Total return = 20 percent with probability 50 percent
Investment B: Total return = 12 percent with probability 50 percent
Total return = 20 percent with probability 50 percent
Investment C: Total return = 5 percent with probability 60 percent
Total return = 25 percent with probability 40 percent
Investment D: Total return = 5 percent with probability 60 percent
Total return = 7 percent with probability 40 percent
a. Investment A
b. Investment B
c. Investment C
d. Investment D
Answer:
A financial holding company (FHC) is the a financial structure that can
a. own a bank and an insurance underwriting firm.
b. own either an insurance underwriting firm or an insurance agency.
c. own either an insurance agency or a securities agency.
d. own either a securities agency or a securities underwriting firm.
Answer:
Risk that cannot be eliminated by diversification is
a. unsystematic risk.
b. systematic risk.
c. default risk.
d. interest-rate risk.
Answer:
Suppose your bank lowers its minimum balance requirement by $500. So you take $500
out of your checking account and put it into a money market deposit account. What is
the overall effect on M1 and M2?
a. M1 falls by $500, M2 rises by $500.
b. M1 is unchanged, M2 is unchanged.
c. M1 falls by $500, M2 is unchanged.
d. M1 is unchanged, M2 rises by $500.
Answer:
An investor expects earnings from a stock to grow at a constant rate of 3% over time
and the investors’ rate of discount is constant at 4%. If earnings last year were $152,
then the fundamental value of the stock would be
a. $152.
b. $190.
c. $1,520.
d. $15,656.
Answer:
The amount repaid by a coupon bond at maturity is called its_____ value.
a. present
b. future
c. face
d. coupon
Answer:
M1 consists of
a. coins, paper currency, and travelers checks.
b. coins, paper currency, travelers checks, and amounts in checking accounts.
c. coins, paper currency, travelers checks, and amounts in checking accounts and
savings accounts.
d. coins, paper currency, travelers checks, and amounts in checking accounts and retail
money-market mutual funds.
Answer:
Regression analysis is a key method used in econometrics in which the coefficients of
an equation are calculated by finding values for them that make the as small as possible.
a. correlation
b. standard error
c. sum of the squared error terms
d. confidence interval
Answer: