Suppose that for several periods the aggregate demand and supply curves have been
intersecting at the same point, and at full employment. Then the central bank increases
money growth as a result of an announced policy change. Under the assumption of
adaptive expectations the likely short-run result is __________ output and __________
price level.
A) rising; a rising
B) rising; an unchanged
C) unchanged; a rising
D) unchanged; an unchanged
Consumer finance companies specialize in
A) consumer loans.
B) residential mortgages.
C) corporate stock.
D) financial disintermediation.
Assume that there is an excess supply of euros in the foreign exchange market. If a
fixed exchange rate system exists with the United States, the European Central Bank
would have to __________ to prevent the euro from __________.
A) buy excess euros; appreciating
B) buy excess euros; depreciating
C) sell euros; appreciating
D) sell euros; depreciating
With velocity constant and equal to 2, a $10 billion increase in the money supply shifts
the LM curve to the right by
A) $2 billion.
B) $5 billion.
C) $10 billion.
D) $20 billion.
An unannounced increase in the money supply will increase both prices and real GDP
under
A) neither rational nor adaptive expectations.
B) rational but not adaptive expectations.
C) adaptive but not rational expectations.
D) both adaptive and rational expectations.
“Housing starts” is __________ indicator.
A) a leading
B) a coincident
C) a lagging
D) an inconsistent
U.S. government purchases of gold are officially carried out by the
A) New York Federal Reserve Bank.
B) Federal Open Market Committee.
C) Federal Deposit Insurance Corporation.
D) U.S. Treasury.
A bond has a duration of 4 years and a price of $1,000. The yield to maturity of the
bond just changed from 5 percent to 7 percent. The new price of the bond should be
A) $1,076.
B) $924..
C) $1,093.
D) $907.
According to Say’s law
A) the economy will suffer from underemployment when total spending is insufficient
to justify production at full employment.
B) the economy will never suffer from unemployment or underconsumption.
C) money is neutral with respect to the real sector of the economy.
D) the production function defines the total demand for goods and services.
Which of the following statements is not true about money?
A) Money is sometimes viewed as a lubricant that greases the wheels of economic
activity.
B) Without money, some transactions would be unimaginably difficult.
C) Money influences the behavior of the economy as a whole.
D) All of the above are true.
The best known financial auction market is the
A) New York Stock Exchange.
B) American Stock Exchange.
C) Pacific Stock Exchange.
D) Nasdaq.
An upward-sloping LM curve implies that the expenditure multiplier, when compared
with the simple Keynesian expenditure multiplier, is
A) smaller.
B) larger.
C) equal.
D) equal to the inverse of the simple multiplier.
The steps in the process of commercial bank lending in order are
A) borrower bank search, credit analysis, borrower-bank negotiation, bank funding.
B) borrower bank search, borrower-bank negotiation, credit analysis, bank funding.
C) credit analysis, borrower bank search, borrower-bank negotiation, bank funding.
D) borrower-bank negotiation, borrower bank search, credit analysis, bank funding.
Fiscal policy is impotent when the LM curve is
A) vertical.
B) horizontal.
C) downward-sloping.
D) horizontal or downward-sloping.
The dominance of banks in Germany comes at the expense of __________ markets
there.
A) securities
B) government bond
C) consumer borrowing
D) foreign exchange
A key difference between a Walrasian market and most auction markets is that in most
auction markets
A) transactions occur continuously.
B) bid prices exceed offer prices.
C) only dealers have complete information.
D) offer prices exceed bid prices.
Federal Reserve credit is equal to bank borrowing plus U.S. government security
holdings plus
A) currency outstanding.
B) capital accounts.
C) float.
D) bank reserves.
If the interest rate on a security consists only of the riskless rate, then
A) there is no uncertainty.
B) velocity is constant.
C) the money supply is fixed.
D) the price level is fixed.
Monetary policy has no effect on equilibrium income when the
A) LM curve is positively sloped.
B) IS curve is negatively sloped.
C) IS curve is vertical.
D) IS curve is horizontal.