Which of the following financial institutions is likely to have a preferred habitat in
long-term securities?
A) Commercial banks
B) Money market mutual funds
C) Life insurance companies
D) Credit unions
In terms of the aggregate demand and supply framework, a decrease in the money
supply will shift the aggregate
A) demand curve to the right.
B) demand curve to the left.
C) supply curve to the left.
D) supply curve to the right.
The majority of small businesses
A) are privately owned.
B) are managed by professional managers.
C) raise funds in financial markets.
D) are self-financing.
Observations of the yield curve suggest that when interest rates are high and investors
expect interest rates to fall, the yield curve will have a(n)
A) upward slope.
B) downward slope.
C) horizontal slope.
D) vertical slope.
An increase in German Treasury interest rates, all else held constant, causes a rightward
shift in the __________ euros and causes the dollar to __________ against the euro.
A) supply of, appreciate
B) supply of, depreciate
C) demand for, appreciate
D) demand for, depreciate
A Classical aggregate supply curve is
A) vertical.
B) upward-sloping.
C) horizontal.
D) downward-sloping.
Assume that the price of a futures contract is higher than the price of the underlying
security during the delivery period. Arbitrageurs would
A) buy the futures, simultaneously sell the underlying asset, and pocket the price
difference.
B) sell the futures, simultaneously buy the underlying asset, and pocket the price
difference.
C) sell the futures, simultaneously sell the underlying asset, and pocket the price
difference.
D) buy the futures, simultaneously buy the underlying asset, and pocket the price
difference.
A “forbearance” policy in dealing with weak banks is opposed by the __________
policy.
A) prompt corrective action
B) too-big-to-fail
C) risk-based capital ratio
D) leverage ratio
In the Keynesian model, an unwanted decrease in inventories leads to
A) falling interest rates.
B) rising unemployment.
C) rising output.
D) falling money wages.
An increase in interest rates causes __________ the demand-for-loanable funds curve
A) a rightward shift in
B) a leftward shift in
C) a movement down along
D) a movement up along
A speculator becomes the floating-rate payer in an interest-rate swap. She hopes that
A) long rates rise.
B) long rates fall.
C) short rates rise.
D) short rates fall.
Monetarists have argued that since velocity __________, this shows that shifts to the
investment demand function must __________.
A) is rather stable; cause the private economy to be unstable
B) is rather stable; be offset by interest rate changes
C) moves counter-cyclically; cause the private economy to be unstable
D) moves counter-cyclically; be offset by interest rate changes
A rise in Durable Goods Orders should send bond prices __________ and stock prices
__________.
A) up; up
B) up; down
C) down; up
D) down; down
Julia hen just purchased a $1,000 face value bond for $987. The bond pays $50 in
interest every six months and matures in five years. The yield to maturity for this bond
is __________ percent. (Note: This question requires a financial calculator.)
A) 10.0
B) 10.2
C) 10.3
D) 10.6
A relatively steep aggregate demand curve indicates that
A) velocity is relatively constant.
B) the economy is near full employment.
C) inflation is relatively high.
D) spending is insensitive to changes in the price level.
The relationship between the price in the cash market and the price in the futures
market is
A) nonexistent.
B) negative.
C) positive.
D) None of the above.
An individual anticipating rising interest rates is likely to hold more
A) money.
B) real assets.
C) stock.
D) bonds.
Which of the following is an equilibrium condition for the goods market?
A) M = kPQ
B) Desired saving and desired investment
C) Money demand = money supply
D) IS = LM
Can a Keynesian still believe in an active counter-cyclical policy if she adopts the
assumption of rational expectations?
A) No, it destroys the case for active policy.
B) Yes, so long as she continues to assume wage and price rigidity.
C) Yes, if she also adopts the assumption of wage and price flexibility.
D) Yes, if she assumes that economic policy shifts are anticipated in advance.