If the consumption function is C = 20 + 0.8YD, then an increase in disposable income
by $100 will result in an increase in consumer expenditure by
A) $58.
B) $64.
C) $80.
D) $100.
The interest rate for primary credit is usually set ________ basis points ________ the
federal funds rate. In March 2008, this gap was changed to ________ basis points.
A) 50; below; 100
B) 100; above; 25
C) 100; below; 50
D) 50; above; 25
The monetarist statistical evidence examines the correlations between both ________
and ________ with ________.
A) money; aggregate spending; the unemployment rate
B) money; autonomous expenditures; the unemployment rate
C) money; consumption spending; aggregate spending
D) money; autonomous expenditures; aggregate spending
Everything else held constant, an increase in the time deposit ratio will mean ________
in the M2 money multiplier and ________ in the M2 money supply.
A) an increase; an increase
B) an increase; a decrease
C) a decrease; an increase
D) a decrease; a decrease
Studies of the major developed countries show that when businesses go looking for
funds to finance their activities they usually obtain these funds from
A) government agencies.
B) equities markets.
C) financial intermediaries.
D) bond markets.
Which of the following increases aggregate supply in the short-run, everything else held
constant?
A) an increase in the price of crude oil
B) a successful wage push by workers
C) expectations of a higher inflation
D) a technological improvement that increases worker productivity
If, for a $1000 premium, you buy a $100,000 call option on bond futures with a strike
price of 110, and at the expiration date the price is 114, your ________ is ________.
A) profit; $4000
B) loss; $4000
C) profit; $3000
D) loss; $3000
A key factor in producing high economic growth is
A) eliminating foreign trade.
B) well-functioning financial markets.
C) high interest rates.
D) stock market volatility.
The leverage ratio is the ratio of a bank’s
A) assets divided by its liabilities.
B) income divided by its assets.
C) capital divided by its total assets.
D) capital divided by its total liabilities.
Fisher’s quantity theory of money suggests that the demand for money is purely a
function of ________, and ________ no effect on the demand for money.
A) income; interest rates have
B) interest rates; income has
C) government spending; interest rates have
D) expectations; income has
An electronic payments system has not completely replaced the paper payments system
because of all of the following reasons EXCEPT
A) expensive equipment is necessary to set up the system.
B) security concerns.
C) privacy concerns.
D) transportation costs.
Equity of U.S. companies can be purchased by
A) U.S. citizens only.
B) foreign citizens only.
C) U.S. citizens and foreign citizens.
D) U.S. mutual funds only.
The components of the U.S. M1 money supply are demand and checkable deposits plus
A) currency.
B) currency plus savings deposits.
C) currency plus travelers checks.
D) currency plus travelers checks plus money market deposits.
With ________, firms value assets on their balance sheet at what they would sell for in
the market.
A) mark-to-market accounting
B) book-value accounting
C) historical-cost accounting
D) off-balance sheet accounting
Under the Global Legal Settlement of 2002, the provision that requires investment
banking firms to sever the link between underwriting and research is an example of
A) regulate for transparency.
B) supervisory oversight.
C) separation of functions.
D) socialization of information production.
Which of the following is a contractual savings institution?
A) a life insurance company
B) a credit union
C) a savings and loan association
D) a mutual fund
During hyperinflations
A) the value of money rises rapidly.
B) money no longer functions as a good store of value and people may resort to barter
transactions on a much larger scale.
C) middle-class savers benefit as prices rise.
D) money’s value remains fixed to the price level; that is, if prices double so does the
value of money.
The expectations theory and the segmented markets theory do not explain the facts very
well, but they provide the groundwork for the most widely accepted theory of the term
structure of interest rates
A) the Keynesian theory.
B) the separable markets theory.
C) the liquidity premium theory.
D) the asset market approach.
With downward-sloping monetary policy and IS curves,the aggregate demand curve is
A) downward sloping.
B) flat.
C) vertical.
D) upward sloping.
An equal decrease in all bond interest rates
A) increases the price of a five-year bond more than the price of a ten-year bond.
B) increases the price of a ten-year bond more than the price of a five-year bond.
C) decreases the price of a five-year bond more than the price of a ten-year bond.
D) decreases the price of a ten-year bond more than the price of a five-year bond.
The value of any investment is found by computing the
A) present value of all future sales.
B) present value of all future liabilities.
C) future value of all future expenses.
D) present value of all future cash flows.
In the one-period valuation model, the current stock price increases if
A) the expected sales price increases.
B) the expected sales price falls.
C) the required return increases.
D) dividends are cut.
Regulation of the financial system
A) occurs only in the United States.
B) protects the jobs of employees of financial institutions.
C) protects the wealth of owners of financial institutions.
D) ensures the stability of the financial system.
You can borrow $5000 to finance a new business venture. This new venture will
generate annual earnings of $251. The maximum interest rate that you would pay on the
borrowed funds and still increase your income is
A) 25%.
B) 12.5%.
C) 10%.
D) 5%.
Potential advantages of nominal GDP targeting include
A) it implies that the central bank will respond to slowdowns in the real economy even
if inflation is not falling.
B) real GDP growth that is below potential or inflation that is below the inflation
objective will encourage more expansionary monetary policy.
C) it focuses not only on controlling inflation but also explicitly on stabilizing real
GDP.
D) all of the above.
Fear of a major recession causes stock prices to fall, everything else held constant,
which in turn causes consumer spending to
A) increase.
B) remain unchanged.
C) decrease.
D) cannot be determined.
Anything that increases the demand for foreign goods relative to domestic goods tends
to ________ the domestic currency because domestic goods will only continue to sell
well if the value of the domestic currency is ________, everything else held constant.
A) depreciate; lower
B) depreciate; higher
C) appreciate; lower
D) appreciate; higher
In the Keynesian framework, as long as output is below the equilibrium level,
unplanned inventory investment will remain ________ and firms will continue to
________ production.
A) negative; lower
B) negative; raise
C) positive; lower
D) positive; raise
Of the four sources of external funding for nonfinancial businesses, the least often used
in the U.S. is
A) bank loans.
B) nonbank loans.
C) bonds.
D) stock.
In the figure above, the decrease in the interest rate from i1 to i2 can be explained by
A) a decrease in money growth.
B) a decline in the expected price level.
C) an increase in income.
D) an increase in the expected price level.