Funds that used to flow through intermediated markets and now flow through financial
markets are
A) intermediated.
B) indirectly financed.
C) securitized.
D) saved.
If the government collects taxes to pay for expenditures of an equal amount, bank
reserves
A) are unaffected.
B) rise by an equal amount.
C) rise by a multiple amount.
D) fall by an equal amount.
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 the result of an announced policy change. Under New Classical
assumptions 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
Which of the following is an example of a reserve aggregate closely watched by the
Federal Reserve?
A) Monetary base
B) Currency held by the public
C) Vault cash
D) Total non-financial debt
Which of the following is an example of an autonomous spending change?
A) An increase in investment caused by a technological innovation
B) An increase in consumption caused by an increase in interest income
C) An increase in tax revenue caused by a rise in GDP
D) An increase in saving caused by a rise in income
Modern monetarists view any increases or decreases in total output stemming from
expansions or contractions in the money supply as
A) permanent.
B) temporary.
C) irrelevant.
D) extremely important.
Banks destroy money when they
A) lend securities.
B) sell securities.
C) buy securities.
D) purchase government bonds.
An establishment survey is used to calculate
A) the unemployment rate.
B) the level of payroll employment.
C) both the unemployment rate and the level of payroll employment.
D) neither the unemployment rate nor the level of payroll employment.
A narrow bid-asked spread on a security can be expected if
A) price fluctuations are large.
B) liquidity costs are high.
C) transactions volume is large.
D) the market is thin.
Asymmetric information occurs when
A) buyers and sellers are not equally informed about the true quality of what they are
buying and selling.
B) banks face an adverse selection problem with their borrowers.
C) borrowers covertly engage in activities that increase the probability of poor
performance.
D) All of the above.
Which of the following statements about banks is false?
A) They play a critical role in the economy.
B) They provide a place where individuals and businesses can invest their funds to earn
interest with a minimum of risk.
C) They make loans, and are therefore very different from other financial institutions
like finance companies and insurance companies.
D) They indirectly issue money in the form of deposits.
A __________ shift in the demand curve for a foreign currency causes the foreign
currency to __________.
A) rightward; appreciate
B) leftward; appreciate
C) rightward; depreciate
D) None of the above.
An index fund
A) is a bond fund that provides diversification.
B) is a mutual fund that buys the stocks that compose a well-known index.
C) is a growth fund that reduces transaction costs.
D) produces information on the securities it invests in.
Unless there are deaths or resignations, a two-term U.S. President can appoint up to
A) twelve members of the Federal Reserve Board of Governors.
B) eight members of the Federal Reserve Board of Governors.
C) four members of the Federal Reserve Board of Governors.
D) two members of the Federal Reserve Board of Governors.
The price paid for an option is called the
A) settlement price.
B) mark-to-market price.
C) option premium.
D) call price.
Adverse selection is, in general, the asymmetric information problem that occurs
A) after a transaction is consummated.
B) due to a size difference in the parties to a transaction.
C) with securitization.
D) before a transaction is consummated.
Which of the following statements is correct?
A) Option buyers have rights; option sellers have obligations.
B) Option sellers have rights; option buyers have obligations.
C) Option buyers and sellers have obligations but not rights.
D) Options buyers and sellers each have both rights and obligations.
Which of the following will increase the natural rate of interest?
A) An increase in the saving rate
B) A decrease in inflationary expectations
C) An increase in government spending
D) A decrease in the money supply
Monetarists argue that an exogenous fall in investment spending leads to
A) declining real output.
B) declining money supply.
C) declining velocity.
D) declining interest rates.
Which of these forms of financing requires the smallest minimum size of the borrower?
A) short-term commercial bank loans
B) commercial paper
C) mezzanine funds
D) venture capital funds
Changes in the money supply do not always cause predictable changes in the level of
spending because
A) the velocity of money is not always constant.
B) the inflation rate varies.
C) the economy’s proximity to full employment varies.
D) the saving rate varies.
Which of the following will cause the aggregate demand curve to shift to the right?
A) An increase in the price level
B) An increase in the interest rate
C) An increase in money demand
D) An increase in investment expenditures