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An increase in oil prices will
A) shift the short-run aggregate supply curve up and to the left.
B) shift the short-run aggregate supply curve down and to the right.
C) cause a movement along the short-run aggregate supply curve.
D) not affect the short-run aggregate supply curve.
Answer:
Blood tests administered to applicants for medical insurance are an example of an
attempt by insurance companies to deal with the problem of
A) moral hazard.
B) the drug abuse problems currently plaguing the country.
C) adverse selection.
D) failure of policyholders to keep paying their premiums.
Answer:
The double taxation of dividends typically refers to
A) dividends being taxed first as corporate profits and then as income after being paid
to stock holders.
B) stock holders paying both income and social security taxes on dividends.
C) stock holders paying an income tax and dividend surtax on dividends.
D) dividends being taxed at both the state and local level.
Answer:
The result of the supply shocks of 1973-1974 was to
A) reduce aggregate output and raise the price level.
B) reduce the price level and raise aggregate output.
C) reduce both aggregate output and the price level.
D) raise both aggregate output and the price level.
Answer:
In banking, the spread refers to the difference between the
A) interest rate on long-term bonds and the interest rate on short-term bonds.
B) interest rate on car loans and the interest rate on home mortgages.
C) average interest rate earned on assets and the average interest rate paid on liabilities.
D) bid and asked prices on a bond.
Answer:
The McFadden Act of 1927
A) separated commercial banking from investment banking.
B) put a tax on the issuance of bank notes by state banks.
C) prohibited national banks from operating branches outside their home states.
D) established the Federal Reserve System.
Answer:
In what year did the mutual fund industry in the United States begin?
A) 1812
B) 1924
C) 1974
D) 1990
Answer:
When interest rates in the bond market rise,
A) adverse selection problems increase.
B) adverse selection problems are mitigated.
C) moral hazard problems increase.
D) moral hazard problems are mitigated.
Answer:
Financial markets
A) channel funds indirectly between borrowers and lenders.
B) channel funds directly from lenders to borrowers.
C) act as go-betweens by holding a portfolio of assets and issuing claims based on that
portfolio to savers.
D) generally provide lenders with lower returns than do financial intermediaries.
Answer:
A syndicate is
A) a group of brokers illegally making use of insider information.
B) a group of commercial banks that agrees to accept the checks of each other's
depositors.
C) a group of investment banks underwriting a large security issue.
D) a group of dealers that markets a government bond issue.
Answer:
When financial markets and institutions are not efficient in matching savers and
borrowers,
A) interest rates fall, which discourages saving even further.
B) interest rates fall, which discourages investment even further.
C) resources are lost.
D) investment rises.
Answer:
The law of one price does not hold for
A) agricultural goods.
B) tradeable goods.
C) differentiated goods.
D) goods whose production causes pollution.
Answer:
Which group is hurt by inflation being less than expected?
A) holders of TIPS
B) lenders of fixed-rate mortgages
C) borrowers with fixed-rate mortgages
D) all of the above
Answer:
Moral hazard problems arise when
A) lenders have difficulty in distinguishing between good and lemon firms.
B) when a downturn in economic activity makes repaying loans difficult for borrowers.
C) borrowers default on loans.
D) borrowers have an incentive to conceal information.
Answer:
If the required reserve ratio is 5%, what is the value of the simple deposit multiplier?
A) 0.05
B) 0.20
C) 5
D) 20
Answer:
What new authority did the ECB receive in 2012?
A) the authority to oversee the banking systems of all member countries
B) the ability to set different interest rates in different member countries
C) the ability to require that member nations balance their budget
D) permission to monetize the debt of member countries
Answer:
Suppose one person buys a copy of Consumer Reports and gives away free copies to all
who request one. This is an example of
A) free rider problem.
B) moral hazard.
C) adverse selection.
D) economies of scale.
Answer:
When Ben Bernanke referred to the exit strategy of the Fed, he was referring to:
A) his plans to retire as chair of the Fed
B) when the Fed would stop implementing monetary policy
C) the process by which the Fed would shrink its balance sheet
D) increasing the federal funds rate back to where it was prior to the financial crisis
Answer:
Financial intermediaries are able to exploit economies of scale since
A) the equipment or expertise necessary for one transaction can be applied to other
transactions.
B) they have special licenses needed to perform financial transactions.
C) financial markets fail to do so.
D) they can reduce transactions cost, but not information costs.
Answer:
The nominal exchange rate is
A) the difference between the interest rate in one country and the interest rate in another
country.
B) the rate at which a bond may be exchanged for currency.
C) the rate at which a stock may be exchanged for currency.
D) the price of one country's currency in terms of another's.
Answer:
The IS curve depicts the relationship between
A) aggregate output and the real interest rate.
B) investment demand and the real interest rate.
C) investment demand and the level of current output.
D) national saving and the level of current output.
Answer:
When a country's nominal exchange rate appreciates, the price of
A) that country's goods abroad increases.
B) that country's goods abroad decreases.
C) foreign goods sold in the country increases.
D) that country's goods produced and sold at home increases.
Answer:
According to the Fisher effect, an increase in expected inflation results in:
A) lower nominal interest rates
B) higher nominal interest rates
C) lower real interest rates
D) higher real interest rates
Answer:
In the United States, the lender of last resort is
A) Fannie Mae.
B) the Federal Reserve.
C) the Federal Deposit Insurance Corporation.
D) Securities and Exchange Commission.
Answer:
Securities that banks sell and agree to repurchase are known as
A) federal funds.
B) discount loans.
C) repurchase agreements.
D) NOW accounts.
Answer:
The new classical explanation of aggregate supply in the short run builds on research by
A) Irving Fisher.
B) John Maynard Keynes.
C) Robert Lucas.
D) Robert Solow.
Answer:
All of the following are likely results of a negative demand shock EXCEPT
A) a negative output gap.
B) lower inflation.
C) IS shifts to the left.
D) Phillips curve shifts to the left.
Answer:
On a bank's balance sheet, bank capital is considered:
A) an asset
B) a liability
C) the difference between a firm's assets and it's shareholder's equity
D) the total amount of funds banks have availability to make loans
Answer:
Which of the following men has NOT served as Chairman of the Board of Governors?
A) Milton Friedman
B) Arthur Burns
C) Paul Volcker
D) Alan Greenspan
Answer:
The expectations theory
A) has difficulty explaining why U.S. Treasury securities have lower yields than
corporate bonds.
B) has difficulty explaining why yields on bonds of different maturities move together.
C) has difficulty explaining why yield curves usually slope upward.
D) accounts well for the fact that yield curves usually slope upward.
Answer:
The reduction in average cost resulting from an increase in the volume of a good or
services produced is called:
A) information cost
B) transaction cost
C) diminishing returns
D) economies of scale
Answer:
The key to present value calculations is that they
A) are appropriate only for funds in the same time period.
B) provide a common unit for measuring funds at different times.
C) provide accurate answers only in a low-inflation environment.
D) provide accurate answers only in a high-inflation environment.
Answer:
During the financial crisis of 2007-09, the prices of U.S. Treasury securities
A) rose and the price of corporate bonds declined.
B) fell relative to the prices of corporate bonds.
C) remained in the same relative position to the prices of corporate bonds.
D) were frozen by order of the federal government.
Answer:
An exporter can hedge against the possible decline in a foreign currency by purchasing
A) put options on the currency.
B) call options on the currency.
C) the currency on the spot market.
D) currency on forward contracts.
Answer:
