Which of the following is the third step in the procedure of conducting a research by
researchers using a DSGE model?
a. To match up the model with economic data, using statistical techniques to calculate
the size of shocks that occur.
b. To pose the question to be answered.
c. To simulate the model and compare statistical properties of the model with those of
the data.
d. To develop a model containing major elements needed to answer the question, and to
analyze the decision that each economic agent must face.
Answer:
An advantage of using the realmoney demand function is that it is unaffected by
changes in
a. geographical location.
b. ruling political power.
c. prices of goods and services.
d. income of consumers.
Answer:
Consider a three-year coupon bond that has a present value of $2,000. If the annual rate
of discount is 7 percent, and the payment made at the end of each year is $140, the
principal amount to be repaid at the end of three years is
a. $1,860.00.
b. $2,000.00.
c. $2,140.00.
d. $2,156.40.
Answer:
Full-employment output is the amount of output produced when the economy is
a. in recession.
b. above the natural rate of unemployment.
c. utilizing all of its labor and capital.
d. in equilibrium.
Answer:
The amount of goods and services that a household can consume, given its income, is
represented by a(n)
a. indifference curve.
b. budget line.
c. demand curve.
d. supply curve.
Answer:
A bank in good condition may take out a loan without the Fed questioning the purpose
or nature of the loan. Such a loan is known as
a. a no documentation discount loan.
b. a haircut.
c. a covenant.
d. a primary credit discount loan.
Answer:
When the price level in an economy declines
a. the demand for money in the economy increases.
b. the nominal interest rate in the economy increases.
c. the total consumption in the economy reduces.
d. the aggregate demand in the economy increases.
Answer:
When the central bank chooses a policy at one date, which leads people to make
decisions based on that policy, which then causes the central bank to choose a different
policy at a later date, then there is said to be
a. irrational expectations.
b. time inconsistency.
c. a liquidity trap.
d. an expectations trap.
Answer:
Which of the following is true of the yield curve?
a. The yield curve is steep and is upward sloping when the recession ends and the
economy starts to recover.
b. The yield curve is flat and is downward sloping when the recession ends and the
economy starts to recover.
c. The yield curve is flat or inverted when the term premium is small.
d. The yield curve is downward sloping when the term premium is large.
Answer:
In the CAPM, if a stock has a beta coefficient near zero, then
a. the stock’s return is less volatile than the market’s average return.
b. the stock’s return is about as volatile as the market’s average return.
c. the stock’s return is more volatile than the market’s average return.
d. the stock’s risk is greater than its expected return.
Answer:
In the liquidity-preference model, the nominal interest rate is represented on the vertical
axis and the quantity of money is represented on the horizontal axis. Hence,
a. the money demand curve slopes downward and the money supply curve is vertical.
b. the money demand curve slopes upward and the money supply curve is horizontal.
c. both the money demand and money supply curve slope downward.
d. both the money demand and money supply curve slope upward.
Answer:
The sum of net exports of goods and services plus net income from abroad plus net
unilateral current transfers equals
a. the trade balance.
b. the balance on current account.
c. the capital account balance.
d. the capital and financial account balance.
Answer:
A bushel of rice costs 500 yen in Japan and 100 pesos in Mexico. If someone could sell
a bushel of rice in Japan for yen, take those yen and exchange them for pesos, then buy
a bushel of rice in Mexico, the nominal exchange rate would be and the real exchange
rate would be .
a. 5 pesos per yen; 6 pesos per yen.
b. 1 peso per yen; 4 pesos per yen.
c. 1 peso per yen; 2 pesos per yen.
d. 5 pesos per yen; 1 peso per yen.
Answer:
To oppose the Glass-Steagall Act, banks argued that they
a. would be forced to extend deposit insurance coverage to firms that were not banks.
b. would have a conflict of interest between their needs to underwrite stocks and to
serve their customers.
c. could gain greater monopoly power by lending only to big businesses.
d. could take advantage of economies of scope if they were able to underwrite securities
and sell them directly to their customers.
Answer:
The process in which the principal amount of a security is repaid gradually over time is
referred to as
a. securitization.
b. depreciation.
c. amortization.
d. discounting.
Answer:
The Federal Reserve creates money by
a. printing bills and circulating them in public meetings.
b. giving dollar bills to banks to circulate.
c. changing a number in its computer system.
d. spending money on government purchases.
Answer:
What is the real present value of $5,202 to be received after two years if the expected
rate of inflation over the next two years is 2 percent ?
a. $5,000
b. $4,105
c. $4,807
d. $5,100
Answer:
_______occurs in banking if the firm receiving a bank loan behaves differently after it
receives the loan, in a way that harms the bank.
a. Irrational expectations
b. Adverse selection
c. Moral hazard
d. Rent-seeking behavior
Answer:
If stock prices are below their fundamental values,
a. the stock market is overvalued.
b. the stock market is undervalued.
c. investors have rational expectations.
d. mutual funds will be worth more than their price.
Answer:
Precautionary savings is
a. forced savings, which occurs when the government implicitly saves for people
through the Social Security system.
b. additional savings people make in order to profit from the high returns to the stock
market.
c. savings made by the poor.
d. the extra amount of savings a household maintains because of uncertainty about its
future income.
Answer:
Implicit capital gains are
a. increases in the capital stock required to operate stock markets.
b. capital gains realized by foreign investors.
c. capital gains that have been realized by domestic investors.
d. capital gains that have been accrued but not yet realized.
Answer:
In 1990, exchange rates were: 61 U.S. dollars per U.K. pound and 144 Japanese yen per
U.S. dollar. In 1980, the exchange rates were: 22 U.S. dollars per U.K. pound and 240
Japanese yen per U.S. dollar. Based on these data, from 1980 to 1990 the U.S. dollar
a. depreciated versus the U.K. pound and appreciated versus the Japanese yen.
b. appreciated versus the U.K. pound and depreciated versus the Japanese yen.
c. depreciated versus both the U.K. pound and the Japanese yen.
d. appreciated versus both the U.K. pound and the Japanese yen.
Answer:
If your after-tax realized real interest rate was 1 percent over the past year and you
owned a one-year bond that paid 6 percent interest, what was the inflation rate if your
tax rate was 15 percent?
a. 3.95 percent
b. 4.1 percent
c. 4.25 percent
d. 5.0 percent
Answer:
The shortest economic expansion in U.S. history occurred in the
a. 1960s.
b. 1970s.
c. 1980s.
d. 1990s.
Answer:
The new coin introduced in 2000, which added to the coin shortage that had begun in
1999, was the
a. Sacagawea golden dollar.
b. Virginia state quarter.
c. Buffalo nickel.
d. Dale Earnhardt dollar.
Answer:
In which of the following periods was output growth the fastest in the U.S. economy?
a. Long boom period
b. Economic liftoff period
c. Great Depression period
d. Reorganization period
Answer:
Which of the following is true of the Dodd-Frank Wall Street Reform and Consumer
Protection Act?
a. The Dodd-Frank Act prevents bank holding companies from branching across state
lines.
b. The Dodd-Frank Act allowed banks to sell insurance and engage in investment
banking activities.
c. The Dodd-Frank Act was passed in the year
d. Under the Dodd-Frank Act banking regulators increased the capital and liquidity
requirements for banks and other financial institutions.
Answer:
Suppose the banking market in Cedar Rapids consists of banks that have the following
shares of the market: 24 percent, 18 percent, 17 percent, 14 percent, 9 percent, 8
percent, 4 percent, 3 percent, 2 percent, 1 percent. Calculate the HHI.
a. 100
b. 576
c. 780
d. 1,560
Answer:
An inflation rate exceeding 50 percent per month is referred to as
a. hyperinflation.
b. deflation.
c. disinflation.
d. core inflation.
Answer:
A period when a recession ends and an expansion begins is known as
a. a depression.
b. an inflationary period.
c. a peak.
d. a trough.
Answer:
M1 – coins and currency – amount in travelers checks equals
a. M2.
b. amount held in checking accounts.
c. amount held in savings deposits.
d. amount held in time deposits.
Answer:
A benefit of mutual funds that mainly buy stocks and hold them is that
a. the price of the stocks they hold always appreciate.
b. dividend payments on such stocks are not taxed.
c. they help avoid taxes as the capital gains on these stocks are implicit.
d. they promise annual returns of more than 50% of the principal amount.
Answer:
John spends $4,000 on a perpetuity that pays $150 each year. The yield to maturity of
this perpetuity is
a. 1.5%.
b. 3.75%.
c. 6.2 %.
d. 15%.
Answer:
A contract whereby a borrower, who seeks to obtain money from someone, promises to
compensate the lender in the future is known as
a. a warrant.
b. an exchange rate.
c. a derivative security.
d. a financial security.
Answer:
Which of the following is NOT a method used by the FDIC to handle a bank failure?
a. Foreclosure
b. Purchase and assumption
c. Assistance
d. Payoff
Answer: