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1) A lesson of the Enron collapse is that government regulation
A) always fails
B) can reduce but not eliminate asymmetric information
C) increases the problem of asymmetric information
D) should be reduced
2) The originate-to-distribute business model has a serious ________ problem since the
mortgage broker has little incentive to make sure that the mortgagee is a good credit
risk
A) principal-agent
B) debt deflation
C) democratization of credit
D) collateralized debt
3) Everything else held constant, a decrease in the value of the dollar relative to all
foreign currencies means that the price of foreign goods purchased by Americans
A) increases
B) decreases
C) remains unchanged
D) either increases, decreases, or remains unchanged
4) When the economy suffers a temporary negative supply shock and the central bank
responds by changing the autonomous component of monetary policy to keep inflation
at the target inflation rate, then
A) aggregate output drops in the short run
B) output will return to potential output over time
C) aggregate output is stabilized
D) all of the above
E) both A and B
5) Which of the following can be described as involving direct finance?
A) A corporation takes out loans from a bank
B) People buy shares in a mutual fund
C) A corporation buys a short-term corporate security in a secondary market
D) People buy shares of common stock in the primary markets
6) If the Brazilian demand for American exports rises at the same time that US
productivity rises relative to Brazilian productivity, then, in the long run, ________,
everything else held constant
A) the Brazilian real will appreciate relative to the US dollar
B) the Brazilian real will depreciate relative to the US dollar
C) the Brazilian real will either appreciate, depreciate, or remain constant relative to the
US dollar
D) there is no effect on the Brazilian real relative to the US dollar
7) Under Keynesian analysis, aggregate demand can be written as
A) Yad = C + I + G + NX
B) Yad = C + I + G - NX
C) Yad = C - I - G - NX
D) Yad = C + I - G - NX
8) ________ is a process of bundling together smaller loans (like mortgages) into
standard debt securities
A) Securitization
B) Origination
C) Debt deflation
D) Distribution
9) Because the quantity theory of money tells us how much money is held for a given
amount of aggregate income, it is also a theory of
A) interest-rate determination
B) the demand for money
C) exchange-rate determination
D) the demand for assets
10) The new Consumer Financial Protection Bureau is an independent agency but is
funded and housed within
A) the Treasury Department
B) the Federal Reserve
C) the SEC
D) the IRS
11) High interest rates might cause a corporation to ________ building a new plant that
would provide more jobs
A) complete
B) consider
C) postpone
D) contemplate
12) When the Fed buys $100 worth of bonds from First National Bank, reserves in the
banking system
A) increase by $100
B) increase by more than $100
C) decrease by $100
D) decrease by more than $100
13) An instrument developed to help investors and institutions hedge interest-rate risk is
A) a put option
B) a call option
C) a financial derivative
D) a mortgage-backed security
14) As the payments system evolves from barter to a monetary system,
A) commodity money is likely to precede the use of paper currency
B) transaction costs increase
C) the number of prices that need to be calculated increase rather dramatically
D) specialization decreases
15) ________ is creating a marketable capital market instrument by bundling a
portfolio of mortgage or auto loans
A) diversification
B) arbitrage
C) computerization
D) securitization
16) A goal of the Securities and Exchange Commission is to reduce problems arising
from
A) competition
B) banking panics
C) risk
D) asymmetric information
17) The implementation lag is
A) the time it takes for policy makers to obtain data indicating what is happening in the
economy
B) the time it takes for policy makers to be sure of what the data are signaling about the
future course of the economy
C) the time it takes to pass legislation to implement a particular policy
D) the time it takes for policy makers to change policy instruments once they have
decided on the new policy
E) the time it takes for the policy actually to have an impact on the economy
18) The process in which people take their funds out of the banking system seeking
higher-yielding securities is called
A) capital mobility
B) loophole mining
C) disintermediation
D) deposit jumping
19) If the money supply is $500 and nominal income is $4,000, the velocity of money is
A) 1/20
B) 1/8
C) 8
D) 20
20) The organization responsible for the conduct of monetary policy in the United
States is the
A) Comptroller of the Currency
B) US Treasury
C) Federal Reserve System
D) Bureau of Monetary Affairs
