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1) The IS curve shifts to the left when
A) taxes increase
B) government spending increases
C) the money supply increases
D) autonomous planned investment spending increases
2) Everything else held constant, if a central bank makes an unsterilized sale of foreign
assets, then the domestic money supply will ________ and the domestic currency will
________
A) increase; appreciate
B) increase; depreciate
C) decrease; appreciate
D) decrease; depreciate
3) Under the European System of Central Banks, the Executive Board is similar in
structure to the ________ of the Federal Reserve System
A) Board of Governors
B) Federal Open Market Committee
C) Federal Reserve Banks
D) Federal Advisory Council
4) When the inflation rate is expected to increase, the ________ for bonds falls, while
the ________ curve shifts to the right, everything else held constant
A) demand; demand
B) demand; supply
C) supply; demand
D) supply; supply
5) In the simple Keynesian model, equilibrium aggregate output is determined by
A) aggregate demand
B) aggregate supply
C) the national demand for labor
D) the price level
6) In the figure above, the price of bonds would fall from P1 to P2 when
A) inflation is expected to increase in the future
B) interest rates are expected to fall in the future
C) the expected return on bonds relative to other assets is expected to increase in the
future
D) the riskiness of bonds falls relative to other assets
7) If the economy is on the LM curve, but is to the left of the IS curve, aggregate output
will ________ and the interest rate will ________
A) rise; rise
B) rise; fall
C) fall; rise
D) fall; fall
8) An essential characteristic of credit unions is that
A) they are typically large
B) branching across state lines is prohibited
C) their lending is primarily for mortgage loans
D) they are organized for individuals with a common bond
9) If the real exchange rate between the United States and Japan is ________, then it is
cheaper to buy goods in Japan than in the United States
A) greater than 10
B) greater than 05
C) less than 05
D) less than 10
10) Everything else held constant, the vertical section of the supply curve of reserves is
lengthened when the
A) discount rate increases
B) discount rate decreases
C) federal funds rate rises
D) federal funds rate falls
11) Inflation results in
A) ease of planning for the future
B) ease of comparing prices over time
C) lower nominal interest rates
D) difficulty interpreting relative price movements
12) Patrick places his pocket change into his savings bank on his desk each evening By
his actions, Patrick indicates that he believes that money is a
A) medium of exchange
B) unit of account
C) store of value
D) unit of specialization
13) Two reasons for an industrialized country to adopt an exchange-rate targeting
regime are if the country ________ conduct successful monetary policy on its own, and
if the country wants to ________ integration of the domestic economy with its
neighbors
A) cannot; encourage
B) cannot; discourage
C) can; encourage
D) can; discourage
