GSM 417 | Course Paper

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1) To calculate the growth rate of a variable, you will

A) calculate the percentage change from one time period to the next

B) calculate the difference between the two variables

C) add the ending value to the beginning value

D) divide the increase by the number of time periods

2) When the ________ interest rate is low, there are greater incentives to ________ and

fewer incentives to ________

A) nominal; lend; borrow

B) real; lend; borrow

C) real; borrow; lend

D) market; lend; borrow

3) Financial crises generally develop along two basic paths:

A) mismanagement of financial liberalization/globalization and severe fiscal

imbalances

B) stock market declines and severe fiscal imbalances

C) mismanagement of financial liberalization/globalization and stock market declines

D) stock market declines and unanticipated declines in the value of the domestic

currency

4) When the price of a bond decreases, all else equal, the bond demand curve

A) shifts right

B) shifts left

C) does not shift

D) inverts

5) Suppose the economy is producing at the natural rate of output A decrease in

consumer and business confidence will cause ________ in real GDP in the short run

and ________ in inflation in the short run, everything else held constant

A) an increase; an increase

B) a decrease; a decrease

C) no change; an increase

D) no change; a decrease

6) The long-run aggregate supply curve shifts to the right when there is

A) an increase in the total amount of capital in the economy

B) an increase in the available technology

C) a decrease in the natural rate of unemployment

D) A and B

E) A, B, and C

7) Risk sharing is profitable for financial institutions due to

A) low transactions costs

B) asymmetric information

C) adverse selection

D) moral hazard

8) The monetary base minus reserves equals

A) currency in circulation

B) the borrowed base

C) the nonborrowed base

D) discount loans

9) Which of the following is not a financial institution?

A) a life insurance company

B) a pension fund

C) a credit union

D) a business college

10) The monetary liabilities of the Federal Reserve include

A) securities and loans to financial institutions

B) currency in circulation and reserves

C) securities and reserves

D) currency in circulation and loans to financial institutions

11) Before the South Korean financial crisis, sales by the top five chaebols

(family-owned conglomerates) were

A) nearly 50% of GDP

B) about 10% of GDP

C) almost 90% of GDP

D) nearly 25% of GDP

12) Large-denomination CDs are ________, so that like a bond they can be resold in a

________ market before they mature

A) nonnegotiable; secondary

B) nonnegotiable; primary

C) negotiable; secondary

D) negotiable; primary

13) When a bank sells a government bond to the Federal Reserve, reserves in the

banking system ________ and the monetary base ________, everything else held

constant

A) increase; increases

B) increase; decreases

C) decrease; increases

D) decrease; decreases

14) In the generalized dividend model, a future sales price far in the future does not

affect the current stock price because

A) the present value cannot be computed

B) the present value is almost zero

C) the sales price does not affect the current price

D) the stock may never be sold