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1) With a 10 percent interest rate on dollar deposits, and an expected appreciation of 7
percent over the coming year, the expected return on dollar deposits in terms of the
foreign currency is
A) 3 percent
B) 10 percent
C) 135 percent
D) 17 percent
2) Which of the following are true concerning the distinction between interest rates and
returns?
A) The rate of return on a bond will not necessarily equal the interest rate on that bond
B) The return can be expressed as the difference between the current yield and the rate
of capital gains
C) The rate of return will be greater than the interest rate when the price of the bond
falls between time t and time t + 1
D) The return can be expressed as the sum of the discount yield and the rate of capital
gains
3) The monetary policy strategy that results in the loss of an independent monetary
policy is
A) exchange-rate targeting
B) monetary targeting
C) inflation targeting
D) the implicit nominal anchor
4) Introduction of checks into the payments system reduced the costs of exchanging
goods and services Another advantage of checks is that
A) they provide convenient receipts for purchases
B) they can never be stolen
C) they are more widely accepted than currency
D) the funds from a deposited check are available for use immediately
5) All but the most primitive societies use money as a medium of exchange, implying
that
A) the use of money is economically efficient
B) barter exchange is economically efficient
C) barter exchange cannot work outside the family
D) inflation is not a concern
6) Eurodollars are
A) dollar-dominated deposits held in banks outside the United States
B) deposits held by US banks in Europe
C) deposits held by US banks in foreign countries
D) dollar-dominated deposits held in US banks by Europeans
7) Tests used to rate the performance of rules developed in technical analysis conclude
that technical analysis
A) outperforms the overall market
B) far outperforms the overall market, suggesting that stockbrokers provide valuable
services
C) does not outperform the overall market
D) does not outperform the overall market, suggesting that stockbrokers do not provide
services of any value
8) You have observed that the forecasts of an investment advisor consistently
outperform the other reported forecasts The efficient markets hypothesis says that future
forecasts by this advisor
A) may or may not be better than the other forecasts Past performance is no guarantee
of the future
B) will always be the best of the group
C) will definitely be worse in the future What goes up must come down
D) will be worse in the near future, but improve over time
9) In the Keynesian model the quantity of money demanded is ________ related to
income and ________ related to the interest rate
A) positively; positively
B) positively; negatively
C) negatively; negatively
D) negatively; positively
10) This method of financing government spending is frequently called printing money
because high-powered money (the monetary base) is created in the process
A) Financing government spending with taxes
B) Financing government spending through a Treasury sale of bonds that are then
purchased by the Fed
C) Financing government spending by selling bonds to the public, which pays for the
bonds with currency
D) Financing government spending by selling bonds to the public, which pays for the
bonds with checks
11) Money ________ transaction costs, allowing people to specialize in what they do
best
A) reduces
B) increases
C) enhances
D) eliminates
