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1) The time it takes for policy makers to change policy instruments once they have
decided on the new policy is called
A) the data lag
B) the recognition lag
C) the legislative lag
D) the implementation lag
E) the effectiveness lag
2) Stockholders are residual claimants, meaning that they
A) have the first priority claim on all of a company's assets
B) are liable for all of a company's debts
C) will never share in a company's profits
D) receive the remaining cash flow after all other claims are paid
3) Banks earn profits by selling ________ with attractive combinations of liquidity,
risk, and return, and using the proceeds to buy ________ with a different set of
characteristics
A) loans; deposits
B) securities; deposits
C) liabilities; assets
D) assets; liabilities
4) As "haircuts" increased during 2007-2009, financial institutions found that to borrow
the same loan amount now required ________ collateral
A) less
B) no
C) more
D) default-free
5) A possible sequence for the three stages of a financial crisis in an advanced economy
might be ________ leads to ________ leads to ________
A) asset price declines; banking crises; unanticipated decline in price level
B) unanticipated decline in price level; banking crises; increase in interest rates
C) banking crises; increase in interest rates; unanticipated decline in price level
D) banking crises; increase in uncertainty; increase in interest rates
6) The long-run aggregate supply curve is a vertical line passing through
A) the natural rate of output
B) the natural-rate price level
C) the actual rate of unemployment
D) the expected rate of inflation
7) His analysis started with the recognition that the total quantity demanded of an
economy's output was the sum of four types of spending: consumer expenditure,
planned investment spending, government spending, and net exports
A) John Maynard Keynes
B) Sir John Hicks
C) Milton Friedman
D) Paul A Samuelson
8) Under the Gramm-Leach-Bliley Act states retain regulatory authority over
A) bank holding companies
B) securities activities
C) insurance activities
D) bank subsidiaries engaged in securities underwriting
9) When Americans or foreigners expect the return on dollar assets to be high relative to
the return on foreign assets, there is a ________ demand for dollar assets and a
correspondingly ________ demand for foreign assets
A) higher; higher
B) higher; lower
C) lower; higher
D) lower; lower
10) The classical economists' contention that prices double when the money supply
doubles is predicated on the belief that in the short run velocity is ________ and real
GDP is ________
A) constant; constant
B) constant; variable
C) variable; variable
D) variable; constant
11) As bonds become a riskier asset, the demand for money ________ and, all else
constant, the equilibrium interest rate ________
A) rises; rises
B) rises; falls
C) falls; rises
D) falls; falls
12) An increase in ________ reduces the money supply since it causes the ________ to
fall
A) reserve requirements; monetary base
B) reserve requirements; money multiplier
C) margin requirements; monetary base
D) margin requirements; money multiplier
13) In the United States during the late 1970s, the nominal interest rates were quite
high, but the real interest rates were negative From the Fisher equation, we can
conclude that expected inflation in the United States during this period was
A) irrelevant
B) low
C) negative
D) high
14) Which of the following bonds would you prefer to be buying?
A) A $10,000 face-value security with a 10 percent coupon selling for $9,000
B) A $10,000 face-value security with a 7 percent coupon selling for $10,000
C) A $10,000 face-value security with a 9 percent coupon selling for $10,000
D) A $10,000 face-value security with a 10 percent coupon selling for $10,000
15) In a barter economy the number of prices in an economy with N goods is
A) [N(N - 1)]/2
B) N(N/2)
C) 2N
D) N(N/2) - 1
16) The regulatory agency responsible for supervising savings and loans institutions is
the
A) FSLIC
B) Fed
C) Comptroller of the Currency
D) Office of Thrift Supervision
17) When the growth rate of the money supply is increased, interest rates will fall
immediately if the liquidity effect is ________ than the other money supply effects and
there is ________ adjustment of expected inflation
A) larger; fast
B) larger; slow
C) smaller; slow
D) smaller; fast
18) The less interest-sensitive is money demand, the
A) more effective is fiscal policy relative to monetary policy
B) more effective is monetary policy relative to fiscal policy
C) steeper is the IS curve
D) flatter is the LM curve
19) The interest rate on seasonal credit equals
A) the federal funds rate
B) the primary credit rate
C) the secondary credit rate
D) an average of the federal funds rate and rates on certificates of deposits
20) When the economy suffers a temporary negative supply shock, the central bank's
autonomous monetary policy to keep inflation at the target inflation rate leads to
A) more stable economic activities
B) a large deviation of output from its potential
C) divine coincidence
D) both B and C
