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1) In the period 1965 through the 1970s, policymakers pursued ________ policies in
order to achieve ________
A) expansionary; high employment
B) expansionary; low inflation
C) contractionary; high employment
D) contractionary; low inflation
2) The delivery of financial services electronically is called
A) e-business
B) e-commerce
C) e-finance
D) e-possible
3) Bank capital has both benefits and costs for the bank owners Higher bank capital
________ the likelihood of bankruptcy, but higher bank capital ________ the return on
equity for a given return on assets
A) reduces; reduces
B) increases; increases
C) reduces; increases
D) increases; reduces
4) In the ISLM framework a contractionary fiscal policy causes aggregate output to
________ and the interest rate to ________, everything else held constant
A) increase; increase
B) increase; decrease
C) decrease; decrease
D) decrease; increase
5) If the consumption function is C = 20 + 05YD, then an increase in disposable income
by $100 will result in an increase in consumer expenditure by
A) $25
B) $70
C) $50
D) $100
6) China chooses to have ________ and ________ and therefore, cannot have free
capital mobility at the same time
A) a fixed exchange rate, no control of monetary policy
B) a fixed exchange rate, an independent monetary policy
C) a flexible exchange rate, an independent monetary policy
D) a flexible exchange rate, no control of monetary policy
7) If the nominal rate of interest is 2 percent, and the expected inflation rate is -10
percent, the real rate of interest is
A) 2 percent
B) 8 percent
C) 10 percent
D) 12 percent
8) Thrift institutions include
A) banks, mutual funds, and insurance companies
B) savings and loan associations, mutual savings banks, and credit unions
C) finance companies, mutual funds, and money market funds
D) pension funds, mutual funds, and banks
9) Which of the following is a true statement?
A) Money or the money supply is defined as Federal Reserve notes
B) The average price of goods and services in an economy is called the aggregate price
level
C) The inflation rate is measured as the rate of change in the federal government budget
deficit
D) The aggregate price level is measured as the rate of change in the inflation rate
10) Prices and returns for ________ bonds are more volatile than those for ________
bonds, everything else held constant
A) long-term; long-term
B) long-term; short-term
C) short-term; long-term
D) short-term; short-term
11) Macroprudential supervision policies try to prevent a leverage cycle by changing
capital requirements so that they ________ during an expansion and ________ during a
downturn
A) increase; decrease
B) increase; increase
C) decrease; increase
D) decrease; decrease
12) The bond supply curve is ________ sloping, indicating a(n) ________ relationship
between the price and quantity supplied of bonds
A) downward; inverse
B) downward; direct
C) upward; inverse
D) upward; direct
13) A rise in stock prices ________ the net worth of firms and so leads to ________
investment spending because of the reduction in moral hazard
A) raises; higher
B) raises; lower
C) reduces; higher
D) reduces; lower
14) When Americans or foreigners expect the return on ________ assets to be high
relative to the return on ________ assets, there is a ________ demand for dollar assets,
everything else held constant
A) dollar; foreign; constant
B) dollar; foreign; higher
C) foreign; dollar; higher
D) foreign; dollar; constant
15) Total reserves minus bank deposits with the Fed equals
A) vault cash
B) excess reserves
C) required reserves
D) currency in circulation
