In which of the following periods was the relationship between the U.S. unemployment
rate and U.S. inflation rate unstable?
A) 1901 to 1909
B) 1911 to 1919
C) 1921 to 1929
D) 1931 to 1939
E) none of the above
Which of the following is considered a benefit of inflation?
A) the option of a negative real interest rate
B) money illusion
C) seignorage
D) all of the above
E) none of the above
“Debt repudiation” occurs when
A) a government announces it will no longer run nominal deficits.
B) a government announces it will no longer run real deficits.
C) a government announces it will no longer honor its debt obligations.
D) a central bank will no longer monetize the debt.
Equity finance is represented by which of the following?
A) when a firm borrows money from banks
B) when a firm sells bonds
C) when a firm sells shares of stock
D) when a firm draws down retained earnings
E) when a firm sells off part of its capital stock
Labor income’s share in an advanced country is likely to be
A) 70%.
B) 45%.
C) 29%.
D) 10%.
E) none of the above
A bond has a face value of $10,000, a price of $12,000, and coupon payments of $2000
for two years. The coupon rate of this bond is
A) 10%.
B) 16.7%.
C) 20%.
D) 30%.
E) none of the above
Suppose an economy experiences a 5% increase in human capital. We know that this
will cause
A) Y/N to increase by more than 5%.
B) Y/N to increase by exactly 5%.
C) Y/N to increase by less than 5%.
D) no change in Y/N.
E) a reduction in output per worker.
In the United States, day-to-day decisions about monetary policy are carried out by
A) the Board of Governors.
B) the Chairman of the Board of Governors.
C) the Federal Open Market Committee.
D) the Open Market desk in New York.
E) none of the above
Which of the following best describes a situation where research is considered
relatively fertile?
A) research that translates into many new products
B) research that costs the firms relatively little money
C) research that cannot be easily copied by other firms
D) all of the above
E) none of the above
Which of the following is an implication of rational expectations theory?
A) Deviations of output from the natural rate are likely to be serious and long-lived.
B) The economy is like a complex machine, that needs to be optimally controlled with
the proper policy.
C) Macroeconometric models based on past behavior will not be very useful in
formulating policy.
D) Wages and prices are set almost entirely at random, so it is pointless to try to model
their behavior.
E) Business cycles almost always result from a shift in aggregate demand.
Suppose an open economy is in equilibrium. Given this information, we know with
certainty that
A) G = T.
B) X = IM.
C) S = I.
D) Y = Z.
When the U.S. has a current account surplus, we know that it is also
A) running a balanced trade account.
B) lending to the rest of the world.
C) borrowing from the rest of the world.
D) suffering from negative investment income.
E) none of the above
The Case-Shiller index reached its peak in
A) 2006.
B) 2007.
C) 2005.
D) 2008.
Part of the reason for the Mexican peso crisis of 1994 was Mexico’s decision to
A) allow the peso to depreciate too rapidly.
B) allow the peso to appreciate too rapidly.
C) maintain relatively low nominal interest rates in the face of relatively high inflation.
D) maintain a roughly fixed nominal exchange rate in the face of relatively high
inflation.
E) run a very small budget deficit in the face of relatively high inflation.
Suppose bank A has assets of 100, liabilities of 60, and capital of 40. Its leverage ratio
is
A) 1.5.
B) 2.5.
C) 0.6.
D) 0.4.
Assume that the price levels in two countries are constant. In this situation, we know
that
A) neither the real nor the nominal exchange rate can change.
B) the real exchange rate can change, while the nominal exchange rate is constant.
C) the nominal exchange rate can change, while the real exchange rate is constant.
D) the real and nominal exchange rate must move together, changing by the same
percentage.
E) the nominal exchange rate will fluctuate more widely than the real exchange rate.
Which of the following will cause a real depreciation?
A) an increase in E
B) a reduction in P*
C) a reduction in P
D) all of the above
E) none of the above
Assume that constant returns to scale exists and that N and K both decrease by 3%.
Given this information, we know that
A) output (Y) will decrease 6%.
B) Y will decrease by 3%.
C) Y will decrease by less than 3%.
D) the capital-labor ratio (K/N) will decrease.
The LM curve shifts down (or, equivalently, to the right) when which of the following
occurs?
A) an increase in taxes
B) an increase in output
C) an open market sale of bonds by the central bank
D) an increase in consumer confidence
E) none of the above
The rate of growth of output per capita for the United States and France between 1985
and 2014 has been caused by
A) the rate of technological progress.
B) the saving rate.
C) the accumulation of capital.
D) the rate of growth of N.
Assume that an economy experiences both positive population growth and
technological progress. Once the economy has achieved balanced growth, we know that
A) S/NA = (δ + gA + gN)K/NA.
B) S/NA = (gA + gN)K/NA.
C) I/NA = (δ)K/NA.
D) I = δK.
E) none of the above
Which of the following is the definition for the real supply of money?
A) The stock of money measured in terms of goods, not dollars.
B) The stock of high powered money only.
C) The real value of currency in circulation only.
D) The actual quantity of money, rather than the officially reported quantity.
E) The ratio of the real GDP to the nominal money supply.
Which of the following will likely cause an increase in output per worker?
A) an increase in education expenditures
B) an increase in the saving rate
C) an increase in on-the-job training
D) all of the above
Which of the following is a function of money?
A) medium of exchange
B) provides protection from inflation
C) it is a flow variable
D) all of the above
E) none of the above
Which of the following would decrease the cyclically adjusted deficit?
A) an increase in income
B) a decrease in income
C) an increase in the primary deficit
D) a decrease in the primary deficit
E) none of the above
The most recent financial crisis started in
A) stock market.
B) bond market.
C) foreign exchange market.
D) housing market.
An increase in the nominal interest rate, all else held constant, will always cause which
of the following?
A) the real interest rate to decrease
B) the expected inflation rate to decrease
C) the demand for money to increase
D) all of the above
E) none of the above
Which of the following will cause the money multiplier to become smaller?
A) an increase in high powered money
B) a decrease in the ratio of reserves to checkable deposits
C) an increase in the public’s preference for checking deposits as opposed to holding
currency
D) a reduction in high powered money
E) none of the above
Suppose there is an increase in the saving rate. This increase in the saving rate must
cause an increase in consumption per capita in the long run when
A) capital per worker approaches the golden-rule level of capital per worker.
B) the saving is used for education rather than physical capital.
C) the rate of saving exceeds the rate of depreciation.
D) there is no technological progress.
E) technological progress depends on human capital.
The first structured investment vehicle (SIV) was set up by ________ in 1988.
A) J.P. Morgan
B) Chase
C) Citigroup
D) Goldman Sachs
An increase in the marginal propensity to save from .1 to .2 will cause
A) an increase in the multiplier and a given change in autonomous consumption (c0) to
have a smaller effect on output.
B) an increase in the multiplier and a given change in autonomous consumption (c0) to
have a larger effect on output.
C) a reduction in the multiplier and a given change in autonomous consumption (c0) to
have a smaller effect on output.
D) a reduction in the multiplier and a given change in autonomous consumption (c0) to
have a larger effect on output.
