When the prices of rare coins become volatile, the ________ curve for bonds shifts to
the ________, everything else held constant.
A. demand; right
B. demand; left
C. supply; right
D. supply; left
Answer:
Everything else held constant, if a central bank makes an unsterilized ________ of
foreign assets, then the domestic money supply will ________ and the domestic
currency will appreciate.
A) purchase; increase
B) purchase; decrease
C) sale; increase
D) sale; decrease
Answer:
Positive spending shocks lead to ________ inflation ________.
A. higher; in both the short and long runs
B. higher; in the short run but not in the long run
C. lower; in both the short and long runs
D. lower; in the short run but not in the long run
Answer:
The principal lender-savers are
A. governments.
B. businesses.
C. households.
D. foreigners.
Answer:
The basic concepts used in the analytic framework of this text include all of the
following EXCEPT
A. the not-for-profit nature of most financial institutions.
B. a basic supply and demand analysis to explain the behavior of financial markets.
C. an approach to financial structure based on transaction costs and asymmetric
information.
D. the concept of equilibrium.
Answer:
Which of the following $1,000 face-value securities has the highest yield to maturity?
A. a 5 percent coupon bond with a price of $600
B. a 5 percent coupon bond with a price of $800
C. a 5 percent coupon bond with a price of $1,000
D. a 5 percent coupon bond with a price of $1,200
Answer:
An autonomous easing of monetary policy
A. causes an upward movement along the monetary policy curve.
B. causes a downward movement along the monetary policy curve.
C. shifts the monetary policy curve upward.
D. shifts the monetary policy curve downward.
Answer:
Which of the following statements is an example of the Fed’s conditional commitment
policy?
A. “In these circumstances, the Committee believes that policy accommodation can be
maintained for a considerable period.”
B. “The Committee anticipates that weak economic conditions are likely to warrant
exceptionally low levels of the federal funds rate for some time.”
C. “Policy accommodation can be removed at a pace that is likely to be measured.”
D. “The exceptionally low range for the federal funds rate will be appropriate at least as
long as the unemployment rate remains above 6-1/2 percent, and inflation between one
and two years ahead is projected to be no more than a half percentage point above the
Committee’s 2 percent longer-run goal.”
Answer:
When the expected inflation rate increases, the real cost of borrowing ________ and
bond supply ________, everything else held constant.
A. increases; increases
B. increases; decreases
C. decreases; increases
D. decreases; decreases
Answer:
Using the information contained in Situation 20-1, if autonomous consumption
increases by $100, then equilibrium aggregate output will change by
A. -$1,000.
B. -$100.
C. $100.
D. $1,000.
Answer:
If the interest rate falls, other things being equal, investment spending will
A. fall.
B. rise.
C. either rise, fall, or remain unchanged.
D. not be affected.
Answer:
The expected return on dollar deposits in terms of foreign currency can be written as the
________ of the interest rate on dollar deposits and the expected appreciation of the
dollar.
A. product
B. ratio
C. sum
D. difference
Answer:
Everything else held constant, if the expected return on U.S. Treasury bonds falls from
10 to 5 percent and the expected return on GE stock rises from 7 to 8 percent, then the
expected return of holding GE stock ________ relative to U.S. Treasury bonds and the
demand for GE stock ________.
A. rises; rises
B. rises; falls
C. falls; rises
D. falls; falls
Answer:
The Dow reached a peak of over 11,000 before the collapse of the ________ bubble in
2000.
A. housing
B. manufacturing
C. high-tech
D. banking
Answer:
In the Keynesian cross diagram, a decrease in investment spending because companies
become more pessimistic about investment profitability causes the aggregate demand
function to shift ________, the equilibrium level of aggregate output to fall, and the IS
curve to shift to the ________, everything else held constant.
A. up; left
B. up; right
C. down; left
D. down; right
Answer:
When the level of unplanned inventory investment is equal to zero, the economy is
A. in disequilibrium.
B. in a recession.
C. in equilibrium.
D. overheating
Answer:
When gold prices become more volatile, the ________ curve for gold shifts to the
________; ________ the price of gold.
A. supply; right; increasing
B. supply; left; increasing
C. demand; right; decreasing
D. demand; left; decreasing
Answer:
The velocity of money is defined as
A. real GDP divided by the money supply.
B. nominal GDP divided by the money supply.
C. real GDP times the money supply.
D. nominal GDP times the money supply.
Answer:
In Keynes’s liquidity preference framework, if there is excess demand for money, there
is
A. an excess demand for bonds.
B. equilibrium in the bond market.
C. an excess supply of bonds.
D. too much money.
Answer:
Regarding central bank independence
A. the Fed is more independent than the European Central Bank.
B. the European Central Bank is more independent than the Fed.
C. the trend in industrialized nations has been to reduce central bank independence.
D. the Bank of England has the longest tradition of independence of any central bank in
the world.
Answer:
Everything else held constant, a decrease in autonomous planned investment spending
will cause the IS curve to shift to the ________ and aggregate demand will ________.
A. right; increase
B. right; decrease
C. left; increase
D. left; decrease
Answer:
Rules used to predict movements in stock prices based on past patterns are, according to
the efficient markets hypothesis
A. a waste of time.
B. profitably employed by all financial analysts.
C. the most efficient rules to employ.
D. consistent with the random walk hypothesis.
Answer:
In the long-run ISLM model and with everything else held constant, the long-run effect
of an expansionary fiscal policy is to ________ real output and ________ the interest
rate.
A. increase; increase
B. not change; not change
C. increase; not change
D. not change; increase
Answer:
Deposits in European banks denominated in dollars for the purpose of international
transactions are known as
A) Eurodollars.
B) European Currency Units.
C) European Monetary Units.
D) International Monetary Units.
Answer:
All of the following are common to banking crises in different countries EXCEPT
A. financial liberalization or innovation.
B. weak bank regulatory systems.
C. a government safety net.
D. a dual banking system.
Answer:
In actual practice, short-term interest rates and long-term interest rates usually move
together; this is the major shortcoming of the
A. segmented markets theory.
B. expectations theory.
C. liquidity premium theory.
D. separable markets theory.
Answer:
An expectation may fail to be rational if
A. relevant information was not available at the time the forecast is made.
B. relevant information is available but ignored at the time the forecast is made.
C. information changes after the forecast is made.
D. information was available to insiders only.
Answer:
Like the dual banking system for commercial banks, thrifts can have either ________ or
________ charters.
A) state; federal
B) state; local
C) local; federal
D) municipal; federal
Answer:
Which of the following are reported as liabilities on a bank’s balance sheet?
A. discount loans
B. reserves
C. U.S. Treasury securities
D. real estate loans
Answer:
Which of the following is NOT a form of e-money?
A. a debit card
B. a credit card
C. a stored-value card
D. a smart card
Answer:
During the 1960s, 1970s, and early 1980s, traditional bank profitability declined
because of
A. financial innovation that increased competition from new financial institutions.
B. a decrease in interest rates to fight the inflation problem.
C. a decrease in deposit insurance.
D. increased regulation that prohibited banks from making risky real estate loans.
Answer: