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1) Everything else held constant, a stronger dollar benefits ________ and hurts
________
A) American businesses; American consumers
B) American businesses; foreign businesses
C) American consumers; American businesses
D) foreign businesses; American consumers
2) High-powered money minus currency in circulation equals
A) reserves
B) the borrowed base
C) the nonborrowed base
D) discount loans
3) The aggregate demand curve is the total quantity of an economy's
A) intermediate goods demanded at different inflation rates
B) intermediate goods demanded at a particular inflation rate
C) final goods and services demanded at a particular inflation rate
D) final goods and services demanded at different inflation rates
4) The concept of adverse selection helps to explain
A) why collateral is not a common feature of many debt contracts
B) why large, well-established corporations find it so difficult to borrow funds in
securities markets
C) why financial markets are among the most heavily regulated sectors of the economy
D) why stocks are the most important source of external financing for businesses
5) For banks,
A) return on assets exceeds return on equity
B) return on assets equals return on equity
C) return on equity exceeds return on assets
D) return on equity is another name for net interest margin
6) The Federal Reserve entity that makes decisions regarding the conduct of open
market operations is the
A) Board of Governors
B) chairman of the Board of Governors
C) Federal Open Market Committee
D) Open Market Advisory Council
7) The driving force behind the securitization of mortgages and automobile loans has
been
A) the rising regulatory constraints on substitute financial instruments
B) the desire of mortgage and auto lenders to exit this field of lending
C) the improvement in computer technology
D) the relaxation of regulatory restrictions on credit card operations
8) Everything else held constant, an increase in the interest rate paid on checkable
deposits will cause ________ in the amount of checkable deposits held relative to
currency holdings and ________ in the currency ratio
A) an increase; an increase
B) an increase; a decrease
C) a decrease; an increase
D) a decrease; a decrease
9) If the money supply is $2 trillion and velocity is 5, then nominal GDP is
A) $1 trillion
B) $2 trillion
C) $5 trillion
D) $10 trillion
10) When Jane Brown writes a $100 check to her nephew and he cashes the check, Ms
Brown's bank ________ assets of $100 and ________ liabilities of $100
A) gains; gains
B) gains; loses
C) loses; gains
D) loses; loses
11) ________ in the foreign interest rate causes the demand for domestic assets to shift
to the ________ and the domestic currency to appreciate, everything else held constant
A) An increase; right
B) An increase; left
C) A decrease; right
D) A decrease; left
12) In the Keynesian cross diagram, a decline in autonomous consumer expenditure
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
