1) In the figure above, a factor that could cause the supply of bonds to increase (shift to
the right) is:
A) a decrease in government budget deficits
B) a decrease in expected inflation
C) expectations of more profitable investment opportunities
D) a business cycle recession
2) Other things equal, a decrease in autonomous consumption shifts the ________ curve
to the ________
A) IS; right
B) IS; left
C) LM; left
D) LM; right
3) A weakness of the Bretton Woods system was that the ________ had no way to force
surplus countries to either revalue their exchange rates upwards or pursue more
expansionary policies
A) IMF
B) World Bank
C) European Exchange Rate Mechanism (ERM)
D) Bank of International Settlements
4) A bank failure occurs whenever
A) a bank cannot satisfy its obligations to pay its depositors and have enough reserves
to meet its reserve requirements
B) a bank suffers a large deposit outflow
C) a bank has to call in a large volume of loans
D) a bank is not allowed to borrow from the Fed
5) The money market is in equilibrium
A) at any point on the IS curve
B) at any point on the LM curve
C) at only one point on the LM curve
D) only at the intersection of the IS and LM curves
6) The primary goal of the European Central Bank is
A) price stability
B) exchange rate stability
C) interest rate stability
D) high employment
7) Credit card debt is
A) secured debt
B) unsecured debt
C) restricted debt
D) unrestricted debt
8) A lower level of income causes the demand for money to ________ and the interest
rate to ________, everything else held constant
A) decrease; decrease
B) decrease; increase
C) increase; decrease
D) increase; increase
9) When talking about a coupon bond, face value and ________ mean the same thing
A) par value
B) coupon value
C) amortized value
D) discount value
10) An international lender of last resort creates a serious moral hazard problem
because ________ and other ________ of banking institutions expect that they will be
protected if a crisis occurs
A) depositors; debtors
B) depositors; creditors
C) borrowers; debtors
D) borrowers; creditors
11) Long-term customer relationships ________ the cost of information collection and
make it easier to ________ credit risks
A) reduce; screen
B) increase; screen
C) reduce; increase
D) increase; increase
12) The average number of times that a dollar is spent in buying the total amount of
final goods and services produced during a given time period is known as
A) gross national product
B) the spending multiplier
C) the money multiplier
D) velocity