1) Unemployment resulting from a mismatch of workers’ skills and job requirements is
called
A) frictional unemployment
B) structural unemployment
C) seasonal unemployment
D) cyclical unemployment
2) In the Keynesian cross diagram, an increase in autonomous consumer expenditure
causes the aggregate demand function to shift ________, the equilibrium level of
aggregate output to rise, and the IS curve to shift to the ________, everything else held
constant
A) up; left
B) up; right
C) down; left
D) down; right
3) Under the Bretton Woods system, when a country adopted an expansionary monetary
policy, thereby causing a balance of payments ________, the country would eventually
be forced to implement ________ monetary policy
A) deficit; expansionary
B) deficit; contractionary
C) surplus; expansionary
D) surplus; contractionary
4) The value of any investment is found by computing the
A) present value of all future sales
B) present value of all future liabilities
C) future value of all future expenses
D) present value of all future cash flows
5) Although the dominance of ________ over ________ is clear in all countries, the
relative importance of bond versus stock markets differs widely
A) financial intermediaries; securities markets
B) financial intermediaries; government agencies
C) government agencies; financial intermediaries
D) government agencies; securities markets
6) Under the Bretton Woods system, the organization assigned the task of making loans
to countries that were experiencing balance of payments difficulties is known as the
A) World Bank
B) International Development Association
C) International Monetary Fund
D) Federal Reserve System
7) If an individual moves money from currency to a demand deposit account,
A) M1 decreases and M2 stays the same
B) M1 stays the same and M2 increases
C) M1 stays the same and M2 stays the same
D) M1 increases and M2 stays the same
8) Assuming initially that rr = 10%, c = 40%, and e = 0, a decrease in rr to 5% causes
the M1 money multiplier to ________, everything else held constant
A) increase from 28 to 311
B) decrease from 311 to 28
C) increase from 2 to 222
D) decrease from 222 to 2
9) Which of the following are not liabilities on the Fed’s balance sheet?
A) Discount loans
B) Bank deposits
C) Deferred availability cash items
D) US Treasury deposits
10) The Fed’s mistakes of the early 1930s were compounded by its decision to
A) raise reserve requirements in 1936-1937
B) lower reserve requirements in 1936-1937
C) raise the monetary base in 1936-1937
D) lower the monetary base in 1936-1937
11) If merchants in the country Zed choose to close their doors, preferring to be stuck
with rotting merchandise rather than worthless currency, then one can conclude that Zed
is experiencing a
A) superdeflation
B) hyperdeflation
C) disinflation
D) hyperinflation
12) Financial intermediaries provide customers with liquidity services Liquidity
services
A) make it easier for customers to conduct transactions
B) allow customers to have a cup of coffee while waiting in the lobby
C) are a result of the asymmetric information problem
D) are another term for asset transformation
13) Everything else held constant, Americans who love French wine benefit most from
A) a decrease in the dollar price of euros
B) an increase in the dollar price of euros
C) a constant dollar price for euros
D) a ban on imports from Europe
14) In Keynes’s liquidity preference framework,
A) the demand for bonds must equal the supply of money
B) the demand for money must equal the supply of bonds
C) an excess demand of bonds implies an excess demand for money
D) an excess supply of bonds implies an excess demand for money
15) What country is given credit for the birth of the Eurodollar market?
A) The United States
B) England
C) The Soviet Union
D) Japan
16) Everything else held constant, when output is ________ the natural rate level,
wages will begin to ________, increasing short-run aggregate supply
A) above; fall
B) above; rise
C) below; fall
D) below; rise
17) Under a fixed exchange rate regime, a central bank that does not want to acquire
international reserves to keep its currency from ________ will decide to ________ its
currency
A) depreciating; revalue
B) depreciating; devalue
C) appreciating; revalue
D) appreciating; devalue
18) Using the information contained in Situation 20-1, if planned investment decreases
by $100, the equilibrium aggregate output will change by
A) -$1,000
B) $-100
C) $100
D) $1,000
19) Goal independence is the ability of ________ to set monetary policy ________
A) the central bank; goals
B) Congress; goals
C) Congress; instruments
D) the central bank; instruments
20) What rights does ownership interest give stockholders?
21) Using the liquidity preference framework, show what happens to interest rates
during a business cycle recession
22) Explain what inflation targeting is What are the advantages and disadvantages of
this type of monetary policy strategy?
23) Explain how cigarettes could be called “money” in prisoner-of-war camps of World
War II
24) Explain how expansionary and contractionary monetary policies affect aggregate
demand through the exchange rate channel
25) Distinguish between a foreign bond and a Eurobond