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1) A decrease in the expected future domestic exchange rate causes the demand for
domestic assets to ________ and the domestic currency to ________, everything else
held constant
A) increase; appreciate
B) increase; depreciate
C) decrease; appreciate
D) decrease; depreciate
2) American farmers who sell beef to Europe 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 European ban on imports of American beef
3) Fear of a major recession causes stock prices to fall, everything else held constant,
which in turn causes consumer spending to
A) increase
B) remain unchanged
C) decrease
D) cannot be determined
4) Factors causing an increase in currency holdings include
A) an increase in the interest rates paid on checkable deposits
B) an increase in the cost of acquiring currency
C) a decrease in bank panics
D) an increase in illegal activity
5) If aggregate demand equals output,
A) the economy is in a recession
B) output will increase
C) output will fall
D) the economy is at its equilibrium level
6) A person's house is part of her
A) money
B) income
C) liabilities
D) wealth
7) Most US financial crises have started during periods of ________ either after the
start of a recession or a stock market crash
A) high uncertainty
B) low interest rates
C) low asset prices
D) high financial regulation
8) ________ is the field of study that applies concepts from social sciences such as
psychology and sociology to help understand the behavior of securities prices
A) Behavioral finance
B) Strategical finance
C) Methodical finance
D) Procedural finance
9) The high growth rate in China in the last twenty years has similarities to the high
growth rate of ________ during the 1950s and 1960s
A) the United States
B) the Soviet Union
C) Brazil
D) Mexico
10) An analysis of the political economy of the savings and loan crisis helps one to
understand
A) why politicians aided the efforts of thrift regulators, raising regulatory
appropriations and encouraging closing of insolvent thrifts
B) why thrift regulators were so quick to inform Congress of the problems that existed
in the thrift industry
C) why thrift regulators willingly acceded to pressures placed upon them by members
of Congress
D) why politicians listened so closely to the taxpayers they represented
11) If the interest rate on euro-denominated assets is 13 percent and it is 15 percent on
peso-denominated assets, and if the euro is expected to appreciate at a 4 percent rate,
for Manuel the Mexican the expected rate of return on euro-denominated assets is
A) 11 percent
B) 13 percent
C) 17 percent
D) 19 percent
12) Of the sources of external funds for nonfinancial businesses in the United States,
stocks account for approximately ________ of the total
A) 2%
B) 11%
C) 20%
D) 40%
