1) Everything else held constant, when a country’s currency depreciates, its goods
abroad become ________ expensive while foreign goods in that country become
________ expensive
A) more; less
B) more; more
C) less; less
D) less; more
2) On January 25, 2009, one US dollar traded on the foreign exchange market for about
490 Indian rupees Thus, one Indian rupee would have purchased about ________ US
dollars
A) 002
B) 120
C) 700
D) 490
3) Keynes’s theory of the demand for money is consistent with ________ movements in
________
A) countercyclical; velocity
B) procyclical; velocity
C) countercyclical; expectations
D) procyclical; expectations
4) The yield to maturity for a discount bond is ________ related to the current bond
price
A) negatively
B) positively
C) not
D) directly
5) Of the following assets, the least liquid is
A) stocks
B) traveler’s checks
C) checking deposits
D) a house
6) Everything else held constant, a decrease in holdings of excess reserves will mean
A) a decrease in the money supply
B) an increase in the money supply
C) a decrease in checkable deposits
D) an increase in discount loans
7) The amount of borrowed reserves is ________ related to the discount rate, and is
________ related to the market interest rate
A) negatively; negatively
B) negatively; positively
C) positively; negatively
D) positively; positively
8) The quantity theory of money is a theory of how
A) the money supply is determined
B) interest rates are determined
C) the nominal value of aggregate income is determined
D) the real value of aggregate income is determined
9) The monetary policy strategy that does not allow the policy to focus on domestic
considerations is
A) exchange-rate targeting
B) monetary targeting
C) inflation targeting
D) the implicit nominal anchor
10) A decrease in unplanned inventory investment for the entire economy equals the
excess of
A) output over aggregate supply
B) output over aggregate demand
C) aggregate supply over output
D) aggregate demand over output
11) Which of the following are not assets on the Fed’s balance sheet?
A) Securities
B) Discount loans
C) Cash items in the process of collection
D) Deferred availability cash items
12) One way for banks to reduce the principal-agent problems associated with trading
activities is to
A) set limits on the total amount of a traders’ transactions
B) make sure that the person conducting the trades is also the person responsible for
recording the transactions
C) encourage traders to take on more risk if the potential rewards are higher
D) reduce the regulations on the traders so that they have more flexibility in conducting
trades
13) A sharp depreciation of the domestic currency after a currency crisis leads to
A) higher inflation
B) lower import prices
C) lower interest rates
D) decrease in the value of foreign currency-denominated liabilities
14) Under an exchange-rate targeting rule for monetary policy, a crawling peg
A) fixes the value of the domestic currency to a commodity such as gold
B) fixes the value of the domestic currency to that of a large, low-inflation country
C) allows the domestic currency to depreciate at a steady rate so that inflation in the
pegging country can be higher than that of the anchor country
D) allows the domestic currency to depreciate at a steady rate so that inflation in the
pegging country can be lower than that of the anchor country