Question 1

Which of the following is true with regard to bonds?

Accepted Answer

A)  As the price of a bond falls, the interest rates rises. 
B)  As the price of a bond rises, the interest rates rises. 
C)  As the price of a bond falls, the interest rates remains unchanged. 
D)  As the price of a bond falls, the interest rates falls. 
A)  As the price of a bond falls, the interest rates rises. 
B)  As the price of a bond rises, the interest rates rises. 
C)  As the price of a bond falls, the interest rates remains unchanged. 
D)  As the price of a bond falls, the interest rates falls.

Question 2

Figure 10-7  
-Refer to Figure 10-7. The shift in the money supply curve from S1 to S2 is due to

Accepted Answer

A)  an open market sale conducted by the Fed. 
B)  an open market purchase conducted by the Fed. 
C)  an issue of new securities by the government to finance government spending. 
D)  an increase in government borrowing. 
A)  an open market sale conducted by the Fed. 
B)  an open market purchase conducted by the Fed. 
C)  an issue of new securities by the government to finance government spending. 
D)  an increase in government borrowing.

Question 3

An investor who felt that the U.S. and world economies were about to improve, would be likely to

Accepted Answer

A)  avoid investing in U.S. treasury bonds because interest rates would soon fall causing bond prices to rise. 
B)  avoid investing in U.S. treasury bonds because interest rates would soon rise causing bond prices to fall. 
C)  invest in U.S. treasury bonds because interest rates would soon fall causing bond prices to rise. 
D)  invest in U.S. treasury bonds because interest rates would soon rise causing bond prices to fall. 
A)  avoid investing in U.S. treasury bonds because interest rates would soon fall causing bond prices to rise. 
B)  avoid investing in U.S. treasury bonds because interest rates would soon rise causing bond prices to fall. 
C)  invest in U.S. treasury bonds because interest rates would soon fall causing bond prices to rise. 
D)  invest in U.S. treasury bonds because interest rates would soon rise causing bond prices to fall.

Question 4

A higher U.S. exchange rate means that

Accepted Answer

A)  foreign products are now more expensive to U.S. citizens. 
B)  foreign products are now cheaper to U.S. citizens. 
C)  U.S. products are now more expensive to U.S. citizens. 
D)  U.S. products are now cheaper to foreign countries. 
A)  foreign products are now more expensive to U.S. citizens. 
B)  foreign products are now cheaper to U.S. citizens. 
C)  U.S. products are now more expensive to U.S. citizens. 
D)  U.S. products are now cheaper to foreign countries.

Question 5

As a result of an increase in the money supply, the aggregate demand will shift to the left.

Accepted Answer

A) True 
 B)False

Question 6

The creation of savings plans such as savings deposits and money market mutual accounts that allow easy transfer of funds between interest-earning assets and checkable deposits tends to

Accepted Answer

A)  lower the cost of holding money. 
B)  reduce the demand for money. 
C)  increase the demand for money. 
D)  increase the risk of holding money. 
A)  lower the cost of holding money. 
B)  reduce the demand for money. 
C)  increase the demand for money. 
D)  increase the risk of holding money.

Question 7

The Fed could conduct an open market sale to eliminate an inflationary gap.

Accepted Answer

A) True 
 B)False

Question 8

Suppose the Fed announces that it expects interest rates to fall in the next quarter. What happens to the demand for money today?

Accepted Answer

A)  The precautionary demand for money goes up. 
B)  The speculative demand for money goes up. 
C)  The transaction demand for money goes down. 
D)  The speculative demand for money goes down. 
A)  The precautionary demand for money goes up. 
B)  The speculative demand for money goes up. 
C)  The transaction demand for money goes down. 
D)  The speculative demand for money goes down.

Question 9

An increase in the money supply will lower the equilibrium rate of interest.

Accepted Answer

A) True 
 B)False

Question 10

The interest rate on a bond is

Accepted Answer

A)  the difference between the face value and the bond price, expressed as a percentage of the face value. 
B)  the difference between the face value and the bond price, expressed as a percentage of the bond price. 
C)  the ratio of the face value and the bond price, expressed as a percentage. 
D)  the difference between the face value and the yield, expressed as a percentage of the bond price. 
A)  the difference between the face value and the bond price, expressed as a percentage of the face value. 
B)  the difference between the face value and the bond price, expressed as a percentage of the bond price. 
C)  the ratio of the face value and the bond price, expressed as a percentage. 
D)  the difference between the face value and the yield, expressed as a percentage of the bond price.

Question 11

If the prices of bonds go up, the interest rates will fall and the quantity of investment demanded will rise.

Accepted Answer

A) True 
 B)False

Question 12

Figure 10-8  
-Refer to Figure 10-8. If the economy is at point a,

Accepted Answer

A)  employment is greater than the natural level of employment. 
B)  it is at the natural level of employment. 
C)  it is in a recessionary gap. 
D)  the unemployment rate is negative. 
A)  employment is greater than the natural level of employment. 
B)  it is at the natural level of employment. 
C)  it is in a recessionary gap. 
D)  the unemployment rate is negative.

Question 13

Suppose you earn $4,800 a month and spend exactly $160 in each of the 30 days. If you deposit $1, 600 into your checking account on the first day, eleventh day, and twenty-first day of the month, then your average quantity of money demanded is

Accepted Answer

A)  $800. 
B)  $1,200. 
C)  $2,400. 
D)  $4,800. 
A)  $800. 
B)  $1,200. 
C)  $2,400. 
D)  $4,800.

Question 14

Which of the following statements is true?

Accepted Answer

A)  Advancements in statistical methods and data collection have made it possible for the Fed to closely link the changes in the rate of growth in M1 and M2 with changes in the rate of growth of GDP. 
B)  The introduction of new financial products and changes in the ways people pay for transactions have blurred the distinction between M1 and M2 so that the Fed no longer has reliable estimates of the money demand curve. 
C)  With the proliferation of new financial products, the close relationship between M1 growth and output growth has been further strengthened. 
D)  Unlike the demand for M1, the demand for the much broader M2 money aggregate is unaffected by the financial innovation in interest bearing checking deposits. 
A)  Advancements in statistical methods and data collection have made it possible for the Fed to closely link the changes in the rate of growth in M1 and M2 with changes in the rate of growth of GDP. 
B)  The introduction of new financial products and changes in the ways people pay for transactions have blurred the distinction between M1 and M2 so that the Fed no longer has reliable estimates of the money demand curve. 
C)  With the proliferation of new financial products, the close relationship between M1 growth and output growth has been further strengthened. 
D)  Unlike the demand for M1, the demand for the much broader M2 money aggregate is unaffected by the financial innovation in interest bearing checking deposits.

Question 15

The face value of a bond is

Accepted Answer

A)  the price an individual pays to purchase the bond. 
B)  the amount that the issuer will have to pay upon maturity. 
C)  the market value of the bond. 
D)  the rate of return on the bond. 
A)  the price an individual pays to purchase the bond. 
B)  the amount that the issuer will have to pay upon maturity. 
C)  the market value of the bond. 
D)  the rate of return on the bond.

Question 16

An increase in interest rates is likely to cause

Accepted Answer

A)  firms and households to increase the quantity of money demanded. 
B)  firms and households to decrease the quantity of money demanded. 
C)  the money demand curve to shift to the right. 
D)  the money demand curve to shift to the left. 
A)  firms and households to increase the quantity of money demanded. 
B)  firms and households to decrease the quantity of money demanded. 
C)  the money demand curve to shift to the right. 
D)  the money demand curve to shift to the left.

Question 17

If the money supply curve is vertical, an increase in bond interest rates

Accepted Answer

A)  is likely to cause banks to supply more money. 
B)  is likely to cause banks to supply less money. 
C)  has no effect on the money supply. 
D)  is likely to cause the Federal Reserve to increase the money supply. 
A)  is likely to cause banks to supply more money. 
B)  is likely to cause banks to supply less money. 
C)  has no effect on the money supply. 
D)  is likely to cause the Federal Reserve to increase the money supply.

Question 18

The price of a bond is determined by

Accepted Answer

A)  the seller. 
B)  the buyer. 
C)  the demand for and supply of bonds. 
D)  the investment bank that auctions off the bonds. 
A)  the seller. 
B)  the buyer. 
C)  the demand for and supply of bonds. 
D)  the investment bank that auctions off the bonds.

Question 19

A higher exchange rate for the U.S. dollar means that

Accepted Answer

A)  the U.S. dollar trades for less foreign currency. 
B)  the U.S. dollar trades for more foreign currency. 
C)  foreign currency has risen in value relative to the dollar. 
D)  the U.S. dollar has fallen in value relative to the foreign currency. 
A)  the U.S. dollar trades for less foreign currency. 
B)  the U.S. dollar trades for more foreign currency. 
C)  foreign currency has risen in value relative to the dollar. 
D)  the U.S. dollar has fallen in value relative to the foreign currency.

Question 20

An increase in interest rates due to a decrease in the money supply will

Accepted Answer

A)  reduce aggregate demand. 
B)  not change aggregate demand. 
C)  increase aggregate demand. 
D)  decrease aggregate supply in the short run and in the long run. 
A)  reduce aggregate demand. 
B)  not change aggregate demand. 
C)  increase aggregate demand. 
D)  decrease aggregate supply in the short run and in the long run.

Which of the following is true with regard to bonds?

Figure 10-7 -Refer to Figure 10-7. The shift in the money supply curve from S₁ to S₂ is due to

An investor who felt that the U.S. and world economies were about to improve, would be likely to

A higher U.S. exchange rate means that

As a result of an increase in the money supply, the aggregate demand will shift to the left.

The creation of savings plans such as savings deposits and money market mutual accounts that allow easy transfer of funds between interest-earning assets and checkable deposits tends to

The Fed could conduct an open market sale to eliminate an inflationary gap.

Suppose the Fed announces that it expects interest rates to fall in the next quarter. What happens to the demand for money today?

An increase in the money supply will lower the equilibrium rate of interest.

The interest rate on a bond is

If the prices of bonds go up, the interest rates will fall and the quantity of investment demanded will rise.

Figure 10-8 -Refer to Figure 10-8. If the economy is at point a,

Suppose you earn $4,800 a month and spend exactly $160 in each of the 30 days. If you deposit $1, 600 into your checking account on the first day, eleventh day, and twenty-first day of the month, then your average quantity of money demanded is

Which of the following statements is true?

The face value of a bond is

An increase in interest rates is likely to cause

If the money supply curve is vertical, an increase in bond interest rates

The price of a bond is determined by

A higher exchange rate for the U.S. dollar means that

An increase in interest rates due to a decrease in the money supply will

Economics: the Study of Choice

Demand and Supply

Applications of Demand and Supply

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Economic Development

Socialist Economies in Transition

Filters

Exam 10: Financial Markets and the Economy

Which of the following is true with regard to bonds?

Figure 10-7 -Refer to Figure 10-7. The shift in the money supply curve from S1 to S2 is due to

An investor who felt that the U.S. and world economies were about to improve, would be likely to

A higher U.S. exchange rate means that

As a result of an increase in the money supply, the aggregate demand will shift to the left.

The creation of savings plans such as savings deposits and money market mutual accounts that allow easy transfer of funds between interest-earning assets and checkable deposits tends to

The Fed could conduct an open market sale to eliminate an inflationary gap.

Suppose the Fed announces that it expects interest rates to fall in the next quarter. What happens to the demand for money today?

An increase in the money supply will lower the equilibrium rate of interest.

The interest rate on a bond is

If the prices of bonds go up, the interest rates will fall and the quantity of investment demanded will rise.

Figure 10-8 -Refer to Figure 10-8. If the economy is at point a,

Suppose you earn $4,800 a month and spend exactly $160 in each of the 30 days. If you deposit $1, 600 into your checking account on the first day, eleventh day, and twenty-first day of the month, then your average quantity of money demanded is

Which of the following statements is true?

The face value of a bond is

An increase in interest rates is likely to cause

If the money supply curve is vertical, an increase in bond interest rates

The price of a bond is determined by

A higher exchange rate for the U.S. dollar means that

An increase in interest rates due to a decrease in the money supply will

Economics: the Study of Choice

Demand and Supply

Applications of Demand and Supply

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Economic Development

Socialist Economies in Transition

Filters

Figure 10-7 -Refer to Figure 10-7. The shift in the money supply curve from S₁ to S₂ is due to