Question 1

A rise in bond prices would cause the price of a dollar to rise.

Accepted Answer

A) True 
 B)False

Question 2

Since the late 1970s, the United States

Accepted Answer

A)  has experienced only moderate inflation, usually between 2 to 3 percent. 
B)  has seen a steadily increasing rate of inflation. 
C)  has experienced low inflation, except for a seven-year period between 1979 and 1986. 
D)  has experienced high inflation followed by a long period of deflation. 
A)  has experienced only moderate inflation, usually between 2 to 3 percent. 
B)  has seen a steadily increasing rate of inflation. 
C)  has experienced low inflation, except for a seven-year period between 1979 and 1986. 
D)  has experienced high inflation followed by a long period of deflation.

Question 3

The transactions demand for money is the money households and firms hold in order to pay for goods and services they buy.

Accepted Answer

A) True 
 B)False

Question 4

Figure 10-6  
-Refer to Figure 10-6. If the Fed wants to encourage investment and expand the economy, it would conduct

Accepted Answer

A)  an expansionary monetary policy such as an open market purchase. The results of such a policy are represented in Panel (a). 
B)  a contractionary monetary policy such as an open market sale. The results of such a policy are represented in Panel (b). 
C)  an expansionary monetary policy such as an open market sale. The results of such a policy are represented in Panel (a). 
D)  a contractionary monetary policy such as an open market purchase. The results of such a policy are represented in Panel (a). 
A)  an expansionary monetary policy such as an open market purchase. The results of such a policy are represented in Panel (a). 
B)  a contractionary monetary policy such as an open market sale. The results of such a policy are represented in Panel (b). 
C)  an expansionary monetary policy such as an open market sale. The results of such a policy are represented in Panel (a). 
D)  a contractionary monetary policy such as an open market purchase. The results of such a policy are represented in Panel (a).

Question 5

Which of the following statements is true?

Accepted Answer

A)  The lower the price of a bond, relative to its face value, the lower the interest rate. 
B)  The lower the price of a bond, relative to its maturity, the lower the interest rate. 
C)  The higher the price of a bond, relative to its face value, the higher the interest rate. 
D)  The lower the price of a bond, relative to its face value, the higher the interest rate. 
A)  The lower the price of a bond, relative to its face value, the lower the interest rate. 
B)  The lower the price of a bond, relative to its maturity, the lower the interest rate. 
C)  The higher the price of a bond, relative to its face value, the higher the interest rate. 
D)  The lower the price of a bond, relative to its face value, the higher the interest rate.

Question 6

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

Accepted Answer

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

Question 7

The supply curve of money is horizontal at the market interest rate.

Accepted Answer

A) True 
 B)False

Question 8

The demand for bonds curve slopes downwards because

Accepted Answer

A)  at higher prices, bonds pay higher interest which makes them more attractive to buyers. 
B)  lower prices reduce the cost of borrowing which makes them less attractive to buyers. 
C)  at lower prices, bonds pay higher interest which makes them more attractive to buyers. 
D)  higher prices raise the cost of borrowing which makes them less attractive to buyers. 
A)  at higher prices, bonds pay higher interest which makes them more attractive to buyers. 
B)  lower prices reduce the cost of borrowing which makes them less attractive to buyers. 
C)  at lower prices, bonds pay higher interest which makes them more attractive to buyers. 
D)  higher prices raise the cost of borrowing which makes them less attractive to buyers.

Question 9

An increase in the supply of bonds

Accepted Answer

A)  raises the interest rate and increases equilibrium quantity of bonds. 
B)  raises the interest rate and decreases equilibrium quantity of bonds. 
C)  lowers the interest rate and decreases equilibrium quantity of bonds. 
D)  lowers the interest rate and increases equilibrium quantity of bonds. 
A)  raises the interest rate and increases equilibrium quantity of bonds. 
B)  raises the interest rate and decreases equilibrium quantity of bonds. 
C)  lowers the interest rate and decreases equilibrium quantity of bonds. 
D)  lowers the interest rate and increases equilibrium quantity of bonds.

Question 10

Which of the following is an index of exchange rates?

Accepted Answer

A)  import-export ratio 
B)  trade-weighted exchange rate 
C)  trade balance index 
D)  foreign price-domestic price ratio 
A)  import-export ratio 
B)  trade-weighted exchange rate 
C)  trade balance index 
D)  foreign price-domestic price ratio

Question 11

At higher interest rates, people will hold more money.

Accepted Answer

A) True 
 B)False

Question 12

If a British student pays her way to attend Harvard University, her action will:

Accepted Answer

A)  cause the exchange rate of the British pound to rise. 
B)  cause the exchange rate of the U.S. dollar to fall. 
C)  change the supply of dollars in the foreign currency market. 
D)  change the supply of pounds in the foreign currency market. 
A)  cause the exchange rate of the British pound to rise. 
B)  cause the exchange rate of the U.S. dollar to fall. 
C)  change the supply of dollars in the foreign currency market. 
D)  change the supply of pounds in the foreign currency market.

Question 13

Figure 10-6  
-Refer to Figure 10-6. Panel (b) illustrates what happens when the Fed

Accepted Answer

A)  lowers the money supply and lowers interest rates. 
B)  increases the money supply and increases interest rates. 
C)  increases the money supply and lowers interest rates. 
D)  lowers the money supply and increases interest rates. 
A)  lowers the money supply and lowers interest rates. 
B)  increases the money supply and increases interest rates. 
C)  increases the money supply and lowers interest rates. 
D)  lowers the money supply and increases interest rates.

Question 14

Holding everything else unchanged, higher interest rates in foreign countries relative to U.S. interest rates

Accepted Answer

A)  increase the demand and reduce the supply of dollars leading to an increase in the exchange rate. 
B)  decrease the demand and the supply of dollars leading to an decrease in the exchange rate. 
C)  increase the demand and the supply of dollars leading to an increase in the exchange rate. 
D)  decrease the demand and increase the supply of dollars leading to a decrease in the exchange rate. 
A)  increase the demand and reduce the supply of dollars leading to an increase in the exchange rate. 
B)  decrease the demand and the supply of dollars leading to an decrease in the exchange rate. 
C)  increase the demand and the supply of dollars leading to an increase in the exchange rate. 
D)  decrease the demand and increase the supply of dollars leading to a decrease in the exchange rate.

Question 15

The demand curve for money curve shows, all other things unchanged, the

Accepted Answer

A)  quantity of money demanded at each price. 
B)  quantity of money demanded at each bond rate. 
C)  quantity of money demanded at each interest rate. 
D)  amount of money people demand at a specific interest rate. 
A)  quantity of money demanded at each price. 
B)  quantity of money demanded at each bond rate. 
C)  quantity of money demanded at each interest rate. 
D)  amount of money people demand at a specific interest rate.

A rise in bond prices would cause the price of a dollar to rise.

Since the late 1970s, the United States

The transactions demand for money is the money households and firms hold in order to pay for goods and services they buy.

Figure 10-6 -Refer to Figure 10-6. If the Fed wants to encourage investment and expand the economy, it would conduct

Which of the following statements is true?

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

The supply curve of money is horizontal at the market interest rate.

The demand for bonds curve slopes downwards because

An increase in the supply of bonds

Which of the following is an index of exchange rates?

At higher interest rates, people will hold more money.

If a British student pays her way to attend Harvard University, her action will:

Figure 10-6 -Refer to Figure 10-6. Panel (b) illustrates what happens when the Fed

Holding everything else unchanged, higher interest rates in foreign countries relative to U.S. interest rates

The demand curve for money curve shows, all other things unchanged, the

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

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Exam 10: Financial Markets and the Economy

A rise in bond prices would cause the price of a dollar to rise.

Since the late 1970s, the United States

The transactions demand for money is the money households and firms hold in order to pay for goods and services they buy.

Figure 10-6 -Refer to Figure 10-6. If the Fed wants to encourage investment and expand the economy, it would conduct

Which of the following statements is true?

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

The supply curve of money is horizontal at the market interest rate.

The demand for bonds curve slopes downwards because

An increase in the supply of bonds

Which of the following is an index of exchange rates?

At higher interest rates, people will hold more money.

If a British student pays her way to attend Harvard University, her action will:

Figure 10-6 -Refer to Figure 10-6. Panel (b) illustrates what happens when the Fed

Holding everything else unchanged, higher interest rates in foreign countries relative to U.S. interest rates

The demand curve for money curve shows, all other things unchanged, the

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