Question 1

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 2

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 3

The demand for money curve is negatively sloped because people tend to hold less money at lower interest rates.

Accepted Answer

A) True 
 B)False

Question 4

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.

Question 5

Expectations that bond prices will be rising in the near future are likely to decrease the demand for money.

Accepted Answer

A) True 
 B)False

Question 6

Use the following to answer questions .
Exhibit: Changes in the Money Supply  
-(Exhibit: Changes in the Money Supply) The increase in money supply and the resulting decrease in the interest rate from 6% to 4%, is accomplished by action that also

Accepted Answer

A)  lowers the price of government bonds. 
B)  raises the interest rate on government bonds. 
C)  increases the demand for government bonds. 
D)  increases the supply of government bonds. 
A)  lowers the price of government bonds. 
B)  raises the interest rate on government bonds. 
C)  increases the demand for government bonds. 
D)  increases the supply of government bonds.

Question 7

The foreign exchange market

Accepted Answer

A)  is a government-run market where foreign currencies are traded. 
B)  is a bank-owned market through which people buy and sell currencies. 
C)  refers to the entire array of institutions through which people buy and sell currencies. 
D)  an open market run by the Federal Reserve through which banks buy and sell currencies. 
A)  is a government-run market where foreign currencies are traded. 
B)  is a bank-owned market through which people buy and sell currencies. 
C)  refers to the entire array of institutions through which people buy and sell currencies. 
D)  an open market run by the Federal Reserve through which banks buy and sell currencies.

Question 8

Use the following to answer questions .
Exhibit: Foreign Exchange Market  
-(Exhibit: Foreign Exchange Market) The demand for dollars curve slopes downwards because

Accepted Answer

A)  a higher exchange rate tends to make U.S. goods and services more expensive for foreigners, thereby generating a lower quantity of dollars in the foreign exchange market. 
B)  a higher exchange rate tends to make U.S. goods and services cheaper for foreigners, thereby generating a lower quantity of dollars in the foreign exchange market. 
C)  a lower exchange rate tends to decrease U.S. exports, which raises the price of foreign currency in the foreign exchange market. 
D)  a lower exchange rate tends to increase U.S. imports, thereby raising the price of foreign currency in the foreign exchange market. 
A)  a higher exchange rate tends to make U.S. goods and services more expensive for foreigners, thereby generating a lower quantity of dollars in the foreign exchange market. 
B)  a higher exchange rate tends to make U.S. goods and services cheaper for foreigners, thereby generating a lower quantity of dollars in the foreign exchange market. 
C)  a lower exchange rate tends to decrease U.S. exports, which raises the price of foreign currency in the foreign exchange market. 
D)  a lower exchange rate tends to increase U.S. imports, thereby raising the price of foreign currency in the foreign exchange market.

Question 9

Use the following to answer questions .
Exhibit: Economic Adjustments  
-(Exhibit: Economic Adjustments) If the economy is at point c, the Federal Reserve can close the output gap by buying bonds. In the bond market,

Accepted Answer

A)  the supply curve shifts right, leading to a decrease in bond prices and an increase in interest rates. 
B)  the demand curve shifts right, leading to an increase in bond prices and a decrease in interest rates. 
C)  the supply curve shifts left, leading to an increase in bond prices and an increase in interest rates. 
D)  the demand curve shifts left, leading to a decrease in bond prices and an increase in interest rates. 
A)  the supply curve shifts right, leading to a decrease in bond prices and an increase in interest rates. 
B)  the demand curve shifts right, leading to an increase in bond prices and a decrease in interest rates. 
C)  the supply curve shifts left, leading to an increase in bond prices and an increase in interest rates. 
D)  the demand curve shifts left, leading to a decrease in bond prices and an increase in interest rates.

Question 10

All else constant, a decrease in the supply of money will lead to

Accepted Answer

A)  an increase in the equilibrium quantity of money and an increase in the equilibrium price of bonds. 
B)  an increase in the equilibrium quantity of money and a decrease in the equilibrium price of bonds. 
C)  a decrease in the equilibrium quantity of money and an increase in the equilibrium price of bonds. 
D)  a decrease in the equilibrium quantity of money and a decrease in the equilibrium price of bonds. 
A)  an increase in the equilibrium quantity of money and an increase in the equilibrium price of bonds. 
B)  an increase in the equilibrium quantity of money and a decrease in the equilibrium price of bonds. 
C)  a decrease in the equilibrium quantity of money and an increase in the equilibrium price of bonds. 
D)  a decrease in the equilibrium quantity of money and a decrease in the equilibrium price of bonds.

Question 11

Use the following to answer questions .
Exhibit: Economic Adjustments  
-(Exhibit: Economic Adjustments) Short-run but not long-run equilibrium positions occur at points

Accepted Answer

A)  a and b. 
B)  b and c. 
C)  c and d. 
D)  a and c. 
A)  a and b. 
B)  b and c. 
C)  c and d. 
D)  a and c.

Question 12

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 13

Use the following to answer questions .
Exhibit: Foreign Exchange Market  
-(Exhibit: Foreign Exchange Market) Who generates a supply of dollars in the foreign exchange market?

Accepted Answer

A)  U.S. residents who demand foreign goods, services, and assets. 
B)  U.S. residents and firms who wish to sell domestic assets to foreigners. 
C)  Foreign residents abroad who demand U.S. goods, services, and assets. 
D)  Foreign banks and citizens who wish to increase their holdings of a reserve currency. 
A)  U.S. residents who demand foreign goods, services, and assets. 
B)  U.S. residents and firms who wish to sell domestic assets to foreigners. 
C)  Foreign residents abroad who demand U.S. goods, services, and assets. 
D)  Foreign banks and citizens who wish to increase their holdings of a reserve currency.

Question 14

When the Fed sells government bonds in the open market, the money supply will increase.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following events is likely to generate a supply of U.S. dollars in the foreign exchange market?

Accepted Answer

A)  A Saudi Arabian citizen buys a condominium in New York. 
B)  An American student will pay her way to attend her first year of college at Oxford, England. 
C)  Alabama Mills exports 5,000 bales of cotton to Pakistan. 
D)  Hans Meyer, a German citizen, plans to spend a month in California, sampling wines. 
A)  A Saudi Arabian citizen buys a condominium in New York. 
B)  An American student will pay her way to attend her first year of college at Oxford, England. 
C)  Alabama Mills exports 5,000 bales of cotton to Pakistan. 
D)  Hans Meyer, a German citizen, plans to spend a month in California, sampling wines.

Question 16

A country's exchange rate is the

Accepted Answer

A)  price of its currency in terms of another currency. 
B)  ratio of imports to exports. 
C)  ratio of exports to imports. 
D)  ratio of net exports to real GDP. 
A)  price of its currency in terms of another currency. 
B)  ratio of imports to exports. 
C)  ratio of exports to imports. 
D)  ratio of net exports to real GDP.

Question 17

An increase in the demand for bonds leads to

Accepted Answer

A)  a decrease in the price of bonds, a decrease in the interest rate, and a decrease in aggregate demand. 
B)  an increase in the price of bonds, an increase in the interest rate, and an increase in aggregate demand. 
C)  an increase in the price of bonds, a decrease in the interest rate, and an increase in aggregate demand. 
D)  a decrease in the price of bonds, an increase in the interest rate, and an increase in aggregate demand. 
A)  a decrease in the price of bonds, a decrease in the interest rate, and a decrease in aggregate demand. 
B)  an increase in the price of bonds, an increase in the interest rate, and an increase in aggregate demand. 
C)  an increase in the price of bonds, a decrease in the interest rate, and an increase in aggregate demand. 
D)  a decrease in the price of bonds, an increase in the interest rate, and an increase in aggregate demand.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Use the following to answer questions .
Exhibit: The Money Supply and Aggregate Demand  
-(Exhibit: The Money Supply and Aggregate Demand) Panel (a) 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 20

Use the following to answer questions .
Exhibit: The Money Supply and Aggregate Demand  
-(Exhibit: The Money Supply and Aggregate Demand) 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.

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

Which of the following is true with regard to bonds?

The demand for money curve is negatively sloped because people tend to hold less money at lower interest rates.

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

Expectations that bond prices will be rising in the near future are likely to decrease the demand for money.

Use the following to answer questions . Exhibit: Changes in the Money Supply -(Exhibit: Changes in the Money Supply) The increase in money supply and the resulting decrease in the interest rate from 6% to 4%, is accomplished by action that also

The foreign exchange market

Use the following to answer questions . Exhibit: Foreign Exchange Market -(Exhibit: Foreign Exchange Market) The demand for dollars curve slopes downwards because

Use the following to answer questions . Exhibit: Economic Adjustments -(Exhibit: Economic Adjustments) If the economy is at point c, the Federal Reserve can close the output gap by buying bonds. In the bond market,

All else constant, a decrease in the supply of money will lead to

Use the following to answer questions . Exhibit: Economic Adjustments -(Exhibit: Economic Adjustments) Short-run but not long-run equilibrium positions occur at points

Since the late 1970s, the United States

Use the following to answer questions . Exhibit: Foreign Exchange Market -(Exhibit: Foreign Exchange Market) Who generates a supply of dollars in the foreign exchange market?

When the Fed sells government bonds in the open market, the money supply will increase.

Which of the following events is likely to generate a supply of U.S. dollars in the foreign exchange market?

A country's exchange rate is the

An increase in the demand for bonds leads to

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

Use the following to answer questions . Exhibit: The Money Supply and Aggregate Demand -(Exhibit: The Money Supply and Aggregate Demand) Panel (a) illustrates what happens when the Fed

Use the following to answer questions . Exhibit: The Money Supply and Aggregate Demand -(Exhibit: The Money Supply and Aggregate Demand) Panel (b) illustrates what happens when the Fed

Economics: the Study of Choice

Demand and Supply

Applications of Supply and Demand

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

Filters

Exam 10: Financial Markets and the Economy

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

Which of the following is true with regard to bonds?

The demand for money curve is negatively sloped because people tend to hold less money at lower interest rates.

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

Expectations that bond prices will be rising in the near future are likely to decrease the demand for money.

Use the following to answer questions . Exhibit: Changes in the Money Supply -(Exhibit: Changes in the Money Supply) The increase in money supply and the resulting decrease in the interest rate from 6% to 4%, is accomplished by action that also

The foreign exchange market

Use the following to answer questions . Exhibit: Foreign Exchange Market -(Exhibit: Foreign Exchange Market) The demand for dollars curve slopes downwards because

Use the following to answer questions . Exhibit: Economic Adjustments -(Exhibit: Economic Adjustments) If the economy is at point c, the Federal Reserve can close the output gap by buying bonds. In the bond market,

All else constant, a decrease in the supply of money will lead to

Use the following to answer questions . Exhibit: Economic Adjustments -(Exhibit: Economic Adjustments) Short-run but not long-run equilibrium positions occur at points

Since the late 1970s, the United States

Use the following to answer questions . Exhibit: Foreign Exchange Market -(Exhibit: Foreign Exchange Market) Who generates a supply of dollars in the foreign exchange market?

When the Fed sells government bonds in the open market, the money supply will increase.

Which of the following events is likely to generate a supply of U.S. dollars in the foreign exchange market?

A country's exchange rate is the

An increase in the demand for bonds leads to

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

Use the following to answer questions . Exhibit: The Money Supply and Aggregate Demand -(Exhibit: The Money Supply and Aggregate Demand) Panel (a) illustrates what happens when the Fed

Use the following to answer questions . Exhibit: The Money Supply and Aggregate Demand -(Exhibit: The Money Supply and Aggregate Demand) Panel (b) illustrates what happens when the Fed

Economics: the Study of Choice

Demand and Supply

Applications of Supply and Demand

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

Filters