Question 1

Which statement describes a serious challenge to the efficient markets hypothesis?

Accepted Answer

A)  Stock prices fluctuate more than can be explained by news about fundamentals. 
B)  Individual investors behave in systematically irrational ways. 
C)  Stock prices follow a random walk. 
D)  Stock prices fluctuate more than can be explained by news about fundamentals, and individual investors behave in systematically irrational ways. 
A)  Stock prices fluctuate more than can be explained by news about fundamentals. 
B)  Individual investors behave in systematically irrational ways. 
C)  Stock prices follow a random walk. 
D)  Stock prices fluctuate more than can be explained by news about fundamentals, and individual investors behave in systematically irrational ways. D

Question 2

Financial intermediaries that manage a stock portfolio and sell shares of the portfolio to individual investors are:

Accepted Answer

A)  mutual funds. 
B)  pension funds. 
C)  life insurance companies. 
D)  banks. 
A)  mutual funds. 
B)  pension funds. 
C)  life insurance companies. 
D)  banks. A

Question 3

In an open economy, GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion. How much is the net capital inflow?

Accepted Answer

A)  $1 trillion 
B)  $2 trillion 
C)  $3 trillion 
D)  $4 trillion 
A)  $1 trillion 
B)  $2 trillion 
C)  $3 trillion 
D)  $4 trillion B

Question 4

If Congress passed a law last year that will increase corporate taxes this year, holding other things constant, stock prices will _____ this year.

Accepted Answer

A)  increase 
B)  decrease 
C)  not change 
D)  It is impossible to say how stock prices will change. 
A)  increase 
B)  decrease 
C)  not change 
D)  It is impossible to say how stock prices will change.

Question 5

The budget balance equals:

Accepted Answer

A)  taxes plus government spending. 
B)  taxes minus government spending. 
C)  consumption plus investment. 
D)  imports minus exports. 
A)  taxes plus government spending. 
B)  taxes minus government spending. 
C)  consumption plus investment. 
D)  imports minus exports.

Question 6

Use the following to answer questions:  
-(Figure: Loanable Funds) Use Figure: Loanable Funds. Which scenario might produce a new equilibrium interest rate of 8% and a new equilibrium quantity of loanable funds of $150 billion?

Accepted Answer

A)  Consumption as a fraction of disposable income increases. 
B)  Businesses become more optimistic about the return on investment spending. 
C)  The federal government has a budget surplus, rather than a budget deficit. 
D)  There is an increase in capital inflows from other nations. 
A)  Consumption as a fraction of disposable income increases. 
B)  Businesses become more optimistic about the return on investment spending. 
C)  The federal government has a budget surplus, rather than a budget deficit. 
D)  There is an increase in capital inflows from other nations.

Question 7

Which index is NOT one that is associated with the stock market?

Accepted Answer

A)  the Dow Jones Industrial Average 
B)  the producer price index 
C)  the S&P 500 
D)  the NASDAQ 
A)  the Dow Jones Industrial Average 
B)  the producer price index 
C)  the S&P 500 
D)  the NASDAQ

Question 8

A business will want to borrow to undertake an investment project when the rate of return on that project is _____ rate.

Accepted Answer

A)  lower than the interest 
B)  higher than the interest 
C)  higher than the exchange 
D)  equal to the inflation 
A)  lower than the interest 
B)  higher than the interest 
C)  higher than the exchange 
D)  equal to the inflation

Question 9

Which scenario is NOT associated with government budget deficits?

Accepted Answer

A)  The government becomes a borrower in the market for loanable funds. 
B)  The interest rate rises. 
C)  The total amount of borrowing decreases. 
D)  Private investment spending is crowded out. 
A)  The government becomes a borrower in the market for loanable funds. 
B)  The interest rate rises. 
C)  The total amount of borrowing decreases. 
D)  Private investment spending is crowded out.

Question 10

A random walk occurs when an asset price:

Accepted Answer

A)  moves in a predicable direction but with random error. 
B)  makes unpredictable movements. 
C)  moves in a predictable way with no error. 
D)  moves slowly but predictably. 
A)  moves in a predicable direction but with random error. 
B)  makes unpredictable movements. 
C)  moves in a predictable way with no error. 
D)  moves slowly but predictably.

Question 11

A household's wealth is:

Accepted Answer

A)  what it earns each period. 
B)  what it saves each period. 
C)  the value of its accumulated savings. 
D)  the value of its financial assets. 
A)  what it earns each period. 
B)  what it saves each period. 
C)  the value of its accumulated savings. 
D)  the value of its financial assets.

Question 12

A bond is:

Accepted Answer

A)  share of ownership in a company. 
B)  a promise to pay interest each year and to repay the principal on a specified date. 
C)  a liquid asset since it is a standardized product with a market in which the owner can sell it. 
D)  both a promise to pay interest each year and to repay the principal on a specified date and a liquid asset since it is a standardized product with a market in which the owner can sell it. 
A)  share of ownership in a company. 
B)  a promise to pay interest each year and to repay the principal on a specified date. 
C)  a liquid asset since it is a standardized product with a market in which the owner can sell it. 
D)  both a promise to pay interest each year and to repay the principal on a specified date and a liquid asset since it is a standardized product with a market in which the owner can sell it.

Question 13

The value of a stock depends primarily on investors' assessments of its value in the past.

Accepted Answer

A) True 
 B)False

Question 14

Use the following to answer questions:  
-(Table: Investment Projects) Use Table: Investment Projects. If the market interest rate declines from 15% to 11%, then the amount of investment demanded will increase by:

Accepted Answer

A)  $200. 
B)  $1,000. 
C)  $2,000. 
D)  $2,200. 
A)  $200. 
B)  $1,000. 
C)  $2,000. 
D)  $2,200.

Question 15

Firms want to undertake projects whose rate of return is greater than the interest rate.

Accepted Answer

A) True 
 B)False

Question 16

Changes in the prices of stock are the result of changes in the supply and demand for stocks of investors.

Accepted Answer

A) True 
 B)False

Question 17

During the financial crisis of 2008, many financial assets lost value, but mortgage-backed securities never underwent default.

Accepted Answer

A) True 
 B)False

Question 18

Use the following to answer questions:  
-(Table: Investment Projects) Use Table: Investment Projects. If the market interest rate is 17%, the amount of investment demanded is:

Accepted Answer

A)  $200. 
B)  $800. 
C)  $1,000. 
D)  $2,000. 
A)  $200. 
B)  $800. 
C)  $1,000. 
D)  $2,000.

Question 19

Suppose that there is no trade and no government in a small economy. GDP is $25 trillion, and consumption spending is $18 trillion this year. What is the level of private saving?

Accepted Answer

A)  $7 trillion 
B)  $18 trillion 
C)  $43 trillion 
D)  -$7 trillion 
A)  $7 trillion 
B)  $18 trillion 
C)  $43 trillion 
D)  -$7 trillion

Question 20

The theory that assets embody all publicly available information about their fundamentals is the:

Accepted Answer

A)  efficient markets hypothesis. 
B)  multiplier theory. 
C)  accelerator theory 
D)  Fisher effect. 
A)  efficient markets hypothesis. 
B)  multiplier theory. 
C)  accelerator theory 
D)  Fisher effect.

Which statement describes a serious challenge to the efficient markets hypothesis?

Financial intermediaries that manage a stock portfolio and sell shares of the portfolio to individual investors are:

In an open economy, GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion. How much is the net capital inflow?

If Congress passed a law last year that will increase corporate taxes this year, holding other things constant, stock prices will _____ this year.

The budget balance equals:

Use the following to answer questions: -(Figure: Loanable Funds) Use Figure: Loanable Funds. Which scenario might produce a new equilibrium interest rate of 8% and a new equilibrium quantity of loanable funds of $150 billion?

Which index is NOT one that is associated with the stock market?

A business will want to borrow to undertake an investment project when the rate of return on that project is _____ rate.

Which scenario is NOT associated with government budget deficits?

A random walk occurs when an asset price:

A household's wealth is:

A bond is:

The value of a stock depends primarily on investors' assessments of its value in the past.

Use the following to answer questions: -(Table: Investment Projects) Use Table: Investment Projects. If the market interest rate declines from 15% to 11%, then the amount of investment demanded will increase by:

Firms want to undertake projects whose rate of return is greater than the interest rate.

Changes in the prices of stock are the result of changes in the supply and demand for stocks of investors.

During the financial crisis of 2008, many financial assets lost value, but mortgage-backed securities never underwent default.

Use the following to answer questions: -(Table: Investment Projects) Use Table: Investment Projects. If the market interest rate is 17%, the amount of investment demanded is:

Suppose that there is no trade and no government in a small economy. GDP is $25 trillion, and consumption spending is $18 trillion this year. What is the level of private saving?

The theory that assets embody all publicly available information about their fundamentals is the:

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Filters

Exam 10: Savings, Investment Spending, and the Financial Syst

Which statement describes a serious challenge to the efficient markets hypothesis?

Financial intermediaries that manage a stock portfolio and sell shares of the portfolio to individual investors are:

In an open economy, GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion. How much is the net capital inflow?

If Congress passed a law last year that will increase corporate taxes this year, holding other things constant, stock prices will _____ this year.

The budget balance equals:

Use the following to answer questions: -(Figure: Loanable Funds) Use Figure: Loanable Funds. Which scenario might produce a new equilibrium interest rate of 8% and a new equilibrium quantity of loanable funds of $150 billion?

Which index is NOT one that is associated with the stock market?

A business will want to borrow to undertake an investment project when the rate of return on that project is _____ rate.

Which scenario is NOT associated with government budget deficits?

A random walk occurs when an asset price:

A household's wealth is:

A bond is:

The value of a stock depends primarily on investors' assessments of its value in the past.

Use the following to answer questions: -(Table: Investment Projects) Use Table: Investment Projects. If the market interest rate declines from 15% to 11%, then the amount of investment demanded will increase by:

Firms want to undertake projects whose rate of return is greater than the interest rate.

Changes in the prices of stock are the result of changes in the supply and demand for stocks of investors.

During the financial crisis of 2008, many financial assets lost value, but mortgage-backed securities never underwent default.

Use the following to answer questions: -(Table: Investment Projects) Use Table: Investment Projects. If the market interest rate is 17%, the amount of investment demanded is:

Suppose that there is no trade and no government in a small economy. GDP is $25 trillion, and consumption spending is $18 trillion this year. What is the level of private saving?

The theory that assets embody all publicly available information about their fundamentals is the:

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Filters