Question 1

A small open economy

Accepted Answer

A)  is unable to affect the world real interest rate by its borrowing and lending decisions. 
B)  will always be a net borrower from abroad. 
C)  will always be a net lender abroad. 
D)  is almost never able to borrow abroad. 
A)  is unable to affect the world real interest rate by its borrowing and lending decisions. 
B)  will always be a net borrower from abroad. 
C)  will always be a net lender abroad. 
D)  is almost never able to borrow abroad.

Question 2

The supply curve for loanable funds would increase due to a(n)

Accepted Answer

A)  increase in wealth. 
B)  increase in expected inflation. 
C)  decrease in the liquidity of bonds relative to other assets. 
D)  increase in the information costs of bonds relative to other assets. 
A)  increase in wealth. 
B)  increase in expected inflation. 
C)  decrease in the liquidity of bonds relative to other assets. 
D)  increase in the information costs of bonds relative to other assets.

Question 3

When nominal interest rates rise on financial assets such as U.S.Treasury bills,the amount of interest that households and firms

Accepted Answer

A)  gain by holding money increases. 
B)  lose by holding money decreases. 
C)  lose by holding money increases. 
D)  lose or gain by holding money does not change. 
A)  gain by holding money increases. 
B)  lose by holding money decreases. 
C)  lose by holding money increases. 
D)  lose or gain by holding money does not change.

Question 4

Diversification is most effective in reducing

Accepted Answer

A)  market risk. 
B)  systemic risk. 
C)  idiosyncratic risk. 
D)  all forms of risk. 
A)  market risk. 
B)  systemic risk. 
C)  idiosyncratic risk. 
D)  all forms of risk.

Question 5

If the federal government decreases its spending and doesn't decrease taxes,the bond supply shifts to the

Accepted Answer

A)  left and the equilibrium interest rate rises. 
B)  left and the equilibrium interest rate falls. 
C)  right and the equilibrium interest rate rises. 
D)  right and the equilibrium interest rate falls. 
A)  left and the equilibrium interest rate rises. 
B)  left and the equilibrium interest rate falls. 
C)  right and the equilibrium interest rate rises. 
D)  right and the equilibrium interest rate falls.

Question 6

In recent decades,the United States

Accepted Answer

A)  was essentially a closed economy. 
B)  was generally a net borrower of foreign funds. 
C)  was generally a net lender abroad. 
D)  experienced a net outflow of savings. 
A)  was essentially a closed economy. 
B)  was generally a net borrower of foreign funds. 
C)  was generally a net lender abroad. 
D)  experienced a net outflow of savings.

Question 7

If you think that there is a 75% chance of a stock increasing by 8% and a 25% change of it falling by 20%,what is the expected return on the stock? Report using percentages with two decimal places.

Accepted Answer

The expected return

Question 8

The bond demand curve slopes down because

Accepted Answer

A)  interest rates decline as bond prices decline. 
B)  when bond prices are low, inflation is low. 
C)  the lender is willing and able to purchase more bonds when the price of the bond is low. 
D)  the borrower is willing and able to purchase more bonds when the price of the bond is low. 
A)  interest rates decline as bond prices decline. 
B)  when bond prices are low, inflation is low. 
C)  the lender is willing and able to purchase more bonds when the price of the bond is low. 
D)  the borrower is willing and able to purchase more bonds when the price of the bond is low.

Question 9

The world real interest rate is

Accepted Answer

A)  set annually by a special commission at the United Nations. 
B)  set annually by a special commission at the International Monetary Fund. 
C)  determined in the international capital market. 
D)  determined daily on the New York Stock Exchange. 
A)  set annually by a special commission at the United Nations. 
B)  set annually by a special commission at the International Monetary Fund. 
C)  determined in the international capital market. 
D)  determined daily on the New York Stock Exchange.

Question 10

Which combination of assets represents the most diversification?

Accepted Answer

A)  holding corporate and Treasury bonds 
B)  holding shares of Google and Yahoo 
C)  holding shares of Google and Microsoft 
D)  holding shares of Google along with Treasury bonds 
A)  holding corporate and Treasury bonds 
B)  holding shares of Google and Yahoo 
C)  holding shares of Google and Microsoft 
D)  holding shares of Google along with Treasury bonds

Question 11

The wealth of most people declined as a result of the financial crisis of 2007-2009.As a result,which asset most likely became a larger portion of their portfolio?

Accepted Answer

A)  bonds 
B)  stocks 
C)  house 
D)  checking account 
A)  bonds 
B)  stocks 
C)  house 
D)  checking account

Question 12

In the market for loanable funds the price of the funds exchanged is

Accepted Answer

A)  the price of bonds. 
B)  the volume of bonds purchased. 
C)  the volume of bonds sold. 
D)  the interest rate. 
A)  the price of bonds. 
B)  the volume of bonds purchased. 
C)  the volume of bonds sold. 
D)  the interest rate.

Question 13

Which of the following is a possible impact of a global savings glut on a small open economy?

Accepted Answer

A)  interest rate would increase 
B)  interest rate would decrease 
C)  domestic savings would increase 
D)  domestic investment would increase 
A)  interest rate would increase 
B)  interest rate would decrease 
C)  domestic savings would increase 
D)  domestic investment would increase

Question 14

An increase in expected inflation results in

Accepted Answer

A)  lower nominal interest rates and higher bond prices. 
B)  lower real interest rates and higher bond prices. 
C)  higher real interest rates and lower bond prices. 
D)  higher nominal interest rates and lower bond prices. 
A)  lower nominal interest rates and higher bond prices. 
B)  lower real interest rates and higher bond prices. 
C)  higher real interest rates and lower bond prices. 
D)  higher nominal interest rates and lower bond prices.

Question 15

If the expected gains on stocks rise,while the expected returns on bonds do NOT change,then

Accepted Answer

A)  the demand curve for bonds will shift to the right. 
B)  the supply curve for loanable funds will shift to the right. 
C)  the equilibrium interest rate will fall. 
D)  the equilibrium interest rate will rise. 
A)  the demand curve for bonds will shift to the right. 
B)  the supply curve for loanable funds will shift to the right. 
C)  the equilibrium interest rate will fall. 
D)  the equilibrium interest rate will rise.

Question 16

The demand for bonds is

Accepted Answer

A)  equivalent to the demand for loanable funds. 
B)  equivalent to the supply of loanable funds. 
C)  represented by an upward-sloping line when the price of bonds is on the vertical axis and the quantity of bonds demanded is on the horizontal axis. 
D)  represented by a downward-sloping line when the interest rate is on the vertical axis and the quantity of bonds demanded is on the horizontal axis. 
A)  equivalent to the demand for loanable funds. 
B)  equivalent to the supply of loanable funds. 
C)  represented by an upward-sloping line when the price of bonds is on the vertical axis and the quantity of bonds demanded is on the horizontal axis. 
D)  represented by a downward-sloping line when the interest rate is on the vertical axis and the quantity of bonds demanded is on the horizontal axis.

Question 17

An increase in the corporate profits tax is likely to cause

Accepted Answer

A)  the equilibrium interest rate to rise and the equilibrium price of bonds to fall. 
B)  the equilibrium interest rate to fall and the equilibrium price of bonds to rise. 
C)  the equilibrium interest rate and the equilibrium price of bonds to both rise. 
D)  the equilibrium interest rate and the equilibrium price of bonds to both fall. 
A)  the equilibrium interest rate to rise and the equilibrium price of bonds to fall. 
B)  the equilibrium interest rate to fall and the equilibrium price of bonds to rise. 
C)  the equilibrium interest rate and the equilibrium price of bonds to both rise. 
D)  the equilibrium interest rate and the equilibrium price of bonds to both fall.

Question 18

If the government increases taxes while holding expenditures constant

Accepted Answer

A)  the bond supply curve will shift to the left and the equilibrium interest rate will fall. 
B)  the bond supply curve will shift to the right and the real interest rate will fall. 
C)  government borrowing will be increased. 
D)  the government's deficit will increase. 
A)  the bond supply curve will shift to the left and the equilibrium interest rate will fall. 
B)  the bond supply curve will shift to the right and the real interest rate will fall. 
C)  government borrowing will be increased. 
D)  the government's deficit will increase.

Question 19

Suppose that a new bond rating service is established that specializes in rating municipal bonds that had not previously been rated.The likely result would be

Accepted Answer

A)  a shift to the left in the demand curve for municipal bonds. 
B)  a shift to the left in the supply curve for municipal bonds. 
C)  an increase in the equilibrium interest rate. 
D)  a decrease in the equilibrium interest rate. 
A)  a shift to the left in the demand curve for municipal bonds. 
B)  a shift to the left in the supply curve for municipal bonds. 
C)  an increase in the equilibrium interest rate. 
D)  a decrease in the equilibrium interest rate.

Question 20

The demand curve for bonds would be shifted to the left by

Accepted Answer

A)  an increase in expected returns on other assets. 
B)  a decrease in the information costs of bonds relative to other assets. 
C)  a decrease in expected inflation. 
D)  an increase in the liquidity of bonds relative to other assets. 
A)  an increase in expected returns on other assets. 
B)  a decrease in the information costs of bonds relative to other assets. 
C)  a decrease in expected inflation. 
D)  an increase in the liquidity of bonds relative to other assets.

A small open economy

The supply curve for loanable funds would increase due to a(n)

When nominal interest rates rise on financial assets such as U.S.Treasury bills,the amount of interest that households and firms

Diversification is most effective in reducing

If the federal government decreases its spending and doesn't decrease taxes,the bond supply shifts to the

In recent decades,the United States

If you think that there is a 75% chance of a stock increasing by 8% and a 25% change of it falling by 20%,what is the expected return on the stock? Report using percentages with two decimal places.

The bond demand curve slopes down because

The world real interest rate is

Which combination of assets represents the most diversification?

The wealth of most people declined as a result of the financial crisis of 2007-2009.As a result,which asset most likely became a larger portion of their portfolio?

In the market for loanable funds the price of the funds exchanged is

Which of the following is a possible impact of a global savings glut on a small open economy?

An increase in expected inflation results in

If the expected gains on stocks rise,while the expected returns on bonds do NOT change,then

The demand for bonds is

An increase in the corporate profits tax is likely to cause

If the government increases taxes while holding expenditures constant

Suppose that a new bond rating service is established that specializes in rating municipal bonds that had not previously been rated.The likely result would be

The demand curve for bonds would be shifted to the left by

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Beyond Commercial Banks: Shadow Banks and Nonbank Financial Institutions

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I- the Aggregate Demand and Aggregate Supply Model

Monetary Theory Ii: the Is-Mp Model

Filters

Exam 4: Determining Interest Rates

A small open economy

The supply curve for loanable funds would increase due to a(n)

When nominal interest rates rise on financial assets such as U.S.Treasury bills,the amount of interest that households and firms

Diversification is most effective in reducing

If the federal government decreases its spending and doesn't decrease taxes,the bond supply shifts to the

In recent decades,the United States

If you think that there is a 75% chance of a stock increasing by 8% and a 25% change of it falling by 20%,what is the expected return on the stock? Report using percentages with two decimal places.

The bond demand curve slopes down because

The world real interest rate is

Which combination of assets represents the most diversification?

The wealth of most people declined as a result of the financial crisis of 2007-2009.As a result,which asset most likely became a larger portion of their portfolio?

In the market for loanable funds the price of the funds exchanged is

Which of the following is a possible impact of a global savings glut on a small open economy?

An increase in expected inflation results in

If the expected gains on stocks rise,while the expected returns on bonds do NOT change,then

The demand for bonds is

An increase in the corporate profits tax is likely to cause

If the government increases taxes while holding expenditures constant

Suppose that a new bond rating service is established that specializes in rating municipal bonds that had not previously been rated.The likely result would be

The demand curve for bonds would be shifted to the left by

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Beyond Commercial Banks: Shadow Banks and Nonbank Financial Institutions

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I- the Aggregate Demand and Aggregate Supply Model

Monetary Theory Ii: the Is-Mp Model

Filters