Question 1

A budget ________ occurs when government expenditures exceed tax revenues for a particular time period.

Accepted Answer

A) deficit 
B) surplus 
C) surge 
D) surfeit 
A) deficit 
B) surplus 
C) surge 
D) surfeit

Question 2

A rising stock market index due to higher share prices

Accepted Answer

A) increases people's wealth,but is unlikely to increase their willingness to spend. 
B) increases people's wealth and as a result may increase their willingness to spend. 
C) decreases the amount of funds that business firms can raise by selling newly-issued stock. 
D) decreases people's wealth,but is unlikely to increase their willingness to spend. 
A) increases people's wealth,but is unlikely to increase their willingness to spend. 
B) increases people's wealth and as a result may increase their willingness to spend. 
C) decreases the amount of funds that business firms can raise by selling newly-issued stock. 
D) decreases people's wealth,but is unlikely to increase their willingness to spend.

Question 3

If the aggregate price level at time t is denoted by Pt,the inflation rate from time t - 1 to t is defined as

Accepted Answer

A) πₜ = (Pₜ - Pₜ - 1)/Pₜ - 1. 
B) πₜ = (Pₜ+ 1 - Pₜ - 1)/Pₜ - 1. 
C) πₜ = (Pₜ + 1 - Pₜ )/Pₜ. 
D) πₜ = (Pₜ - Pₜ - 1)/Pₜ. 
A) πₜ = (Pₜ - Pₜ - 1)/Pₜ - 1. 
B) πₜ = (Pₜ+ 1 - Pₜ - 1)/Pₜ - 1. 
C) πₜ = (Pₜ + 1 - Pₜ )/Pₜ. 
D) πₜ = (Pₜ - Pₜ - 1)/Pₜ.

Question 4

If the price of a euro (the European currency)increases from $1.00 to $1.10,then,everything else held constant

Accepted Answer

A) a European vacation becomes less expensive. 
B) a European vacation becomes more expensive. 
C) the cost of a European vacation is not affected. 
D) foreign travel becomes impossible. 
A) a European vacation becomes less expensive. 
B) a European vacation becomes more expensive. 
C) the cost of a European vacation is not affected. 
D) foreign travel becomes impossible.

Question 5

An increase in interest rates might ________ saving because more can be earned in interest income.

Accepted Answer

A) encourage 
B) discourage 
C) disallow 
D) invalidate 
A) encourage 
B) discourage 
C) disallow 
D) invalidate

Question 6

Compared to interest rates on long-term U.S. government bonds,interest rates on three-month Treasury bills fluctuate ________ and are ________ on average.

Accepted Answer

A) more;lower 
B) less;lower 
C) more;higher 
D) less;higher 
A) more;lower 
B) less;lower 
C) more;higher 
D) less;higher

Question 7

Which of the following items are NOT counted in U.S. GDP?

Accepted Answer

A) your purchase of a new Ford Mustang 
B) your purchase of new tires for your old car 
C) GM's purchase of tires for new cars 
D) a foreign consumer's purchase of a new Ford Mustang 
A) your purchase of a new Ford Mustang 
B) your purchase of new tires for your old car 
C) GM's purchase of tires for new cars 
D) a foreign consumer's purchase of a new Ford Mustang

Question 8

An increase in stock prices ________ the size of people's wealth and may ________ their willingness to spend,everything else held constant.

Accepted Answer

A) increases;increase 
B) increases;decrease 
C) decreases;increase 
D) decreases;decrease 
A) increases;increase 
B) increases;decrease 
C) decreases;increase 
D) decreases;decrease

Question 9

Channeling funds from individuals with surplus funds to those desiring funds when the saver does not purchase the borrower's security is known as

Accepted Answer

A) barter. 
B) redistribution. 
C) financial intermediation. 
D) taxation. 
A) barter. 
B) redistribution. 
C) financial intermediation. 
D) taxation.

Question 10

High interest rates might cause a corporation to ________ building a new plant that would provide more jobs.

Accepted Answer

A) complete 
B) consider 
C) postpone 
D) contemplate 
A) complete 
B) consider 
C) postpone 
D) contemplate

Question 11

When the total value of final goods and services is calculated using current prices,the resulting measure is referred to as

Accepted Answer

A) real GDP. 
B) the GDP deflator. 
C) nominal GDP. 
D) the index of leading indicators. 
A) real GDP. 
B) the GDP deflator. 
C) nominal GDP. 
D) the index of leading indicators.

Question 12

Fear of a major recession causes stock prices to fall,everything else held constant,which in turn causes consumer spending to

Accepted Answer

A) increase. 
B) remain unchanged. 
C) decrease. 
D) cannot be determined. 
A) increase. 
B) remain unchanged. 
C) decrease. 
D) cannot be determined.

Question 13

Evidence from the United States and other foreign countries indicates that

Accepted Answer

A) there is a strong positive association between inflation and growth rate of money over long periods of time. 
B) there is little support for the assertion that "inflation is always and everywhere a monetary phenomenon." 
C) countries with low monetary growth rates tend to experience higher rates of inflation,all else being constant. 
D) money growth is clearly unrelated to inflation. 
A) there is a strong positive association between inflation and growth rate of money over long periods of time. 
B) there is little support for the assertion that "inflation is always and everywhere a monetary phenomenon." 
C) countries with low monetary growth rates tend to experience higher rates of inflation,all else being constant. 
D) money growth is clearly unrelated to inflation.

Question 14

A key factor in producing high economic growth is

Accepted Answer

A) eliminating foreign trade. 
B) well-functioning financial markets. 
C) high interest rates. 
D) stock market volatility. 
A) eliminating foreign trade. 
B) well-functioning financial markets. 
C) high interest rates. 
D) stock market volatility.

Question 15

The basic concepts used in the analytic framework of this text include all of the following EXCEPT

Accepted Answer

A) the not-for-profit nature of most financial institutions. 
B) a basic supply and demand analysis to explain the behavior of financial markets. 
C) an approach to financial structure based on transaction costs and asymmetric information. 
D) the concept of equilibrium. 
A) the not-for-profit nature of most financial institutions. 
B) a basic supply and demand analysis to explain the behavior of financial markets. 
C) an approach to financial structure based on transaction costs and asymmetric information. 
D) the concept of equilibrium.

Question 16

The measure of the aggregate price level that is most frequently reported in the media is the

Accepted Answer

A) GDP deflator. 
B) producer price index. 
C) consumer price index. 
D) household price index. 
A) GDP deflator. 
B) producer price index. 
C) consumer price index. 
D) household price index.

Question 17

The gross domestic product is the

Accepted Answer

A) the value of all wealth in an economy. 
B) the value of all goods and services sold to other nations in a year. 
C) the market value of all final goods and services produced in an economy in a year. 
D) the market value of all intermediate goods and services produced in an economy in a year. 
A) the value of all wealth in an economy. 
B) the value of all goods and services sold to other nations in a year. 
C) the market value of all final goods and services produced in an economy in a year. 
D) the market value of all intermediate goods and services produced in an economy in a year.

Question 18

From 2002 to 2011,the dollar depreciated substantially against other currencies. This drop in value most likely benefitted

Accepted Answer

A) European citizens traveling in the U.S. 
B) U)S. citizens traveling in Europe. 
C) U)S. manufacturers importing parts from abroad. 
D) U)S. citizens purchasing foreign-made automobiles. 
A) European citizens traveling in the U.S. 
B) U)S. citizens traveling in Europe. 
C) U)S. manufacturers importing parts from abroad. 
D) U)S. citizens purchasing foreign-made automobiles.

Question 19

During a recession,output declines result in

Accepted Answer

A) lower unemployment in the economy. 
B) higher unemployment in the economy. 
C) no impact on the unemployment in the economy. 
D) higher wages for the workers. 
A) lower unemployment in the economy. 
B) higher unemployment in the economy. 
C) no impact on the unemployment in the economy. 
D) higher wages for the workers.

Question 20

The management of money and interest rates is called ________ policy and is conducted by a nation's ________ bank.

Accepted Answer

A) monetary;superior 
B) fiscal;superior 
C) fiscal;central 
D) monetary;central 
A) monetary;superior 
B) fiscal;superior 
C) fiscal;central 
D) monetary;central

Exam 1: Why Study Money, banking, and Financial Markets

A budget ________ occurs when government expenditures exceed tax revenues for a particular time period.

A rising stock market index due to higher share prices

If the aggregate price level at time t is denoted by Pt,the inflation rate from time t - 1 to t is defined as

If the price of a euro (the European currency)increases from $1.00 to $1.10,then,everything else held constant

An increase in interest rates might ________ saving because more can be earned in interest income.

Compared to interest rates on long-term U.S. government bonds,interest rates on three-month Treasury bills fluctuate ________ and are ________ on average.

Which of the following items are NOT counted in U.S. GDP?

An increase in stock prices ________ the size of people's wealth and may ________ their willingness to spend,everything else held constant.

Channeling funds from individuals with surplus funds to those desiring funds when the saver does not purchase the borrower's security is known as

High interest rates might cause a corporation to ________ building a new plant that would provide more jobs.

When the total value of final goods and services is calculated using current prices,the resulting measure is referred to as

Fear of a major recession causes stock prices to fall,everything else held constant,which in turn causes consumer spending to

Evidence from the United States and other foreign countries indicates that

A key factor in producing high economic growth is

The basic concepts used in the analytic framework of this text include all of the following EXCEPT

The measure of the aggregate price level that is most frequently reported in the media is the

The gross domestic product is the

From 2002 to 2011,the dollar depreciated substantially against other currencies. This drop in value most likely benefitted

During a recession,output declines result in

The management of money and interest rates is called ________ policy and is conducted by a nation's ________ bank.

An Overview of the Financial System

What Is Money

The Meaning of Interest Rates

The Behavior of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Financial Crises

Central Banks and the Federal Reserve System

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory, inflation and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

Financial Crises in Emerging Market Economies

The ISLM Model

Filters

Compared to interest rates on long-term U.S. government bonds,interest rates on three-month Treasury bills fluctuate and are on average.

An increase in stock prices the size of people's wealth and may their willingness to spend,everything else held constant.

The management of money and interest rates is called policy and is conducted by a nation's bank.