Question 1

It is true that inflation is a

Accepted Answer

A) continuous increase in the money supply. 
B) continuous fall in prices. 
C) decline in interest rates. 
D) continually rising price level. 
A) continuous increase in the money supply. 
B) continuous fall in prices. 
C) decline in interest rates. 
D) continually rising price level. D

Question 2

Everything else held constant,a decrease in the value of the dollar relative to all foreign currencies means that the price of foreign goods purchased by Americans

Accepted Answer

A) increases 
B) decreases. 
C) remains unchanged. 
D) either increases,decreases,or remains unchanged. 
A) increases 
B) decreases. 
C) remains unchanged. 
D) either increases,decreases,or remains unchanged. A

Question 3

American companies can borrow funds

Accepted Answer

A) only in U.S.financial markets. 
B) only in foreign financial markets. 
C) in both U.S.and foreign financial markets. 
D) only from the U.S.government. 
A) only in U.S.financial markets. 
B) only in foreign financial markets. 
C) in both U.S.and foreign financial markets. 
D) only from the U.S.government. C

Question 4

If real GDP in 2002 is $10 trillion,and in 2003 real GDP is $9.5 trillion,then real GDP growth from 2002 to 2003 is

Accepted Answer

A) 0.5%. 
B) 5%. 
C) 0%. 
D) -5%. 
A) 0.5%. 
B) 5%. 
C) 0%. 
D) -5%.

Question 5

If nominal GDP in 2001 is $9 trillion,and 2001 real GDP in 1996 prices is $6 trillion,the GDP deflator price index is

Accepted Answer

A) 7. 
B) 100. 
C) 150. 
D) 200. 
A) 7. 
B) 100. 
C) 150. 
D) 200.

Question 6

Everything else held constant,a weaker dollar will likely hurt

Accepted Answer

A) textile exporters in South Carolina. 
B) wheat farmers in Montana that sell domestically. 
C) automobile manufacturers in Michigan that use domestically produced inputs. 
D) furniture importers in California. 
A) textile exporters in South Carolina. 
B) wheat farmers in Montana that sell domestically. 
C) automobile manufacturers in Michigan that use domestically produced inputs. 
D) furniture importers in California.

Question 7

The Dow reached a peak of over 11,000 before the collapse of the ________ bubble in 2000.

Accepted Answer

A) housing 
B) manufacturing 
C) high-tech 
D) banking 
A) housing 
B) manufacturing 
C) high-tech 
D) banking

Question 8

The stock market is important because it is

Accepted Answer

A) where interest rates are determined. 
B) the most widely followed financial market in the United States. 
C) where foreign exchange rates are determined. 
D) the market where most borrowers get their funds. 
A) where interest rates are determined. 
B) the most widely followed financial market in the United States. 
C) where foreign exchange rates are determined. 
D) the market where most borrowers get their funds.

Question 9

Everything else held constant,an increase in interest rates on student loans

Accepted Answer

A) increases the cost of a college education. 
B) reduces the cost of a college education. 
C) has no effect on educational costs. 
D) increases costs for students with no loans. 
A) increases the cost of a college education. 
B) reduces the cost of a college education. 
C) has no effect on educational costs. 
D) increases costs for students with no loans.

Question 10

Stock prices are

Accepted Answer

A) relatively stable trending upward at a steady pace. 
B) relatively stable trending downward at a moderate rate. 
C) extremely volatile. 
D) unstable trending downward at a moderate rate. 
A) relatively stable trending upward at a steady pace. 
B) relatively stable trending downward at a moderate rate. 
C) extremely volatile. 
D) unstable trending downward at a moderate rate.

Question 11

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 12

When stock prices fall

Accepted Answer

A) an individual's wealth is not affected nor is their willingness to spend. 
B) a business firm will be more likely to sell stock to finance investment spending. 
C) an individual's wealth may decrease but their willingness to spend is not affected. 
D) an individual's wealth may decrease and their willingness to spend may decrease. 
A) an individual's wealth is not affected nor is their willingness to spend. 
B) a business firm will be more likely to sell stock to finance investment spending. 
C) an individual's wealth may decrease but their willingness to spend is not affected. 
D) an individual's wealth may decrease and their willingness to spend may decrease.

Question 13

GDP measured with constant prices is referred to as

Accepted Answer

A) real GDP. 
B) nominal GDP. 
C) the GDP deflator. 
D) industrial production. 
A) real GDP. 
B) nominal GDP. 
C) the GDP deflator. 
D) industrial production.

Question 14

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 15

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 16

A share of common stock is a claim on a corporation's

Accepted Answer

A) debt. 
B) liabilities. 
C) expenses. 
D) earnings and assets. 
A) debt. 
B) liabilities. 
C) expenses. 
D) earnings and assets.

Question 17

When in 1985 a British pound cost approximately $1.30,a Shetland sweater that cost 100 British pounds would have cost $130.With a weaker dollar,the same Shetland sweater would have cost

Accepted Answer

A) less than $130. 
B) more than $130. 
C) $130,since the exchange rate does not affect the prices that American consumers pay for foreign goods. 
D) $130,since the demand for Shetland sweaters will decrease to prevent an increase in price due to the stronger dollar. 
A) less than $130. 
B) more than $130. 
C) $130,since the exchange rate does not affect the prices that American consumers pay for foreign goods. 
D) $130,since the demand for Shetland sweaters will decrease to prevent an increase in price due to the stronger dollar.

Question 18

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

Question 19

The price of one country's currency in terms of another country's currency is called the

Accepted Answer

A) exchange rate. 
B) interest rate. 
C) Dow Jones industrial average. 
D) prime rate. 
A) exchange rate. 
B) interest rate. 
C) Dow Jones industrial average. 
D) prime rate.

Question 20

Which of the following is most likely to result from a stronger dollar?

Accepted Answer

A) U.S.goods exported aboard will cost less in foreign countries,and so foreigners will buy more of them. 
B) U.S.goods exported aboard will cost more in foreign countries and so foreigners will buy more of them. 
C) U.S.goods exported abroad will cost more in foreign countries,and so foreigners will buy fewer of them. 
D) Americans will purchase fewer foreign goods. 
A) U.S.goods exported aboard will cost less in foreign countries,and so foreigners will buy more of them. 
B) U.S.goods exported aboard will cost more in foreign countries and so foreigners will buy more of them. 
C) U.S.goods exported abroad will cost more in foreign countries,and so foreigners will buy fewer of them. 
D) Americans will purchase fewer foreign goods.

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

It is true that inflation is a

Everything else held constant,a decrease in the value of the dollar relative to all foreign currencies means that the price of foreign goods purchased by Americans

American companies can borrow funds

If real GDP in 2002 is $10 trillion,and in 2003 real GDP is $9.5 trillion,then real GDP growth from 2002 to 2003 is

If nominal GDP in 2001 is $9 trillion,and 2001 real GDP in 1996 prices is $6 trillion,the GDP deflator price index is

Everything else held constant,a weaker dollar will likely hurt

The Dow reached a peak of over 11,000 before the collapse of the ________ bubble in 2000.

The stock market is important because it is

Everything else held constant,an increase in interest rates on student loans

Stock prices are

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

When stock prices fall

GDP measured with constant prices is referred to as

Evidence from the United States and other foreign countries indicates that

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

A share of common stock is a claim on a corporation's

When in 1985 a British pound cost approximately $1.30,a Shetland sweater that cost 100 British pounds would have cost $130.With a weaker dollar,the same Shetland sweater would have cost

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

The price of one country's currency in terms of another country's currency is called the

Which of the following is most likely to result from a stronger dollar?

An Overview of the Financial System

What Is Money

Understanding 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

Financial Crises and the Subprime Meltdown

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Central Banks and the Federal Reserve System

The Money Supply Process

Tools for Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

The Demand for Money

The Islm Model

Monetary and Fiscal Policy in the ISLM Model

Aggregate Demand and Supply Analysis

Transmission Mechanisms of Monetary Policy: The Evidence

Money and Inflation

Rational Expectations: Implications for Policy

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