Summer 2016 Practice Final - Summer 2016 Practice Final 3229-1 BLUE Name MULTIPLE CHOICE Choose the one alternative that best completes the statement or

Summer 2016 Practice Final - Summer 2016 Practice Final...

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Summer 2016 Practice Final 3229-1 BLUE Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) If the federal government decreases its spending and doesn't decrease taxes, the bond supply shifts to the A) right and the equilibrium interest rate rises. B) right and the equilibrium interest rate falls. C) left and the equilibrium interest rate rises. D) left and the equilibrium interest rate falls. 2) What is the length of a term for the Chairman of the Board of Governors? A) 14 years B) 28 years C) one year D) four years 3) The default risk premium is A) relevant only for securities issued by very small companies. B) zero for corporate bonds, but quite substantial for corporate stock. C) constant across the business cycle. D) the additional yield a saver requires for holding a bond with some default risk. 4) According to the liquidity premium theory, what does a Fat yield curve indicate? A) Long-term interest rates are expected to fall. B) Short-term interest rates are expected to remain stable. C)
Short-term interest rates are expected to fall. D) Short-term interest rates are expected to rise. 5) If the expected gains on stocks rise, while the expected returns on bonds do not change, then A) the demand curve for bonds will shift to the right. B) the equilibrium interest rate will rise. C) the supply curve for loanable funds will shift to the right. D) the equilibrium interest rate will fall. 6) Which of the following is a liability of the Fed? A) discount loans to banks B) checkable deposits in commercial banks C) U.S. government securities D) currency in circulation 7) When a central bank buys foreign assets, A) the composition of its liabilities changes, but its assets are una±ected. B) the composition of its assets changes, but its liabilities are una±ected. C) its assets and liabilities rise by the same amount. D) its assets and liabilities fall by the same amount. 8) The theory of purchasing power parity cannot fully explain exchange rate movements because A) some goods are not traded between countries. B) all goods are identical even if produced in di±erent countries. C)
monetary policy difers across countries. D) Fscal policy difers across countries. 9) ±iat money A) is illegal in most advanced, industrial countries. B) will generally be accepted in trade ²or less than its ²ace value. C) is usually some type o² precious metal. D) is money that would have no value i² it were not usable as money. 10) When the yield curve is downward-sloping, A) short-term yields are higher than long-term yields. B) the in³ation rate is expected to rise. C) the bond market is anticipating the U.S. Treasury may de²ault on its obligations. D) long-term yields are higher than short-term yields. 11) A decrease in the expected ²uture domestic exchange rate causes the demand ²or domestic assets to ________ and the domestic currency to ________, everything else held constant.

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