Midterm+Examination+2+_ECN+1B+-+SS1+2011__KEY_

Midterm+Examination+2+_ECN+1B+-+SS1+2011__KEY_ - Midterm...

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Page 1 of 10 Midterm Examination 2, ECN 1B, SS1 2011, B. Modjtahedi There are 30 multiple choice questions in the exam Question 1. What is credit risk? A. The risk that a potential borrower may not be able to find a lender. B. The risk that a lender may not be able to get part or all of his money back. C. The risk that people may not borrow enough money from banks, thereby reducing the supply of money. D. The risk that banks may ask the borrowers to give back the borrowed money. . E. None of the above. Question 2. Which of the following indicates the government is running a budget deficit (in classroom notation)? A. G + TR – TX < 0. B. G + TR – TX > 0. C. G – TR – TX > 0. D. TX – G + TR > 0. E. None of the above. Question 3. A government can increase spending in three different ways. They are: A. Balanced budget increase in spending, deficit spending, and surplus spending. B. Deficit spending, surplus spending, and monetizing the debt. C. Balanced budget increase in spending, monetizing the debt, and spending through transfer payments. D. Balanced budget increase in spending, borrowing, and monetizing the debt. E. None of the above. Question 4. A balanced budget increase in spending means that: A. The government changes its expenditures and incomes in such a way as to balance the budget. B. The government increases its expenditures without changing the amount of taxes collected. C. The government changes its expenditures and incomes in such a way as to keep the amount of budget deficit or surplus unchanged. D. The government changes its expenditures and incomes in such a way as to turn a budget deficit into a budget surplus. E. None of the above. Question 5. Which of the following is effectively printing money by the government to buy goods and services? A. Monetizing the debt. B. Borrowing. C. Balanced budget increase in spending. D. Multiple deposit creation. E. None of the above.
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Page 2 of 10 Question 6 The values of the cars in which of the following scenarios would be included in the 2008 GDP? A. By the closing of the year 2008, Ford had some unfinished cars on its assembly lines. B. Toyota finishes production of some cars in 2008 but it cannot sell them in 2008. C. GM finishes production of some cars in 2008 and sells them in 2008. D. All of the above. E. None of the above. Question 7 Which of the following statements is true? A. A correctly anticipated inflation hurts lenders. B. An unexpectedly high inflation benefits lenders. C. An unexpectedly low inflation benefits borrowers. D. An unexpectedly high inflation hurts lenders. E. None of the above. Question 8 Which of the following statements is correct? A. Double coincidence of wants reduces the transactions costs in a barter system. B. The price of everything is expressed in monetary units. This is called the store-of-value
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Midterm+Examination+2+_ECN+1B+-+SS1+2011__KEY_ - Midterm...

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