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Unformatted text preview: ollowing is an example of adverse selection faced by an insurance company? A. Susan knows that she has a family history of dental problems, and she does not disclose this information to her insurance agent while purchasing dental insurance. *** B. John buys homeowner’s insurance and then checks the battery of smoke detector less frequently. C. Martha purchases health insurance and then decides to go to the gym less frequently. D. [All of the above] 5. From the US perspective, if the US is experiencing higher inflation than Australia, then the nominal exchange rate should _______ as the US dollar _______ . A. rise; depreciates B. fall; depreciates *** C. rise; appreciates D. fall; appreciates 6. As discouraged workers stop looking for work, the unemployment rate _______ and the labor force participation rate _______ . A. rises; rises B. rises; falls C. falls; rises D. falls; falls *** 7. The State of Indiana increases the duration of unemployment insurance benefits from 6 months to 1 year. This policy will affect A. both the structural and frictional unemployment in the economy. B. only the structural unemployment rate and not the frictional unemployment rate. C. both the frictional and natural rate of unemployment in the economy. *** D. only the cyclical unemployment rate and not the natural unemployment rate in the economy. 8. Which of the following ranks assets from the least liquid to the most liquid? A. house, Treasury bond, M2 money, M1 money *** B. Treasury bond, house, M1 money, M2 money C. M1 money, M2 money, Treasury bond, house D. M2 money, M1 money, house, Treasury bond 9. Which of the following action by the Fed would decrease the money supply in an economy? A. The Fed decreases reserve requirements. B. The Fed raises the discount rate. *** C. The Fed decreases the federal funds rate. D. The Fed buys bonds in open market operations. E. [None of the above] 10. The Fed decides to increase the money supply. Which of the following is true in the long run? A. Output decreases and prices increase. B. Output doesn’t change and prices decrease. C. Output increases and prices increase. D. Output decreases and prices decrease. E. Output doesn’t change and prices increase. *** 11. If China’s real GDP is growing faster than their...
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This test prep was uploaded on 02/19/2014 for the course ECON 252 taught by Professor Robertholand during the Fall '08 term at Purdue.

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