Economics of Banking Review
Questions
Course Introduction
Economics of Banking explores the fundamental role that banks play in the economy, examining how they operate, manage risks, and contribute to financial stability. The course covers the structure and functions of banking institutions, the process of money creation, and the regulation and supervision of banks. Students analyze the impact of banking decisions on economic growth, the effects of monetary policy, and the causes and implications of banking crises. By integrating theoretical models with real-world case studies, the course provides a comprehensive understanding of how banks interact with broader economic systems and respond to changes in the financial environment.
Recommended Textbook
Economics of Money Banking and Financial Markets The Business School Edition 4th Edition by Frederic
Available Study Resources on Quizplus
30 Chapters
2967 Verified Questions
2967 Flashcards
Source URL: https://quizplus.com/study-set/1833 Page 2
Chapter 1: Why Study Money,banking,and Financial Markets
Available Study Resources on Quizplus for this Chatper
108 Verified Questions
108 Flashcards
Source URL: https://quizplus.com/quiz/36509
Sample Questions
Q1) Banks,savings and loan associations,mutual savings banks,and credit unions
A)are no longer important players in financial intermediation.
B)since deregulation now provide services only to small depositors.
C)have been adept at innovating in response to changes in the regulatory environment.
D)produce nothing of value and are therefore a drain on society's resources.
Answer: C
Q2) Financial markets promote greater economic efficiency by channeling funds from ________ to ________.
A)investors;savers
B)borrowers;savers
C)savers;borrowers
D)savers;lenders
Answer: C
Q3) American companies can borrow funds
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.
Answer: C
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter 2: An Overview of the Financial System
Available Study Resources on Quizplus for this Chatper
137 Verified Questions
137 Flashcards
Source URL: https://quizplus.com/quiz/36510
Sample Questions
Q1) Although the dominance of ________ over ________ is clear in all countries,the relative importance of bond versus stock markets differs widely.
A)financial intermediaries;securities markets
B)financial intermediaries;government agencies
C)government agencies;financial intermediaries
D)government agencies;securities markets
Answer: A
Q2) Which of the following are NOT contractual savings institutions?
A)life insurance companies
B)credit unions
C)pension funds
D)state and local government retirement funds
Answer: B
Q3) Contractual savings institutions include
A)mutual savings banks.
B)money market mutual funds.
C)commercial banks.
D)life insurance companies.
Answer: D
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: What Is Money
Available Study Resources on Quizplus for this Chatper
95 Verified Questions
95 Flashcards
Source URL: https://quizplus.com/quiz/36511
Sample Questions
Q1) Although ________ currency is lighter than coins made of metals,a disadvantage arising from modern technology is the ease of ________.
A)paper;transport
B)commodity;counterfeiting
C)fiat;transport
D)paper;counterfeiting
Answer: D
Q2) An individual's annual salary is her A)money.
B)income.
C)wealth.
D)liabilities.
Answer: B
Q3) The components of the U.S.M1 money supply are demand and checkable deposits plus A)currency.
B)currency plus savings deposits.
C)currency plus travelers checks.
D)currency plus travelers checks plus money market deposits.
Answer: C
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: The Meaning of Interest Rates
Available Study Resources on Quizplus for this Chatper
103 Verified Questions
103 Flashcards
Source URL: https://quizplus.com/quiz/36512
Sample Questions
Q1) An equal decrease in all bond interest rates
A)increases the price of a five-year bond more than the price of a ten-year bond.
B)increases the price of a ten-year bond more than the price of a five-year bond.
C)decreases the price of a five-year bond more than the price of a ten-year bond.
D)decreases the price of a ten-year bond more than the price of a five-year bond.
Q2) To claim that a lottery winner who is to receive $1 million per year for twenty years has won $20 million ignores the process of
A)face value.
B)par value.
C)deflation.
D)discounting the future.
Q3) For a 3-year simple loan of $10,000 at 10 percent,the amount to be repaid is
A)$10,030.
B)$10,300.
C)$13,000.
D)$13,310.
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: The Behavior of Interest Rates
Available Study Resources on Quizplus for this Chatper
159 Verified Questions
159 Flashcards
Source URL: https://quizplus.com/quiz/36513
Sample Questions
Q1) When the inflation rate is expected to increase,the ________ for bonds falls,while the ________ curve shifts to the right,everything else held constant.
A)demand;demand
B)demand;supply
C)supply;demand
D)supply;supply
Q2) The figure above illustrates the effect of an increased rate of money supply growth at time period T .From the figure,one can conclude that the
A)Fisher effect is dominated by the liquidity effect and interest rates adjust slowly to changes in expected inflation.
B)liquidity effect is dominated by the Fisher effect and interest rates adjust slowly to changes in expected inflation.
C)liquidity effect is dominated by the Fisher effect and interest rates adjust quickly to changes in expected inflation.
D)Fisher effect is smaller than the expected inflation effect and interest rates adjust quickly to changes in expected inflation.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: The Risk and Term Structure of Interest Rates
Available Study Resources on Quizplus for this Chatper
114 Verified Questions
114 Flashcards
Source URL: https://quizplus.com/quiz/36514
Sample Questions
Q1) When yield curves are steeply upward sloping
A)long-term interest rates are above short-term interest rates.
B)short-term interest rates are above long-term interest rates.
C)short-term interest rates are about the same as long-term interest rates.
D)medium-term interest rates are above both short-term and long-term interest rates.
Q2) According to the liquidity premium theory of the term structure
A)because buyers of bonds may prefer bonds of one maturity over another,interest rates on bonds of different maturities do not move together over time.
B)the interest rate on long-term bonds will equal an average of short-term interest rates that people expect to occur over the life of the long-term bonds plus a term premium.
C)because of the positive term premium,the yield curve will not be observed to be downward sloping.
D)the interest rate for each maturity bond is determined by supply and demand for that maturity bond.
Q3) If a higher inflation is expected,what would you expect to happen to the shape of the yield curve? Why?
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: The Stock Market, the Theory of Rational
Expectations, and the Efficient Market Hypothesis
Available Study Resources on Quizplus for this Chatper
97 Verified Questions
97 Flashcards
Source URL: https://quizplus.com/quiz/36515
Sample Questions
Q1) If additional information is not used when forming an optimal forecast because it is not available at that time,then expectations are
A)obviously formed irrationally.
B)still considered to be formed rationally.
C)formed adaptively.
D)formed equivalently.
Q2) Economists have focused more attention on the formation of expectations in recent years.This increase in interest can probably best be explained by the recognition that A)expectations influence the behavior of participants in the economy and thus have a major impact on economic activity.
B)expectations influence only a few individuals,have little impact on the overall economy,but can have important effects on a few markets.
C)expectations influence many individuals,have little impact on the overall economy,but can have distributional effects.
D)models that ignore expectations have little predictive power,even in the short run.
Q3) What rights does ownership interest give stockholders?
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: An Economic Analysis of Financial Structure
Available Study Resources on Quizplus for this Chatper
93 Verified Questions
93 Flashcards
Source URL: https://quizplus.com/quiz/36516
Sample Questions
Q1) Although debt contracts require less monitoring than equity contracts,debt contracts are still subject to ________ since borrowers have an incentive to take on more risk than the lender would like.
A)moral hazard
B)agency theory
C)diversification
D)the "lemons" problem
Q2) As a source of funds for nonfinancial businesses,stocks are relatively more important in
A)the United States.
B)Germany.
C)Japan.
D)Canada.
Q3) A clause in a debt contract requiring that the borrower purchase insurance against loss of the asset financed with the loan is called a
A)collateral-insurance clause.
B)prescription covenant.
C)restrictive covenant.
D)proscription covenant.
To view all questions and flashcards with answers, click on the resource link above.
Page 10
Chapter 9: Banking and the Management of Financial Institutions
Available Study Resources on Quizplus for this Chatper
148 Verified Questions
148 Flashcards
Source URL: https://quizplus.com/quiz/36517
Sample Questions
Q1) Which of the following statements most accurately describes the task of bank asset management?
A)Banks seek the highest returns possible subject to minimizing risk and making adequate provisions for liquidity.
B)Banks seek to have the highest liquidity possible subject to earning a positive rate of return on their operations.
C)Banks seek to prevent bank failure at all cost;since a failed bank earns no profit,liquidity needs supersede the desire for profits.
D)Banks seek to acquire funds in the least costly way.
Q2) To reduce moral hazard problems,banks include restrictive covenants in loan contracts.In order for these restrictive covenants to be effective,banks must also A)monitor and enforce them.
B)be willing to rewrite the contract if the borrower cannot comply with the restrictions.
C)trust the borrower to do the right thing.
D)be prepared to extend the deadline when the borrower needs more time to comply.
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Economic Analysis of Financial Regulation
Available Study Resources on Quizplus for this Chatper
98 Verified Questions
98 Flashcards
Source URL: https://quizplus.com/quiz/36518
Sample Questions
Q1) The bailout of the savings and loan industry was much delayed and,therefore,much more costly to taxpayers because
A)of regulators' initial attempts to downplay the seriousness of problems within the thrift industry.
B)politicians listened to the taxpayers rather than the S&L lobbyists.
C)Congress did not wait long enough for many of the problems in the thrift industry to correct themselves.
D)regulators could not be fired,therefore,they didn't care if they did a good job or not.
Q2) Banks engage in regulatory arbitrage by
A)keeping high-risk assets on their books while removing low-risk assets with the same capital requirement.
B)keeping low-risk assets on their books while removing high-risk assets with the same capital requirement.
C)hiding risky assets from regulators.
D)buying risky assets from arbitragers.
Q3) The government safety net creates both an adverse selection problem and a moral hazard problem.Explain.
To view all questions and flashcards with answers, click on the resource link above.
Page 12
Chapter 11: Banking Industry: Structure and Competition
Available Study Resources on Quizplus for this Chatper
137 Verified Questions
137 Flashcards
Source URL: https://quizplus.com/quiz/36519
Sample Questions
Q1) In a ________ banking system,commercial banks engage in securities underwriting,but legal subsidiaries conduct the different activities.Also,banking and insurance are not typically undertaken together in this system.
A)universal
B)British-style universal
C)short-fence
D)compartmentalized
Q2) The Federal Reserve Act of 1913 required that A)state banks be subject to the same regulations as national banks.
B)national banks establish branches in the cities containing Federal Reserve banks.
C)national banks join the Federal Reserve System.
D)state banks could not join the Federal Reserve System.
Q3) The FHLBS gives loans to S&Ls and thus performs a function similar to the ________ for commercial banks.
A)Federal Reserve
B)U.S.Treasury
C)Office of the Comptroller of the Currency
D)U.S.Mint
To view all questions and flashcards with answers, click on the resource link above.
Chapter 12: Financial Crises
Available Study Resources on Quizplus for this Chatper
44 Verified Questions
44 Flashcards
Source URL: https://quizplus.com/quiz/36520
Sample Questions
Q1) If uncertainty about banks' health causes depositors to begin to withdraw their funds from banks,the country experiences a(n)
A)banking crisis.
B)financial recovery.
C)reduction of the adverse selection and moral hazard problems.
D)increase in information available to investors.
Q2) In a bank panic,the source of contagion is the A)free-rider problem.
B)too-big-to-fail problem.
C)transactions cost problem.
D)asymmetric information problem.
Q3) The Volcker Rule addresses the off-balance-sheet problem involving A)trading risks.
B)selling loans.
C)loan guarantees.
D)interest rate risks.
Q4) Typically,the economy recovers fairly quickly from a recession.Why did this NOT happen in the United States during the Great Depression?
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Nonbank Finance
Available Study Resources on Quizplus for this Chatper
78 Verified Questions
78 Flashcards
Source URL: https://quizplus.com/quiz/36521
Sample Questions
Q1) The government corporation that insures pension benefits is A)Fannie Mae.
B)Ginnie Mae.
C)Penny Benny.
D)Sallie Mae.
Q2) Allowing individuals to manage a portion of their Social Security funds is
A)socialization.
B)privatization.
C)democratization.
D)regeneration.
Q3) Which of the following is true of life insurance companies?
A)Typically the type of assets that life insurance companies hold are corporate bonds,commercial mortgages,and corporate stock.
B)The two typical forms of life insurance polices that are held can be classified as whole and variable life policies.
C)The major risk that life insurance companies face is that payouts to policy holders are very hard to predict.
D)Life insurance companies have suffered from wide spread failures.
To view all questions and flashcards with answers, click on the resource link above.
15
Chapter 14: Financial Derivatives
Available Study Resources on Quizplus for this Chatper
90 Verified Questions
90 Flashcards
Source URL: https://quizplus.com/quiz/36522
Sample Questions
Q1) The price specified on an option at which the holder can buy or sell the underlying asset is called the A)premium.
B)call.
C)strike price. D)put.
Q2) By taking the long position on a futures contract of $100,000 at a price of 96 you are agreeing to ________ a ________ face value security for ________.
A)sell;$100,000;$96,000.
B)sell;$96,000;$100,000.
C)buy;$100,000;$96,000.
D)buy;$96,000;$100,000.
Q3) If you buy a call option on Treasury futures at 115,and at expiration the market price is 110,the ________ will ________ exercised.
A)call;be
B)put;be
C)call;not be
D)put;not be
To view all questions and flashcards with answers, click on the resource link above.
16
Chapter 15: Conflicts of Interest in the Financial Industry
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/36523
Sample Questions
Q1) Describe what is meant by economies of scope and explain how financial institutions' realizing economies of scope has led to an increase in conflicts of interest.
Q2) A type of ________ problem that occurs when a person or institution has multiple objectives that conflict with each other is called ________.
A)moral hazard;conflicts of interest
B)adverse selection;conflicts of interest
C)moral hazard;spinning
D)adverse selection;spinning
Q3) The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 created an Office of Credit Ratings at the SEC with its own staff and the authority to fine credit-rating agencies and to deregister an agency if it produces bad ratings.This is an example of which remedy of conflicts of interest?
A)regulate for transparency
B)supervisory oversight
C)leave it to the market
D)socialization of information production
Q4) Explain the type of conflicts of interest that can arise from the development of universal banking.
To view all questions and flashcards with answers, click on the resource link above.
Page 17
Chapter 16: Central Banks and the Federal Reserve System
Available Study Resources on Quizplus for this Chatper
71 Verified Questions
71 Flashcards
Source URL: https://quizplus.com/quiz/36524
Sample Questions
Q1) The Federal Open Market Committee usually meets ________ times a year.
A)four
B)six
C)eight
D)twelve
Q2) Although reserve requirements and the discount rate are not actually set by the ________,decisions concerning these policy tools are effectively made there.
A)Federal Reserve Bank of New York
B)Board of Governors
C)Federal Open Market Committee
D)Federal Reserve Banks
Q3) There are ________ members of the Board of Governors of the Federal Reserve System.
A)5
B)7
C)12
D)19
Q4) What is the theory of bureaucratic behavior and how can it be used to explain the behavior of the Federal Reserve?
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: The Money Supply Process
Available Study Resources on Quizplus for this Chatper
218 Verified Questions
218 Flashcards
Source URL: https://quizplus.com/quiz/36525
Sample Questions
Q1) During the bank panics of the Great Depression the excess reserve ratio
A)increased sharply.
B)decreased sharply.
C)increased slightly.
D)decreased slightly.
Q2) If a bank has excess reserves of $7,000 and demand deposit liabilities of $100,000,and if the reserve requirement is 15 percent,then the bank has actual reserves of
A)$17,000.
B)$22,000.
C)$27,000.
D)$29,000.
Q3) When the Treasury acquires gold or SDRs,it issues certificates to the ________,which are a claim on the gold or SDRs,and in turn is credited with deposit balances at the ________.
A)Federal Reserve System;Fed
B)Federal Reserve System;IMF
C)International Monetary Fund;Fed
D)International Monetary Fund;IMF
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Tools of Monetary Policy
Available Study Resources on Quizplus for this Chatper
121 Verified Questions
121 Flashcards
Source URL: https://quizplus.com/quiz/36526
Sample Questions
Q1) If Treasury deposits at the Fed are predicted to ________,the manager of the trading desk at the New York Fed bank will likely conduct ________ open market operations to ________ reserves.
A)increase;defensive;inject
B)decrease;defensive;inject C)increase;dynamic;inject D)decrease;dynamic;drain
Q2) When the federal funds rate equals the interest rate paid on excess reserves
A)the supply curve of reserves is vertical.
B)the supply curve of reserves is horizontal.
C)the demand curve for reserves is vertical.
D)the demand curve for reserves is horizontal.
Q3) If the Fed expects currency holdings to fall,it conducts open market ________ to offset the expected ________ in reserves.
A)purchases;increase
B)purchases;decrease
C)sales;increase
D)sales;decrease
To view all questions and flashcards with answers, click on the resource link above. Page 20
Chapter 19: The Conduct of Monetary Policy: Strategy and Tactics
Available Study Resources on Quizplus for this Chatper
116 Verified Questions
116 Flashcards
Source URL: https://quizplus.com/quiz/36527
Sample Questions
Q1) The most common definition that monetary policymakers use for price stability is A)low and stable deflation.
B)an inflation rate of zero percent.
C)high and stable inflation.
D)low and stable inflation.
Q2) The theory that monetary policy conducted on a discretionary,day-by-day basis leads to poor long-run outcomes is referred to as the
A)adverse selection problem.
B)moral hazard problem.
C)time-inconsistency problem.
D)nominal-anchor problem.
Q3) The mandate for the monetary policy goals that has been given to the Federal Reserve System is an example of a ________ mandate.
A)primary
B)dual
C)secondary
D)hierarchical
Q4) Explain what inflation targeting is.What are the advantages and disadvantages of this type of monetary policy strategy?
To view all questions and flashcards with answers, click on the resource link above. Page 21
Chapter 20: The Foreign Exchange Market
Available Study Resources on Quizplus for this Chatper
123 Verified Questions
123 Flashcards
Source URL: https://quizplus.com/quiz/36528
Sample Questions
Q1) ________ in the domestic interest rate causes the demand for domestic assets to shift to the right and the domestic currency to ________,everything else held constant.
A)An increase;appreciate
B)An increase;depreciate
C)A decrease;appreciate
D)A decrease;depreciate
Q2) If the 2005 inflation rate in Canada is 4 percent,and the inflation rate in Mexico is 2 percent,then the theory of purchasing power parity predicts that,during 2005,the value of the Canadian dollar in terms of Mexican pesos will
A)rise by 6 percent.
B)rise by 2 percent.
C)fall by 6 percent.
D)fall by 2 percent.
Q3) Explain the law of one price and the theory of purchasing power parity.Why doesn't purchasing power parity explain all exchange rate movements in the short run? What factors determine long-run exchange rates?
To view all questions and flashcards with answers, click on the resource link above.
Chapter 21: The International Financial System
Available Study Resources on Quizplus for this Chatper
117 Verified Questions
117 Flashcards
Source URL: https://quizplus.com/quiz/36529
Sample Questions
Q1) The monetary policy strategy that provides an automatic rule for the conduct of monetary policy is
A)exchange-rate targeting.
B)monetary targeting.
C)inflation targeting.
D)the implicit nominal anchor.
Q2) When the domestic currency is initially undervalued in a fixed exchange rate regime,the central bank must intervene in the foreign exchange market to ________ the domestic currency,thereby allowing the money supply to ________.
A)purchase;decline
B)sell;decline
C)purchase;increase D)sell;increase
Q3) If the current account balance shows a surplus,and the capital account also shows a surplus,then the official reserve transactions balance
A)must be positive.
B)must be negative.
C)must be zero.
D)can either be positive,negative,or zero.
To view all questions and flashcards with answers, click on the resource link above.
Page 23
Chapter 22: Quantity Theory, inflation and the Demand for Money
Available Study Resources on Quizplus for this Chatper
112 Verified Questions
112 Flashcards
Source URL: https://quizplus.com/quiz/36530
Sample Questions
Q1) The financing of government spending by issuing debt
A)causes both reserves and the monetary base to rise.
B)causes both reserves and the monetary base to decline.
C)causes reserves to rise,but the monetary base to decline.
D)has no net effect on the monetary base.
Q2) As interest rates rise,the expected absolute return of money ________,money's expected return relative to bonds ________.
A)does not change;decrease
B)rises;decrease
C)does not change;increase
D)falls;decrease
Q3) Of the three motives for holding money suggested by Keynes,which did he believe to be the most sensitive to interest rates?
A)the transactions motive
B)the precautionary motive
C)the speculative motive
D)the altruistic motive
Q4) Describe what the liquidity trap is.Explain how it can be problematic for monetary policymakers.
To view all questions and flashcards with answers, click on the resource link above. Page 24
Chapter 23: Aggregate Demand and Supply Analysis
Available Study Resources on Quizplus for this Chatper
108 Verified Questions
108 Flashcards
Source URL: https://quizplus.com/quiz/36531
Sample Questions
Q1) As of 2009,China's economy had recovered from the global recession that began in 2008.Use aggregate demand and aggregate supply analysis to explain why,and to explain the likely consequences for China of an increase in the growth rate of the global economy.
Q2) The lon-run aggregate supply curve can be expressed by A)output as a function of potential output.
B)inflation as a function of past inflation.
C)inflation as a function of past inflation and output gap.
D)output as a function of inflation and output gap.
Q3) A temporary negative supply shock ________ real interest rates and ________ output in the short run,thereby its effect on stock prices is ________.
A)raises;lowers;negative
B)raises;raises;ambiguous
C)lowers;raises;negative
D)lowers;raises;positive
Q4) Explain through the component parts of aggregate demand why the aggregate demand curve slopes down with respect to the inflation rate.Be sure to discuss two channels through which changes in inflation rates affect demand.
To view all questions and flashcards with answers, click on the resource link above.
Page 25
Chapter 24: Monetary Policy Theory
Available Study Resources on Quizplus for this Chatper
58 Verified Questions
58 Flashcards
Source URL: https://quizplus.com/quiz/36532
Sample Questions
Q1) When the economy suffers a permanent negative supply shock and the central bank does not respond by changing the autonomous component of monetary policy,then
A)inflation will be lower.
B)output will be at its potential.
C)output will be lower.
D)inflation will not change.
E)both B and C.
Q2) The combination of a successful wage push by workers and the government's commitment to high employment leads to
A)demand-pull inflation.
B)supply-side inflation.
C)supply-shock inflation.
D)cost-push inflation.
Q3) When the policy rate hits its lower bound and inflation keeps falling,this portion of the Monetary Policy curve is
A)downward sloping.
B)upward sloping.
C)flat.
D)undetermined.
To view all questions and flashcards with answers, click on the resource link above.
Page 26
Chapter 25: Transmission Mechanisms of Monetary Policy
Available Study Resources on Quizplus for this Chatper
62 Verified Questions
62 Flashcards
Source URL: https://quizplus.com/quiz/36533
Sample Questions
Q1) When Keynesians argue that "correlation does not necessarily imply causation," they are probably criticizing
A)structural-model evidence.
B)reduced-form evidence.
C)indirect-model evidence.
D)black-box evidence.
Q2) Movements of ________ interest rates indicate that,contrary to the early Keynesians' beliefs,monetary policy was ________ during the Great Depression.
A)nominal;tight
B)nominal;easy
C)real;tight
D)real;easy
Q3) If a contractionary monetary policy lowers the price level by more than expected,it raises the real value of consumer debt.This reduces consumer expenditure through A)the bank lending channel.
B)Tobin's q.
C)the traditional interest-rate channel.
D)the household liquidity effect.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 26: Financial Crises in Emerging Market Economies
Available Study Resources on Quizplus for this Chatper
21 Verified Questions
21 Flashcards
Source URL: https://quizplus.com/quiz/36534
Sample Questions
Q1) Factors likely to cause a financial crisis in emerging market countries include A)severe fiscal imbalances.
B)decreases in foreign interest rates.
C)a foreign exchange crisis.
D)too strong oversight of the financial industry.
Q2) What two key factors trigger speculative attacks leading to currency cries in emerging market countries?
Q3) In emerging market countries,the deterioration in bank's balance sheets has more ________ effects on lending and economic activity than in advanced countries.
A)negative
B)positive
C)affirming
D)advancing
Q4) The two key factors that trigger speculative attacks on emerging market currencies are
A)deterioration in bank balance sheets and severe fiscal imbalances.
B)deterioration in bank balance sheets and low interest rates abroad.
C)low interest rates abroad and severe fiscal imbalances.
D)low interest rates abroad and rising asset prices.
To view all questions and flashcards with answers, click on the resource link above. Page 28
Chapter 27: The IS Curve
Available Study Resources on Quizplus for this Chatper
130 Verified Questions
130 Flashcards
Source URL: https://quizplus.com/quiz/36535
Sample
Questions
Q1) In the Keynesian cross diagram,an increase in investment spending because companies become more optimistic about investment profitability causes the aggregate demand function to shift ________,the equilibrium level of aggregate output to rise,and the IS curve to shift to the ________,everything else held constant.
A)up;left
B)up;right
C)down;left
D)down;right
Q2) A tax cut initially
A)increases consumption expenditure by an amount greater than the tax cut.
B)increases consumption expenditure by an amount equal to the tax cut.
C)increases consumption expenditure by an amount that is less than the value of the tax cut.
D)has no effect on consumption expenditure.
E)reduces consumption expenditure by an amount that is less than the value of the tax cut.
Q3) The Federal Reserve increases interest rates when it wants to reduce aggregate demand to fight inflation.How do increases in the interest rate reduce aggregate demand?
To view all questions and flashcards with answers, click on the resource link above.
Page 29
Chapter 28: The Monetary Policy and Aggregate Demand
Curves
Available Study Resources on Quizplus for this Chatper
29 Verified Questions
29 Flashcards
Source URL: https://quizplus.com/quiz/36536
Sample Questions
Q1) Everything else held constant,an autonomous easing of monetary policy will cause
A)aggregate demand to increase.
B)aggregate demand to decrease.
C)the quantity of aggregate demand to increase.
D)the quantity of aggregate demand to decrease.
Q2) In deriving the aggregate demand curve a ________ inflation rate leads the central bank to ________ real interest rates,thereby ________ the level of equilibrium aggregate output.
A)higher;raise;lowering
B)lower;raise;lowering
C)higher;lower;lowering
D)higher;lower;raising
Q3) The aggregate demand curve is downward sloping because a higher inflation rate leads the central bank to raise ________ interest rates,thereby ________ the level of equilibrium aggregate output. ,everything else held constant.
A)real;lowering
B)real;raising
C)nominal;lowering
D)nominal;raising
Page 30
To view all questions and flashcards with answers, click on the resource link above.
Chapter 29: The Role of Expectations in Monetary Policy
Available Study Resources on Quizplus for this Chatper
31 Verified Questions
31 Flashcards
Source URL: https://quizplus.com/quiz/36537
Sample Questions
Q1) Approaches to establishing central bank credibility include
A)inflation targeting.
B)exchange rate targeting.
C)central bank independence.
D)appointment of a more conservative central banker.
E)all of the above.
Q2) The Lucas critique indicates that
A)advocates of discretionary policies' criticisms of rational expectations models are well-founded.
B)advocates of discretionary policies' criticisms of rational expectations models are not well-founded.
C)expectations are important in determining the outcome of a discretionary policy.
D)expectations are not important in determining the outcome of a discretionary policy.
Q3) Approaches to establishing central bank credibility include
A)continued success at keeping inflation under control.
B)central bank independence.
C)appointment of a more conservative central banker.
D)all of the above.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 30: The ISLM Model
Available Study Resources on Quizplus for this Chatper
99 Verified Questions
99 Flashcards
Source URL: https://quizplus.com/quiz/36538
Sample Questions
Q1) If the economy is on the LM curve,but is to the right of the IS curve,aggregate output will ________ and the interest rate will ________.
A)rise;rise
B)rise;fall
C)fall;rise
D)fall;fall
Q2) In the ISLM framework,an expansionary monetary policy causes aggregate output to ________ and the interest rate to ________,everything else held constant.
A)increase;increase
B)increase;decrease
C)decrease;decrease
D)decrease;increase
Q3) An expansionary monetary policy shifts the LM curve to the ________,reducing ________,everything else held constant.
A)left;output and increasing interest rates
B)left;both real output and interest rates
C)right;both interest rates and real output
D)right;interest rates and increasing real output
To view all questions and flashcards with answers, click on the resource link above.