Financial Markets and Institutions
Question Bank
Course Introduction
Financial Markets and Institutions explores the structure, function, and role of financial systems within the economy. The course examines various types of financial markets, including money, capital, and foreign exchange markets, as well as the institutions that operate within them, such as commercial banks, investment firms, insurance companies, and central banks. Students analyze how these markets and institutions facilitate the flow of funds, manage risks, determine interest rates, and promote economic growth. The course also covers regulatory frameworks, monetary policy, and current issues affecting financial systems globally, providing students with a comprehensive understanding of the interconnectedness and significance of financial markets and institutions.
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) If the CPI in 2004 is 200,and in 2005 the CPI is 180,the rate of inflation from 2004 to 2005 is
A)20%.
B)10%.
C)0%.
D)-10%.
Answer: D
Q2) Nominal GDP is output measured in ________ prices while real GDP is output measured in ________ prices.
A)current;current
B)current;fixed
C)fixed;fixed
D)fixed;current
Answer: B
Q3) Everything else held constant,Americans who love French wine benefit most from
A)a decrease in the dollar price of euros.
B)an increase in the dollar price of euros.
C)a constant dollar price for euros.
D)a ban on imports from Europe.
Answer: A
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) The countries that have made the least use of securities markets are ________ and ________;in these two countries finance from financial intermediaries has been almost ten times greater than that from securities markets.
A)Germany;Japan
B)Germany;Great Britain
C)Great Britain;Canada
D)Canada;Japan
Answer: A
Q2) ________ are financial intermediaries that acquire funds by selling shares to many individuals and using the proceeds to purchase diversified portfolios of stocks and bonds.
A)Mutual funds
B)Investment banks
C)Finance companies
D)Credit unions
Answer: A
To view all questions and flashcards with answers, click on the resource link above.
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) Dennis notices that jackets are on sale for $99.In this case money is functioning as a A)medium of exchange.
B)unit of account.
C)store of value.
D)payments-system ruler.
Answer: B
Q2) If an individual moves money from a demand deposit account to a money market deposit account
A)M1 decreases and M2 stays the same.
B)M1 stays the same and M2 increases.
C)M1 stays the same and M2 stays the same.
D)M1 increases and M2 decreases.
Answer: A
Q3) The conversion of a barter economy to one that uses money
A)increases efficiency by reducing the need to exchange goods and services.
B)increases efficiency by reducing the need to specialize.
C)increases efficiency by reducing transactions costs.
D)does not increase economic efficiency.
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) Which of the following are TRUE for discount bonds?
A)A discount bond is bought at par.
B)The purchaser receives the face value of the bond at the maturity date.
C)U.S.Treasury bonds and notes are examples of discount bonds.
D)The purchaser receives the par value at maturity plus any capital gains.
Q3) The yield to maturity for a one-year discount bond equals the increase in price over the year,divided by the
A)initial price.
B)face value.
C)interest rate.
D)coupon rate.
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 price level falls,the ________ curve for nominal money ________,and interest rates ________,everything else held constant.
A)demand;decreases;fall
B)demand;increases;rise
C)supply;increases;rise D)supply;decreases;fall
Q2) In the figure above,a factor that could cause the demand for bonds to decrease (shift to the left)is
A)an increase in the expected return on bonds relative to other assets.
B)a decrease in the expected return on bonds relative to other assets.
C)an increase in wealth.
D)a reduction in the riskiness of bonds relative to other assets.
Q3) Discovery of new gold in Alaska will ________ the ________ of gold,________ its price,everything else held constant.
A)increase;demand;increasing B)decrease;demand;decreasing C)decrease;supply;increasing D)increase;supply;decreasing
To view all questions and flashcards with answers, click on the resource link above.
7
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) If the probability of a bond default increases because corporations begin to suffer large losses,then the default risk on corporate bonds will ________ and the expected return on these bonds will ________,everything else held constant.
A)decrease;increase
B)decrease;decrease C)increase;increase D)increase;decrease
Q2) Everything else held constant,abolishing the individual income tax will
A)increase the interest rate on corporate bonds.
B)reduce the interest rate on municipal bonds.
C)increase the interest rate on municipal bonds.
D)increase the interest rate on Treasury bonds.
Q3) The collapse of the subprime mortgage market
A)did not affect the corporate bond market.
B)increased the perceived riskiness of Treasury securities.
C)reduced the Baa-Aaa spread.
D)increased the Baa-Aaa spread.
Q4) 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) The value of any investment is found by computing the
A)present value of all future sales.
B)present value of all future liabilities.
C)future value of all future expenses.
D)present value of all future cash flows.
Q2) The elimination of unexploited profit opportunities requires that ________ market participants be well informed.
A)all
B)a few
C)zero
D)many
Q3) 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.
Q4) What rights does ownership interest give stockholders?
Page 9
To view all questions and flashcards with answers, click on the resource link above.
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) Nonfinancial businesses in Germany,Japan,and Canada raise most of their funds
A)by issuing stock.
B)by issuing bonds.
C)from nonbank loans.
D)from bank loans.
Q2) The free-rider problem occurs because
A)people who pay for information use it freely.
B)people who do not pay for information use it.
C)information can never be sold at any price.
D)it is never profitable to produce information.
Q3) The recent Enron and Tyco scandals are an example of
A)the free-rider problem.
B)the adverse selection problem.
C)the principal-agent problem.
D)the "lemons problem."
Q4) Solutions to the moral hazard problem include A)low net worth.
B)monitoring and enforcement of restrictive covenants.
C)greater reliance on equity contracts and less on debt contracts.
D)greater reliance on debt contracts than financial intermediaries.
Page 10
To view all questions and flashcards with answers, click on the resource link above.
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) Banks may borrow from or lend to another bank in the Federal Funds market.A loan of excess reserves from one bank to another bank is recorded as a(n)________ for the borrowing bank and a(n)________ for the lending bank.
A)asset;asset
B)asset;liability
C)liability;liability
D)liability;asset
Q2) The most important category of assets on a bank's balance sheet is A)other assets.
B)securities.
C)loans.
D)cash items in the process of collection.
Q3) Banks' asset portfolios include state and local government securities because A)they help to attract business from these government entities.
B)banks consider them helpful in attracting accounts of Federal employees.
C)the Federal Reserve requires member banks to buy securities from state and local governments located within their respective Federal Reserve districts.
D)there is no default-risk with state and local government securities.
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) As in the United States,an important factor in the banking crises in Latin America was the
A)financial liberalization that occurred in the 1980s.
B)decline in real interest rates that occurred in the 1980s.
C)high inflation that occurred in the 1980s.
D)sluggish economic growth that occurred in the 1980s.
Q2) The current supervisory practice toward risk management
A)focuses on the quality of a bank's balance sheet.
B)determines whether capital requirements have been met.
C)evaluates the soundness of a bank's risk-management process.
D)focuses on eliminating all risk.
Q3) The Federal Home Loan Bank Board and the FSLIC,both of which failed in their regulatory tasks,were abolished by the
A)Competitive Equality Banking Act of 1987.
B)Financial Institutions Reform,Recovery and Enforcement Act of 1989.
C)Office of Thrift Supervision.
D)Office of the Comptroller of the Currency.
Q4) How did the increase in the interest rates in the early 80s contribute to the S&L crisis?
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) Adjustable rate mortgages
A)protect households against higher mortgage payments when interest rates rise.
B)keep financial institutions' earnings high even when interest rates are falling.
C)benefit homeowners when interest rates are falling.
D)generally have higher initial interest rates than on conventional fixed-rate mortgages.
Q2) Credit cards date back to
A)prior to the second World War.
B)just after the second World War.
C)the early 1950s.
D)the late 1950s.
Q3) A disadvantage of virtual banks (clicks)is that
A)their hours are more limited than physical banks.
B)they are less convenient than physical banks.
C)they are more costly to operate than physical banks.
D)customers worry about the security of on-line transactions.
Q4) Discuss three ways in which U.S.banks can become involved in international banking.
Q5) Why did the interest rate volatility of the 1970s spur financial innovation?
To view all questions and flashcards with answers, click on the resource link above. Page 13
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) Typically,the economy recovers fairly quickly from a recession.Why did this NOT happen in the United States during the Great Depression?
Q2) The economy recovers quickly from most recessions,but the increase in adverse selection and moral hazard problems in the credit markets caused by ________ led to the severe economic contraction known as The Great Depression.
A)debt deflation
B)illiquidity
C)an improvement in banks' balance sheets
D)increases in bond prices
Q3) A financial crisis occurs when an increase in asymmetric information from a disruption in the financial system
A)causes severe adverse selection and moral hazard problems that make financial markets incapable of channeling funds efficiently.
B)allows for a more efficient use of funds.
C)increases economic activity.
D)reduces uncertainty in the economy and increases market efficiency.
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) Mutual funds are primarily held by
A)financial institutions.
B)households.
C)nonfinancial businesses.
D)the Social Security trust fund.
Q2) A Supreme Court ruling in March 1996 held that
A)state laws to prevent banks from selling insurance can be superseded by federal rulings from banking regulators that allow banks to sell insurance.
B)state laws to prevent banks from selling insurance cannot be superseded by federal rulings from banking regulators that allow banks to sell insurance.
C)state laws to prevent banks from selling insurance can be superseded only if Congress enacts legislation that allow banks to sell insurance.
D)state laws to prevent banks from selling insurance cannot be superseded by federal legislation.
Q3) Explain the problems that necessitate insurance management,and three methods insurance companies use to address these problems.Identify the problem that each practice addresses.
To view all questions and flashcards with answers, click on the resource link above. Page 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) A swap that involves the exchange of one set of interest payments for another set of interest payments is called
A)an interest rate swap.
B)a currency swap.
C)a swaption.
D)an international swap.
Q2) The main advantage of using options on futures contracts rather than the futures contracts themselves is that interest-rate risk is
A)controlled while preserving the possibility of gains.
B)controlled,while removing the possibility of losses.
C)not controlled,but the possibility of gains is preserved.
D)not controlled,but the possibility of gains is lost.
Q3) By taking the long position on a futures contract of $100,000 at a price of 115 you are agreeing to ________ a ________ face value security for ________.
A)sell;$100,000;$115,000.
B)sell;$115,000;$100,000.
C)buy;$100,000;$115,000.
D)buy;$115,000;$100,000.
To view all questions and flashcards with answers, click on the resource link above. Page 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) Conflicts of interest may arise within the credit rating agencies because
A)the investors pay the credit agencies for ratings.
B)the issuers of debt securities pay the credit agencies for ratings.
C)the credit rating agencies provide auditing services to issuers of debt securities.
D)the credit rating agencies are involved in offering credit counseling to investors.
Q2) Under the Global Legal Settlement of 2002,the provision that requires,for a period of five years,brokerage firms to contract with independent research firms to provide information to their customers is an example of
A)regulate for transparency.
B)supervisory oversight.
C)separation of functions.
D)socialization of information production.
Q3) The incentive for analysts in investment banks to distort research increases when A)revenues from brokerage commissions increase.
B)the potential revenues from underwriting greatly exceed brokerage commissions.
C)the potential brokerage commissions greatly exceed revenues from underwriting.
D)revenues from underwriting decrease.
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) Members of the Executive Board of the European System of Central Banks are appointed to ________ year,nonrenewable terms.
A)four
B)eight
C)ten
D)fourteen
Q2) The case for Federal Reserve independence does NOT include the idea that A)political pressure would impart an inflationary bias to monetary policy.
B)a politically insulated Fed would be more concerned with long-run objectives and thus be a defender of a sound dollar and a stable price level.
C)policy is always performed better by an elite group such as the Fed.
D)a Federal Reserve under the control of Congress or the president might make the so-called political business cycle more pronounced.
Q3) Why does the Federal Reserve Bank of New York play a special role within the Federal Reserve System?
Q4) Make the case for and against an independent Federal Reserve.
Q5) Explain the similarities and differences between the European System of Central Banks and the Federal Reserve System.
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) All else the same,when the Fed calls in a $100 discount loan previously extended to the First National Bank,reserves in the banking system
A)increase by $100.
B)increase by more than $100.
C)decrease by $100.
D)decrease by more than $100.
Q2) A Fed purchase of gold,SDRs,a deposit denominated in a foreign currency or any other asset is just an open market ________ of these assets,________ the monetary base.
A)purchase;raising
B)sale;raising
C)purchase;lowering
D)sale;lowering
Q3) In the simple deposit expansion model,an expansion in checkable deposits of $1,000 when the required reserve ratio is equal to 10 percent implies that the Fed
A)sold $1,000 in government bonds.
B)sold $100 in government bonds.
C)purchased $1000 in government bonds.
D)purchased $100 in government bonds.
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) An increase in ________ reduces the money supply since it causes the ________ to fall.
A)reserve requirements;monetary base
B)reserve requirements;money multiplier
C)margin requirements;monetary base
D)margin requirements;money multiplier
Q2) State whether the following statement is true or false AND explain why: "An increase in the interest rate paid on excess reserves will always cause an increase in the federal reserve funds rate."
A)True
B)False
Q3) From before the financial crisis began in September of 2007 to when the crisis was over at the end of 2009,the huge expansion in the Fed's balance sheet and the monetary base did not result in a large increase in monetary supply because
A)most of it just flowed into holdings of excess reserve.
B)the Fed also increased the required reserve ratio.
C)the Fed also conducted open market sales.
D)the discount loan decreased.
To view all questions and flashcards with answers, click on the resource link above.
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 real bills doctrine was the guiding principle for the conduct of monetary policy during the
A)1910s.
B)1940s.
C)1950s.
D)1960s.
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 European Central Bank (ECB)pursues a hybrid monetary policy strategy that has elements in common with the -targeting strategy previously used by the Bundesbank but also includes some elements of targeting.
A)monetary;inflation
B)inflation;monetary
C)monetary;exchange rate
D)monetary;nominal GDP
21
To view all questions and flashcards with answers, click on the resource link above.
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) The theory of PPP suggests that if one country's price level rises relative to another's,its currency should
A)depreciate.
B)appreciate.
C)float.
D)do none of the above.
Q2) Higher tariffs and quotas cause a country's currency to ________ in the ________ run,everything else held constant.
A)depreciate;short
B)appreciate;short
C)depreciate;long
D)appreciate;long
Q3) On January 25,2009,one U.S.dollar traded on the foreign exchange market for about 0.75 euros.Therefore,one euro would have purchased about ________ U.S.dollars.
A)0.75
B)1.00
C)1.33
D)1.75
To view all questions and flashcards with answers, click on the resource link above. Page 22
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) Everything else held constant,if a central bank makes a sterilized purchase of foreign assets,then the domestic currency will
A)appreciate.
B)depreciate.
C)either appreciate,depreciate,or remain constant.
D)not be affected.
Q2) A balance of payments deficit is associated with a ________ of international reserves,while a balance of payments surplus is associated with a ________.
A)loss;loss
B)loss;gain
C)gain;loss
D)gain;gain
Q3) A country that dollarizes
A)maximizes its seignorage.
B)earns the same amount of seignorage as it would with a currency board.
C)earns the same amount of seignorage as it would with exchange-rate targeting.
D)eliminates its seignorage.
E)must pay seignorage to other governments to use their currency.
To view all questions and flashcards with answers, click on the resource link above.
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 classical economists' conclusion that nominal income is determined by movements in the money supply rested on their belief that ________ could be treated as ________ in the short run.
A)velocity;constant B)velocity;variable
C)money;constant D)money;variable
Q2) If the money supply is $2 trillion and velocity is 5,then nominal GDP is
A)$1 trillion.
B)$2 trillion.
C)$5 trillion.
D)$10 trillion.
Q3) Because Keynes assumed that the expected return on money was zero,he argued that people would
A)never hold money.
B)never hold money as a store of wealth.
C)hold money as a store of wealth when the expected return on bonds was negative.
D)hold money as a store of wealth only when forced to by government policy.
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) The long-run aggregate supply curve shifts to the right when there is
A)a decrease in the total amount of capital in the economy.
B)a decrease in the total amount of labor supplied in the economy.
C)a decrease in the available technology.
D)a decline in the natural rate of unemployment.
Q2) Everything else held constant,an autonomous monetary policy easing ________ aggregate ________.
A)increases;demand B)decreases;demand C)decreases;supply D)increases;supply
Q3) The aggregate supply curve is the total quantity of
A)raw materials offered for sale at different inflation rates.
B)final goods and services offered for sale at the current inflation rate.
C)final goods and services offered for sale at different inflation rates.
D)intermediate and final goods and service offered for sale at different inflation rates.
Q4) Using the aggregate demand-aggregate supply model,explain and demonstrate graphically the short-run and long-run effects of an increase in the money supply.
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) The data lag is
A)the time it takes for policy makers to obtain data indicating what is happening in the economy.
B)the time it takes for policy makers to be sure of what the data are signaling about the future course of the economy.
C)the time it takes to pass legislation to implement a particular policy.
D)the time it takes for policy makers to change policy instruments once they have decided on the new policy.
E)the time it takes for the policy actually to have an impact on the economy.
Q2) If aggregate output is below the natural rate level,activists of policies would recommend that the government
A)do nothing.
B)try to eliminate the high unemployment by attempting to shift the aggregate supply curve to the right.
C)try to eliminate the high unemployment by attempting to shift the aggregate demand curve to the right.
D)try to eliminate the high unemployment by attempting to shift the aggregate demand curve to the left.
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) Discuss three channels by which monetary policy affects stock prices and aggregate spending.
Q2) The monetary transmission mechanism that links monetary policy to GDP through real interest rates and investment spending is called the
A)traditional interest-rate channel.
B)Tobins' q theory.
C)wealth effects.
D)cash flow channel.
Q3) If the aggregate price level adjusts slowly over time,then an expansionary monetary policy lowers
A)only the short-term nominal interest rate.
B)only the short-term real interest rate.
C)both the short-term nominal and real interest rates.
D)the short-term nominal,the short-term real,and the long-term real interest rates.
Q4) Explain the traditional interest-rate channel for expansionary monetary policy.Explain how a tight monetary policy affects the economy through this channel.
To view all questions and flashcards with answers, click on the resource link above. Page 27
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) A sharp depreciation of the domestic currency after a currency crisis leads to
A)higher inflation.
B)lower import prices.
C)lower interest rates.
D)decrease in the value of foreign currency-denominated liabilities.
Q2) A feature of debt markets in emerging-market countries is that debt contracts are typically
A)very short term.
B)long term.
C)intermediate term.
D)perpetual.
Q3) The mismanagement of financial liberalization in emerging market countries can be understood as a severe
A)principal/agent problem.
B)asymmetric information problem.
C)lemons problem.
D)free-rider problem.
Q4) What two key factors trigger speculative attacks leading to currency cries in emerging market countries?
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) Planned investment spending,a component of aggregate demand,is equal to
A)fixed investment plus actual inventory investment.
B)fixed investment plus unplanned inventory investment.
C)fixed investment.
D)fixed investment plus planned inventory investment.
Q2) Keynes believed that changes in autonomous spending were dominated by unstable fluctuations in ________,which are influenced by emotional waves of optimism and pessimism-factors he referred to as "animal spirits."
A)unplanned investment spending
B)actual investment spending
C)planned investment spending
D)autonomous consumer expenditures
Q3) In the Keynesian framework,as long as output is ________ the equilibrium level,unplanned inventory investment will remain positive and firms will continue to ________ production.
A)below;lower
B)above;lower
C)below;raise
D)above;raise
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) 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
Q2) Everything else held constant,an increase in government spending 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.
Q3) The upward slope of the MP curve indicates that
A)the central bank lowers real interest rates when inflation rises.
B)the central bank raises real interest rates when inflation falls.
C)the central bank raises nominal interest rates when inflation rises.
D)the central bank raises real interest rates when inflation rises.
To view all questions and flashcards with answers, click on the resource link above. Page 30
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)continued success at keeping inflation under control.
B)inflation targeting.
C)exchange rate targeting.
D)all of the above.
Q2) The U.S.government can play an important role in establishing the credibility of anti-inflation policy by
A)demonstrating fiscal responsibility.
B)monitoring the Fed.
C)conducting fiscal policy.
D)all of the above.
Q3) Arguments for discretionary policies include
A)policy rules can be too rigid because they cannot foresee every contingency.
B)policy rules do not easily incorporate the use of judgment.
C)discretion avoids the straightjacket that would lock in the wrong policy if the model that was used to derive the policy rule proved to be incorrect.
D)discretion enables policy makers to change policy settings when an economy undergoes structural changes.
E)all of the above.
To view all questions and flashcards with answers, click on the resource link above. Page 31
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 Federal Reserve conducts open market sales,the money supply ________,shifting the LM curve to the ________,everything else held constant.
A)decreases;right
B)decreases;left
C)increases;right
D)increases;left
Q2) The more interest-sensitive is money demand,the
A)more effective is fiscal policy relative to monetary policy.
B)more effective is monetary policy relative to fiscal policy.
C)steeper is the IS curve.
D)steeper is the LM curve.
Q3) In the long-run ISLM model and with everything else held constant,as long as the level of output ________ the natural rate level,the price level will continue to ________,shifting the LM curve to the ________,until finally output is back at the natural rate level.
A)exceeds;rise;right
B)exceeds;fall;left
C)remains below;fall;right
D)remains below;rise;left
To view all questions and flashcards with answers, click on the resource link above.
Page 32