Intermediate Macroeconomics Practice Exam
Course Introduction
Intermediate Macroeconomics builds upon foundational economic principles to explore more advanced topics in the study of whole economies. This course examines the determinants of national income, employment, economic growth, inflation, and business cycles through a variety of theoretical models and empirical evidence. Students will analyze the roles of fiscal and monetary policy, understand the causes and consequences of macroeconomic instability, and discuss current macroeconomic issues facing both open and closed economies. Through problem sets, discussions, and real-world applications, students gain a deeper understanding of how policymakers influence economic performance and how macroeconomic theories relate to observable outcomes.
Recommended Textbook
The Economics of Money Banking and Financial Markets 10th Edition by Frederic S. Mishkin
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26 Chapters
2650 Verified Questions
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Chapter 1: Why Study Money, banking, and Financial Markets
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104 Flashcards
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Sample Questions
Q1) If the aggregate price level at time t is denoted by Pt,the inflation rate from time t - 1 to t is defined as
A) t = (Pt - Pt - 1)/ Pt - 1.
B) t = (Pt + 1 - Pt - 1) /Pt - 1.
C) t = (Pt + 1 - Pt) /Pt.
D) t = (Pt - Pt - 1) /Pt.
Answer: A
Q2) Which of the following is not a financial institution?
A) a life insurance company
B) a pension fund
C) a credit union
D) a business college
Answer: D
Q3) To convert a nominal GDP to a real GDP,you would use
A) the PCE deflator.
B) the CPI measure.
C) the GDP deflator.
D) the PPI measure.
Answer: C
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Chapter 2: An Overview of the Financial System
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Sample Questions
Q1) 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
Q2) An example of the problem of ________ is when a corporation uses the funds raised from selling bonds to fund corporate expansion to pay for Caribbean cruises for all of its employees and their families.
A) adverse selection
B) moral hazard
C) risk sharing
D) credit risk
Answer: B
Q3) The regulatory agency that sets reserve requirements for all banks is
A) the Federal Reserve System.
B) the Federal Deposit Insurance Corporation.
C) the Office of Thrift Supervision.
D) the Securities and Exchange Commission.
Answer: A
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Chapter 3: What Is Money
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Sample Questions
Q1) Which of the following is included in both M1 and M2?
A) Currency
B) Savings deposits
C) Small-denomination time deposits
D) Money market deposit accounts
Answer: A
Q2) If peanuts serve as a medium of exchange,a unit of account,and a store of value,then peanuts are
A) bank deposits.
B) reserves.
C) money.
D) loanable funds.
Answer: C
Q3) Which of the following statements uses the economists' definition of money?
A) I plan to earn a lot of money over the summer.
B) Betsy is rich-she has a lot of money.
C) I hope that I have enough money to buy my lunch today.
D) The job with New Company gave me the opportunity to earn more money.
Answer: C
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Chapter 4: Understanding Interest Rates
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Sample Questions
Q1) The ________ is defined as the payments to the owner plus the change in a security's value expressed as a fraction of the security's purchase price.
A) yield to maturity
B) current yield
C) rate of return
D) yield rate
Q2) The concept of ________ is based on the common-sense notion that a dollar paid to you in the future is less valuable to you than a dollar today.
A) present value
B) future value
C) interest
D) deflation
Q3) A credit market instrument that requires the borrower to make the same payment every period until the maturity date is known as a
A) simple loan.
B) fixed-payment loan.
C) coupon bond.
D) discount bond.
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6
Chapter 5: The Behavior of Interest Rates
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Sample Questions
Q1) If housing prices are expected to increase,then,other things equal,the demand for houses will ________ and that of Treasury bills will ________.
A) increase; increase
B) increase; decrease
C) decrease; decrease
D) decrease; increase
Q2) The riskiness of an asset that is unique to the particular asset is
A) systematic risk.
B) portfolio risk.
C) investment risk.
D) nonsystematic risk.
Q3) In the figure above,a factor that could cause the demand for bonds to shift to the right is:
A) an increase in the riskiness of bonds relative to other assets.
B) an increase in the expected rate of inflation.
C) expectations of lower interest rates in the future.
D) a decrease in wealth.
Q4) Everything else held constant,would an increase in volatility of stock prices have any impact on the demand for rare coins? Why or why not?
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Chapter 8: An Economic Analysis of Financial Structure
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Sample Questions
Q1) As information technology improves,the lending role of financial institutions such as banks should
A) increase somewhat.
B) decrease.
C) stay the same.
D) increase significantly.
Q2) The principal-agent problem
A) occurs when managers have more incentive to maximize profits than the stockholders-owners do.
B) in financial markets helps to explain why equity is a relatively important source of finance for American business.
C) would not arise if the owners of the firm had complete information about the activities of the managers.
D) explains why direct finance is more important than indirect finance as a source of business finance.
Q3) How does a mutual fund lower transactions costs through economies of scale?
Q4) Why does the free-rider problem occur in the debt market?
Q5) How does collateral help to reduce the adverse selection problem in credit market?
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Chapter 9: Financial Crises
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Sample Questions
Q1) At the time of the South Korean financial crisis,the merchant banks were
A) almost virtually unregulated.
B) subject to heavy government regulation.
C) engaged in long-term lending to the corporate sector.
D) restricted to long-term foreign borrowing.
Q2) Before the South Korean financial crisis,sales by the top five chaebols (family-owned conglomerates)were
A) nearly 50% of GDP.
B) about 10% of GDP.
C) almost 90% of GDP.
D) nearly 25% of GDP.
Q3) The economic hardship resulting from a financial crises is severe,however,there are also social consequences such as
A) increased crime.
B) difficulty getting a loan.
C) currency devaluations.
D) loss of output.
Q4) Typically,the economy recovers fairly quickly from a recession. Why did this not happen in the United States during the Great Depression?
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Chapter 20: The Is Curve
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Sample Questions
Q1) If the consumption function is expressed as C = a + mpc × YD,then "mpc" represents A) autonomous consumer expenditure.
B) the marginal propensity to consume.
C) the expenditure multiplier.
D) disposable income.
Q2) Everything else held constant,if consumption expenditure falls by 160 when disposable income falls by 200,the mpc is
A) 0.
B) 0.2.
C) 0.4.
D) 0.8.
Q3) A decline in taxes ________ consumer expenditure and shifts the ________ curve to the ________,everything else held constant.
A) raises; LM; right
B) lowers; IS; left
C) raises; IS; right
D) lowers; LM; left
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