B
Market Capitalization
A) exceeds $1 trillion for each of the largest 10 companies in the world
B) equals the price per share multiplied by the number of shares outstanding for a stock
C) equals the sum of funds raised by a company through stocks, bonds, a
B
Very large short term declines in the values of the stock market as a whole primarily reflect
A) changes in anticipated inflation rates B) changes in the perception of risk
C) changes in expected future earnings D) none of the above
B
To compute stock market indexes such as the Standard and Poor's 500 Index, the value of each stock in the index is weighted by
A) the size of company revenue as a percent of GDP
B) the total market capitalization as a percent of the total market cap of st
D
$10 broadly invested in stocks in 1950 and left to grow, would now be worth
A) less than $10
B) about $20
C) about $100
D) none of the above
C
Suppose you use your debit card to buy a sandwich at Subway. In this transaction
A) The debit card is not money; it's only an instruction to make a loan.
B) The debit card is money because your use reflects the exchange of a good.
C) The debit card is not
D
A Treasury Bill is
A) another term for U.S. currency
B) a short term loan from the U.S. government to the banking system
C) convertible into gold at any Federal Reserve District Bank
D) none of the above
D
Almost all hyperinflations including the famous German hyperinflation during 1922-1923 can be attributed to the:
A) absence of financial intermediaries
B) economic policy that restrict the use of credit markets
C) emergence of large number of political pa
A
During the 1970s in the United States
A) interest rates increased to near-record highs because of the high rates of inflation
B) the U.S. experienced the worst deflationary period since the 1930s
C) the Fed abandoned the conversion of money to gold for th
B
Select the correct statement below:
A) Interest rates are set by the U.S. Treasury Department in coordination with the Federal Reserve System B) the 10-year Treasury Rate reflects the interest rate on 10 year loans to the U.S. government
C) the Treasury Y
C
Using the formula derived from the Equation of Exchange, if the growth rate for Real GDP, the money supply, and velocity of money are 2%, 3%, and 1%, then the rate of inflation will be:
A) 0%.
B) 1%.
C) 2%.
D) 6%.
D
In the graphic above,
A) the blue line represents the "real rate" of interest on 10 year Treasury Bonds
B) the red line represents the "nominal rate" of interest on 10 year Treasury Bonds
C) the difference between the red and blue lines reflects the expec
D
If the annual inflation rate in an economy is positive,
A) the purchasing power of a dollar will increase
B) individuals who have lent money at a fixed rate will come out ahead
C) individuals who are on fixed incomes will come out ahead
D) none of the abo
A
Assuming all else equal, if the demand for loans increases because of a major increase in new building projects, then we will observe airline industry decides to purchase a large number of new planes, it is likely to cause:
A) an increase in the rate of i
C
Over a day, a week, a month, or a year stock markets
A) process new information relatively poorly leading to extensive predictability of stock price changes
B) tend to be highly correlated with the ratio of prices to earnings
C) are usually so efficient a
B
Select the statement below which is accurate concerning financial markets:
A) stock markets are much larger than credit markets in terms of providing funding for companies
B) money markets and credit markets are closely intertwined
C) The Dow Jones Index
D
Bank deposits
A) are a type of loan to the bank that is payable on demand by the depositor
B) are almost all lent with very little actually held in the bank
C) represent both money and credit
D) all of the above
A
Select the accurate statement below regarding monetary standards:
A) paper standard require commitments to the value of money while gold standards require commitments to the conversion rate
B) the U.S. Dollar is the medium of exchange in the Euro Area whi
D
The policy making body within the Fed is
A) part of the U.S. Department of Treasury
B) is comprised of the Fed Chairman, Board of Governors, and Secretary of the Treasury
C) sets the rate of interest on home mortgages
D) none of the above
C
Under normal conditions, if the Fed buys government bonds from the public, it will cause
A) a decrease in the supply of bank reserves and a corresponding decline in M1
B) an increase in the supply of bank reserves and an equal increase in M2
C) an increas
B
An official measure of money in the United States which includes the sum of currency, bank accounts, and most all non-bank checkable deposits is known as
A) Treasury Bills
B) M2
C) Bank Reserves
D) Commercial Paper
B
The two graphics displayed above, indicate that
A) money growth is almost the sole determinant of inflation across countries when very long periods of time are under consideration
B) the velocity of money is an important influence on inflation, even over
A
The funds borrowed and lent on a short term basis out of reserves that banks hold on reserve with the Federal Reserve System
A) determine the level of the Fed Funds rate
B) determine the level of the Treasury Bill Rate
C) are known as Open Market Operatio
B
The Federal Reserve System is divided into
A) 6 Districts with Atlanta as the District Bank in which Bowling Green resides
B) 12 Districts with St. Louis as the District Bank in which Bowling Green resides
C) 20 Districts with Chicago as the District Bank
B
In our discussion of causes of the Financial Crisis of 2008, we highlighted
A) how the structuring of specialized and exotic financial instruments led to projects like City Center
B) the increase in total market debt leading up to 2008 as evidenced by pro
D
A retired worker receives a pension that is not indexed to inflation. Which of the following will happen if the rate of inflation rises?
A) The retiree's purchasing power will increase
B) The retiree will be able to borrow money at a lower rate of interes
C
The close connection between money and credit creates which problem?
A) the problem of collateralized debt obligations with risk undervalued
B) the problem of default risk on long term loans
C) the problem of liquidity risk for banks and financial firms
D
A
The difference between exports and imports is known as
A) the current account trade balance
B) the capital account trade balance
C) the financial account trade balance
D) the trade parity balance
B (D)
The data on currency values above indicates that a person can exchange
A) about 0.8 dollars per euro B) about 0.7 Pounds per dollar
C) 105 dollars per Yen D) about 0.95 Swiss Francs per dollar
A
Table X indicates that a an item that costs $10 in the U.S., would have an equivalent value of
A) about 14 pounds B) about 7 pounds
C) 105 yen D) about 0.09 yen
D
If the U.S. is running a financial or capital account surplus, then
A) the U.S. must also be running a current account surplus
B) U.S. residents are buying less than they are selling abroad
C) U.S. residents must be wealthier than other countries
D) The U
All
From our discussion of cryptocurrencies, select the item below which does not share features with them:
A) Topps Baseball Cards B) S&H Green Stamps
C) Japanese Yen D) Bitcoin
default risk
is the risk that a borrower stops or falls behind on payments on a loan.
liquidity risk
is the risk that a borrower of short term funds (like a bank or other financial services firms) is unable to rollover these short term funds into new short term loans. In general, it arises from the close connection between money and credit.
price earnings ratio
is the price per share of a stock divided by earnings (profits) per share. It is a measure of value of stocks relative to the profits (and ultimately GDP growth) behind them.
A
If the government runs a budget deficit in a given year, then
A) the public debt will increase in size
B) revenues exceed spending
C) exports exceed imports D) government expenditures must be increasing
D
Which of the following is correct:
A) The ratio of Total Government Spending to GDP is about 20 percent in the U.S.
B) The ratio of Total Government Spending to GDP is more than 5% lower in the U.S. than in any other advanced economy
C) The ratio of Total
A
Total Government spending
A) sums up federal, state, and local spending
B) is nearly the same across all large, wealthy countries
C) is evenly divided among federal, state, and local in the U.S.
D) all of the above
C
The U.S. Public Debt
A) is issued and managed by the Fed
B) is equal to the federal budget deficit
C) is about equal to U.S. GDP
D) all of the above
B
Emerging problems and projections for the size of the U.S. public debt expenditures reflect
A) increases in military spending due to Middle East conflicts
B) increases in spending on non-discretionary entitlements
C) decreasing marginal tax rates on highe
D
The federal income tax system in the U.S. is one in which
A) income tax rates and payments increase in proportion to income
B) tax rates for top income earners have stayed nearly constant for the past 100 years
C) tax rates and payments are nearly equal i
B
Select the accurate statement below for U.S. data:
A) All households pay about the same proportion of income in federal income tax
B) Workers bear a substantial part of the burden imposed by a corporate income tax
C) The highest 1 percent of households in
D
The Great Depression
A) is a very serious recession in U.S. history in which national income fell by 30 percent
B) was the most serious recession in U.S. history
C) occurred primarily in the early 1930s
D) all of the above
D
Select the accurate statement:
A the ratio of government spending to GDP provides rough approximation of the degree of "socialization" of an economy
B) the slides relating cows to economic systems mixes in political systems differences with economic diffe
a
Select an accurate statement about the U.S. Public Debt:
A) One potential problem from a very large public debt is that interest payments on the debt can diminish other types of government spending
B) the size of the debt will likely increase if the size
C
The last recession in the U.S. occurred in
A) 1980-82
B) 2000-01
C) 2007-09
D) 2013-14
C
Which of the following typically occur during a recession?
A) Housing prices rise B) Food prices rise
C) Unemployment rates increase
D) none of the above
D
Which of the following is true of business cycles?
A) Recessions occur at irregular time intervals
B) Economic expansions are defined as the period between recessions
C) Unemployment rates usually increase when real GDP growth is zero or negative
D) All o
A
Select the industry which tends to grow very relatively modestly when real GDP is increasing but also does not fall very fast when real GDP is decreasing:
A) Utilities
B) Entertainment
C) Casinos
D) Advertising
D
The recession in the U.S. just after World War II is evidence regarding which type of cause of recessions?
A) financial booms/busts B) consumer pessimism
C) monetary policy shifts D) none of the above
A
Which of the following economic variables is a common policy tool when the government adopts countercyclical fiscal policy?
A) Government spending B) Interest rates
C) Bank reserves D) none of the above
B
The concept of a government spending multiplier refers to
A) how much government spending increases whenever GDP increases
B) how much GDP increases whenever government spending increases
C) how much the money supply multiplies for a given increase in the
B
Select the statement below which is accurate about the effectiveness of temporary fiscal stimulus:
A) it depends on how quickly the Federal Reserve can implement it
B) it depends on the degree to which the public has fiscal illusion
C) it depends on the s
B
The Fed's "dual mandate" as legislated by Congress in 1977 is
A) low and stable levels of inflation and low and stable interest rates
B) low and stable levels of inflation and maximum levels of employment
C) low and stable unemployment rate and high and s
B
An example of countercyclical fiscal policy working by means of an automatic stabilizer is
A) Congress increasing government spending on new infrastructure projects
B) tax revenues decreasing because incomes are falling
C) the monetary base increasing as
C
If the Fed is concerned about a possible recession, the common prescription for monetary policy is for the _____ to decrease the _______ by increasing the _________.
A) Treasury; Treasury Bill rate; monetary base
B) Congress; level of investment; U.S. pub
B
In the context of countercyclical policy, the term "money illusion" refers to
A) households not treating taking account of the higher future taxes from debt-financed spending
B) households treating injects of money as equivalent to the economy becoming mo
D
The current and impending fiscal problems of several state governments, including Kentucky, revolve around which of the following issues
A) state-run jobs programs growing out of the Affordable Care Act
B) declining populations that are shrinking the size
B
With respect to fiscal problems within countries or states, the "dependency ratio" refers to
A) the average number of children or other dependents in a household
B) the size of the working age population relative to the senior population
C) the number net
C
The current Debt to GDP levels in the U.S.
A) is one of the lowest in world among large nations but expected to rise dramatically
B) is at its highest point in U.S. history
C) is higher than at any previous peacetime era
D) is the highest among the high i
A
Japan's long run fiscal situation
A) is worse than the U.S. partly because of a growing dependency ratio
B) is not as bad as the U.S. in terms of Debt to GDP ratio
C) is worse than the U.S. in terms of current interest rates on long term government bonds
A
The graphic for India, China, Brazil, DRC, France and the US showing income groups and percentages of total country income for each group highlights that
A) there are income differences within highly developed countries such as the U.S. but these are rela
B
Select the accurate statement below:
A) using families instead of households as the unit of analysis does not impact measured income differences
B) using incomes before taxes and transfers versus after taxes and transfers impacts measured income differenc
D
For U.S. data,
A) median incomes increased from 1967 to 2015
B) incomes of the lowest quartile increased from 1967 to 2015
C) the spread in incomes between top and bottom quartiles widened some between 1967 and 2015
D) all of the above
B
The preceding graphic from the St. Louis Federal Reserve
A) shows a static view of income differences
B) indicates considerable movement out of the lowest two groups over the decade
C) reflects a highly skewed income distribution
D) none of the above
C
Which of the following is a contributor to low incomes in the U.S.?
A) automatic fiscal stabilizers B) difference in exports and imports
C) family environment D) all of the above
C
Select the accurate statement:
A) state tax revenue depends primarily on income for its tax base
B) federal tax revenue nearly equally relies on income, sales, and property taxes
C) spending on social security and health are now the largest categories of
sector shifts
end of WWII; 1970s shift from manufacturing to more service-oriented 1870s shift from boat/wagon to rail
supply shifts
1970s oil price increases; oil price increases before all but one recession since 1950
credit boom/ busts
early 1930s; 2008
policy shifts/mistakes
early 1980s shift of fed from high to low inflation; early 1930s response to financial/banking crisis
consumer pessimism
great depression? (cause and effect problem)