Typically, borrowers have superior information relative to lenders about the potential returns and risks associated with an investment project. The difference in information is called A) moral selection. B) risk sharing. C) asymmetric information. D) adverse hazard. ANSWER C
Date: September 10th, 2020
Potential advantages of nominal GDP targeting include A) it implies that the central bank will respond to slowdowns in the real economy even if inflation is not falling. B) real GDP growth that is below potential or inflation that is below the inflation objective will encourage more expansionary monetary policy. C) it focuses not only […]
Date: September 10th, 2020
The concept of diversification is captured by the statement A) don’t look a gift horse in the mouth. B) don’t put all your eggs in one basket. C) it never rains, but it pours. D) make hay while the sun shines. ANSWER B
Date: September 10th, 2020
Average duration of unemployment is an example of a: A) leading indicator. B) coincident indicator. C) lagging indicator. D) none of the above. ANSWER C
Date: September 10th, 2020
Everything else held constant, an increase in government spending ________ aggregate ________. A) increases; demand B) decreases; demand C) decreases; supply D) increases; supply ANSWER A
Date: September 10th, 2020
The return on a 5 percent coupon bond that initially sells for $1,000 and sells for $950 next year is A) -10 percent. B) -5 percent. C) 0 percent. D) 5 percent. ANSWER C
Date: September 10th, 2020
Suppose that the Bank of Japan buys U.S. dollar assets with yen-denominated assets. Everything else held constant, this transaction will cause ________ in the foreign assets held by the Federal Reserve and ________ in the U.S. monetary base. A) an increase; an increase B) an increase; a decrease C) a decrease; an increase D) a […]
Date: September 10th, 2020
Everything else held constant, a decrease in government spending ________ aggregate ________. A) increases; demand B) decreases; demand C) decreases; supply D) increases; supply ANSWER B
Date: September 10th, 2020
An expectation may fail to be rational if A) relevant information was not available at the time the forecast is made. B) relevant information is available but ignored at the time the forecast is made. C) information changes after the forecast is made. D) information was available to insiders only. ANSWER B
Date: September 10th, 2020
Risk sharing is profitable for financial institutions due to A) low transactions costs. B) asymmetric information. C) adverse selection. D) moral hazard. ANSWER A
Date: September 10th, 2020
