In the New Keynesian open economy model, government spending A) is an effective stabilization tool with a flexible exchange rate, and an ineffective stabilization tool with a fixed exchange rate B) is an ineffective stabilization tool with a flexible exchange rate, and an effective stabilization tool with a fixed exchange rate; prices are flexible. C) […]
An increase in the general level of prices will tend to cause, other things the same ________. A) an increase in the real value of assets B) an increase in the real value of liabilities C) no change in the real value of liabilities D) a decrease in the real value of liabilities ANSWER […]
For a borrower, an increase in the real interest rate A) definitely reduces current consumption and increases future consumption. B) reduces current consumption and has an uncertain effect on future consumption. C) has an uncertain effect on current consumption and increases future consumption. D) has an uncertain effect on both current and future consumption. […]
An increase in the real interest rate is an example of a A) pure substitution effect. B) substitution effect and a positive income effect. C) substitution effect and a negative income effect. D) substitution effect and an income effect whose sign depends on whether the consumer is initially a borrower or a lender. ANSWER […]
When the Fed sells government securities in the open market, the money supply ________ because ________. A) decreases; banks lose liquidity, they make fewer loans and checking account deposits decrease B) increases; banks gain liquidity, they make more loans and checking account deposits increase C) increases; banks lose liquidity, they make more loans and checking […]
An individual firm is insolvent when ________. A) its assets exceed the value of its liabilities B) its average costs per unit are greater than its marginal cost C) its average costs per unit are less than its marginal cost D) its liabilities exceed the value of its assets ANSWER D
The most severe financial crisis in U.S history occurred in the years ________. A) 2006-2008 B) 1997-98 C) 1929-33 D) 1873-93 ANSWER C
An increase in the real interest rate A) increases savings for both borrowers and lenders. B) increases savings for borrowers, but has an uncertain effect on the savings of lenders. C) increases savings for lenders, but has an uncertain effect on the savings of borrowers. D) has an uncertain effect on the savings of both […]
When the Fed buys government securities in the open market, the money supply ________ because ________. A) decreases; banks lose liquidity, they make fewer loans and checking account deposits decrease B) increases; banks gain liquidity, they make more loans and checking account deposits increase C) increases; banks lose liquidity, they make more loans and checking […]
The FOMC ________. A) meets four times a year to decide on how to conduct open market operations that influence the money supply B) meets six times a year to decide on how to conduct open market operations that influence the money supply and interest rates C) meets eight times a year to decide on […]
