Question 1

To convert a nominal GDP to a real GDP, you would use

Accepted Answer

A)   the PCE deflator.
B)   the CPI measure.
C)   the GDP deflator.
D)   the PPI measure.E) None of the above
F) All of the above

Question 2

From 1980 to early 1985 the dollar ________ in value, thereby benefiting American ________.

Accepted Answer

A)   appreciated; consumers
B)   appreciated, businesses
C)   depreciated; consumers
D)   depreciated, businessesE) C) and D)
F) A) and B)

Question 3

Complete Milton Friedman's famous statement, "Inflation is always and everywhere a ________ phenomenon."

Accepted Answer

A)   recessionary
B)   discretionary
C)   repressionary
D)   monetaryE) A) and C)
F) B) and C)

Question 4

From 1980-1985, the dollar strengthened in value against other currencies. Who was helped and who was hurt by this strong dollar?

Accepted Answer

American consumers benefitted because im...

Question 5

If the CPI in 2004 is 200, and in 2005 the CPI is 180, the rate of inflation from 2004 to 2005 is

Accepted Answer

A)   20%.
B)   10%.
C)   0%.
D)   -10%.E) A) and D)
F) All of the above

Question 6

Which of the following is a true statement?

Accepted Answer

A)   Money or the money supply is defined as Federal Reserve notes.
B)   The average price of goods and services in an economy is called the aggregate price level.
C)   The inflation rate is measured as the rate of change in the federal government budget deficit.
D)   The aggregate price level is measured as the rate of change in the inflation rate.E) A) and C)
F) C) and D)

Question 7

High interest rates might ________ purchasing a house or car but at the same time high interest rates might ________ saving.

Accepted Answer

A)   discourage; encourage
B)   discourage; discourage
C)   encourage; encourage
D)   encourage; discourageE) B) and D)
F) None of the above

Question 8

The price paid for the rental of borrowed funds (usually expressed as a percentage of the rental of $100 per year)  is commonly referred to as the

Accepted Answer

A)   inflation rate.
B)   exchange rate.
C)   interest rate.
D)   aggregate price level.E) B) and D)
F) A) and B)

Question 9

A financial crisis is

Accepted Answer

A)   not possible in the modern financial environment.
B)   a major disruption in the financial markets.
C)   a feature of developing economies only.
D)   typically followed by an economic boom.E) All of the above
F) A) and D)

Question 10

An increase in interest rates might ________ saving because more can be earned in interest income.

Accepted Answer

A)   encourage
B)   discourage
C)   disallow
D)   invalidateE) A) and B)
F) A) and C)

Question 11

Evidence from business cycle fluctuations in the United States indicates that

Accepted Answer

A)   a negative relationship between money growth and general economic activity exists.
B)   recessionsare usually preceded by declines in bond prices.
C)   recessionsare usually preceded by dollar depreciation.
D)   recessions are usually preceded by a decline in the growth rate of money.E) B) and C)
F) A) and D)

Question 12

The stock market is important because it is

Accepted Answer

A)   where interest rates are determined.
B)   the most widely followed financial market in the United States.
C)   where foreign exchange rates are determined.
D)   the market where most borrowers get their funds.E) None of the above
F) C) and D)

Question 13

An increase in stock prices ________ the size of people's wealth and may ________ their willingness to spend, everything else held constant.

Accepted Answer

A)   increases; increase
B)   increases; decrease
C)   decreases; increase
D)   decreases; decreaseE) C) and D)
F) A) and B)

Question 14

If real GDP grows from $10 trillion in 2002 to $10.5 trillion in 2003, the growth rate for real GDP is

Accepted Answer

A)   5%.
B)   10%.
C)   50%.
D)   0.5%.E) A) and D)
F) A) and C)

Question 15

Poorly performing financial markets can be the cause of

Accepted Answer

A)   wealth.
B)   poverty.
C)   financial stability.
D)   financial expansion.E) B) and C)
F) A) and D)

Question 16

If ten years ago the prices of the items bought last month by the average consumer would have been much higher, then one can likely conclude that

Accepted Answer

A)   the aggregate price level has declined during this ten-year period.
B)   the average inflation rate for this ten-year period has been positive.
C)   the average rate of money growth for this ten-year period has been positive.
D)   the aggregate price level has risen during this ten-year period.E) All of the above
F) A) and D)

Question 17

If the price of a euro (the European currency)  increases from $1.00 to $1.10, then, everything else held constant,

Accepted Answer

A)   a European vacation becomes less expensive.
B)   a European vacation becomes more expensive.
C)   the cost of a European vacation is not affected.
D)   foreign travel becomes impossible.E) A) and B)
F) All of the above

Question 18

Which of the following is most likely to result from a stronger dollar?

Accepted Answer

A)   U.S. goods exported aboard will cost less in foreign countries, and so foreigners will buy more of them.
B)   U.S. goods exported aboard will cost more in foreign countries and so foreigners will buy more of them.
C)   U.S. goods exported abroad will cost more in foreign countries, and so foreigners will buy fewer of them.
D)   Americans will purchase fewer foreign goods.E) B) and C)
F) A) and D)

Question 19

The Dow reached a peak of over 11,000 before the collapse of the ________ bubble in 2000.

Accepted Answer

A)   housing
B)   manufacturing
C)   high-tech
D)   bankingE) C) and D)
F) All of the above

Question 20

What happens to economic growth and unemployment during a business cycle recession? What is the relationship between the money growth rate and a business cycle recession?

Accepted Answer

During a recession, output dec...

Exam 1: Why Study Money, Banking, and Financial Markets

From 1980-1985, the dollar strengthened in value against other currencies. Who was helped and who was hurt by this strong dollar?

Correct AnswerverifiedAmerican consumers benefitted because im...View AnswerShow Answer

From 1980 to early 1985 the dollar ________ in value, thereby benefiting American ________.

Correct AnswerverifiedShow Answer

An increase in stock prices ________ the size of people's wealth and may ________ their willingness to spend, everything else held constant.

Correct AnswerverifiedShow Answer

What happens to economic growth and unemployment during a business cycle recession? What is the relationship between the money growth rate and a business cycle recession?

Correct AnswerverifiedDuring a recession, output dec...View AnswerShow Answer

To convert a nominal GDP to a real GDP, you would use

Correct AnswerverifiedShow Answer

An increase in interest rates might ________ saving because more can be earned in interest income.

Correct AnswerverifiedShow Answer

Which of the following is most likely to result from a stronger dollar?

Correct AnswerverifiedShow Answer

If real GDP grows from $10 trillion in 2002 to $10.5 trillion in 2003, the growth rate for real GDP is

Correct AnswerverifiedShow Answer

A financial crisis is

Correct AnswerverifiedShow Answer

The price paid for the rental of borrowed funds (usually expressed as a percentage of the rental of $100 per year) is commonly referred to as the

Correct AnswerverifiedShow Answer

If ten years ago the prices of the items bought last month by the average consumer would have been much higher, then one can likely conclude that

Correct AnswerverifiedShow Answer

The stock market is important because it is

Correct AnswerverifiedShow Answer

If the CPI in 2004 is 200, and in 2005 the CPI is 180, the rate of inflation from 2004 to 2005 is

Correct AnswerverifiedShow Answer

High interest rates might ________ purchasing a house or car but at the same time high interest rates might ________ saving.

Correct AnswerverifiedShow Answer

Which of the following is a true statement?

Correct AnswerverifiedShow Answer

Complete Milton Friedman's famous statement, "Inflation is always and everywhere a ________ phenomenon."

Correct AnswerverifiedShow Answer

Evidence from business cycle fluctuations in the United States indicates that

Correct AnswerverifiedShow Answer

The Dow reached a peak of over 11,000 before the collapse of the ________ bubble in 2000.

Correct AnswerverifiedShow Answer

If the price of a euro (the European currency) increases from $1.00 to $1.10, then, everything else held constant,

Correct AnswerverifiedShow Answer

Poorly performing financial markets can be the cause of

Correct AnswerverifiedShow Answer

Correct Answer
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American consumers benefitted because im...
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From 1980 to early 1985 the dollar in value, thereby benefiting American .

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An increase in stock prices the size of people's wealth and may their willingness to spend, everything else held constant.

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During a recession, output dec...
View Answer

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High interest rates might purchasing a house or car but at the same time high interest rates might saving.

Correct Answer
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