1) The present value of a security is

a) directly relatedto the discount rate.

b.) not related to the discount factor.

c) directlyrelatedto the principal amount.

d) not related to the discount rate.

2) Risk that can be eliminated by diversification is

a) idiosyncratic risk.

b) market risk.

c) default risk.

d) interest-rate risk.

3) Treasury bills issued by the U.S. government that mature in a year or less are similar to

a) perpetuities.

b) discount bonds.

c) coupon bonds.

d.) fixed-income securities.

4) A rise in the price level in an economy

a) shifts its long-run aggregate supply curve to the right.

b) shifts its long-run aggregate supply curve to the left.

c) does not have any effect on its long-run aggregate supply.

d.) does not have any effect on its aggregate demand.

5) The Dodd-Frank Act requires that the FDIC restore its Deposit Insurance Fund to a healthy level in a period of

a) weeks.

b) months.

c) years.

d) decades.

6) If an economy is in a recession, with output below its full-employment level, a(n) ____ monetary policy can be used to return the economy to its long-run equilibrium, which would cause the price level to ____.

a) expansionary; increase

b) expansionary; decline

c) contractionary; decline

d) contractionary; increase

7) Which of the followingwillNOT play a roleineliminating theshortcoming of the taxation system, particularly the factthat the tax system taxes nominal return rather than real return?

a) Eliminating taxation of interest

b) Introducing inflation-indexed bonds

c) Taxing only real interest income, not nominal interest income

d) Reducing inflation to zero

8) The group that determines the peaks and troughs of business cycles is a part of the

a) Department of Commerce.

b) Bureau of Labor Statistics.

c) National Bureau of Economic Research.

d) Center for International Business Cycle Research.