Econ. 315 / Money, Banking and Financial Market

1	If your stock portfolio increases by $1.00, research has demonstrated that you will:
	A)	decrease your consumption by $0.20.
	B)	increase your consumption by $0.04.
	C)	increase your savings by $0.04.
	D)	begin to worry about inflation.

2.	The time between a shock and the policy response is called the:
	A)	Outside lag.
	B)	Period of adaptation.
	C)	Recognition lag.
	D)	Inside lag.

3.	Velocity is defined as:
	A)	The speed with which an asset can be made liquid.
	B)	How quickly money moves through an economy.
	C)	The acceleration of inflation.
	D)	The Fed's response to an expenditure shock.

3.	Deflation is a period of ________ inflation.
	A)	sustained negative
	B)	slowing
	C)	steady and low
	D)	zero

4.	The hyperinflation in Serbia was spurred on by:
	A)	New infrastructure expenditures.
	B)	High energy prices.
	C)	Higher than usual remittances from Serbians living outside Serbia.
	D)	The war in Bosnia.

5.	When economists speak of inflation, they mean:
	A)	Prices of consumer goods and services are rising.
	B)	Prices of all consumer goods, excluding food and energy, are rising.
	C)	All prices, including wages and salaries, are rising.
	D)	Production costs are rising.

6.	The macroeconomic model of the U.S. economy devised by economists at the Board of Governors is nicknamed:
	A)	HUD.
	B)	NAIRU.
	C)	Furbus.
	D)	Fannie Mae.

7.	Suppose you are an economist for Moody's and believe the natural rate of unemployment is constant. If in fact it is falling, and the unemployment rate falls, you would recommend that the Fed:
	A)	Reduce interest rates.
	B)	Raise interest rates.
	C)	Keep interest rates constant.
	D)	Keep tabs on the stock markets.

8.	An asset price crash can be interpreted as:
	A)	A complete lack of confidence.
	B)	The offshoot of a liquidity crisis.
	C)	An asset-price bubble in reverse.
	D)	Government debt default.

9.	In a recession, ________, which makes ________ more likely.
	A)	Loan demand falls; bank panics
	B)	Loan supply rises; insolvency
	C)	Inflation rises; higher interest rates
	D)	Unemployment rises; inflation

10.	The term too big to fail was coined by ________ in 1984.
	A)	President Ronald Reagan
	B)	Treasury Secretary Paulson
	C)	A congressman
	D)	The president of the International Monetary Fund