Question 1

Adjustable rate mortgages became increasingly attractive and grew as a percentage of total outstanding mortgages during 2002 to 2004 because

Accepted Answer

A)  interest rates were kept artificially low during this period. 
B)  interest rates rose sharply during this period. 
C)  lending standards were tightened during this period. 
D)  housing prices declined during this period. 
A)  interest rates were kept artificially low during this period. 
B)  interest rates rose sharply during this period. 
C)  lending standards were tightened during this period. 
D)  housing prices declined during this period. A

Question 2

Given the current structure of the Social Security and Medicare programs, the retirement of the baby boom generation during the years following 2012 will be most likely to

Accepted Answer

A)  reduce government expenditures on health care and income transfers. 
B)  increase government expenditures on health care and income transfers. 
C)  result in large budget surpluses. 
D)  result in lower tax rates. 
A)  reduce government expenditures on health care and income transfers. 
B)  increase government expenditures on health care and income transfers. 
C)  result in large budget surpluses. 
D)  result in lower tax rates. B

Question 3

The mortgage default rate is

Accepted Answer

A)  the percentage of home mortgage loans in which the borrower has failed to make the current monthly payment. 
B)  equal to the foreclosure rate. 
C)  the percentage of home mortgages in which the borrower is 90 days or more late with the payment or it is in the foreclosure process. 
D)  the percentage of home mortgages in which the borrower owes more than the home is worth. 
A)  the percentage of home mortgage loans in which the borrower has failed to make the current monthly payment. 
B)  equal to the foreclosure rate. 
C)  the percentage of home mortgages in which the borrower is 90 days or more late with the payment or it is in the foreclosure process. 
D)  the percentage of home mortgages in which the borrower owes more than the home is worth. C

Question 4

Which of the following is true about the Great Depression?

Accepted Answer

A)  The Great Depression re-enforces the view that raising taxes in the midst of a severe recession is a bad idea. 
B)  The Great Depression clearly indicates that a prolonged period of monetary contraction will keep inflation low and promote monetary stability. 
C)  The Great Depression illustrates that trade restrictions will protect domestic industry and save jobs. 
D)  The Great Depression demonstrates that the political incentive structure during a severe downturn will encourage politicians to avoid frequent policy changes. 
A)  The Great Depression re-enforces the view that raising taxes in the midst of a severe recession is a bad idea. 
B)  The Great Depression clearly indicates that a prolonged period of monetary contraction will keep inflation low and promote monetary stability. 
C)  The Great Depression illustrates that trade restrictions will protect domestic industry and save jobs. 
D)  The Great Depression demonstrates that the political incentive structure during a severe downturn will encourage politicians to avoid frequent policy changes.

Question 5

Among the 23 long-standing members of the Organization for Economic Cooperation and Development (OECD), the highest rates of economic growth during recent decades have been achieved by

Accepted Answer

A)  Western European countries. 
B)  the countries with the smallest government expenditures as a share of GDP. 
C)  the countries with the largest government expenditures as a share of GDP. 
D)  the countries with the most rapid growth of government expenditures as a share of GDP. 
A)  Western European countries. 
B)  the countries with the smallest government expenditures as a share of GDP. 
C)  the countries with the largest government expenditures as a share of GDP. 
D)  the countries with the most rapid growth of government expenditures as a share of GDP.

Question 6

Which of the following is true?

Accepted Answer

A)  Managed equity funds that have yielded attractive returns during the last 5 or 10 years can generally be counted on to yield similar returns in the future. 
B)  Managed funds generally outperform indexed equity mutual funds. 
C)  An investment strategy that yielded a high rate of return in the past will often yield below-average returns in the future. 
D)  Indexed equity mutual funds are usually tied directly to either the Consumer Price Index or the GDP deflator. 
A)  Managed equity funds that have yielded attractive returns during the last 5 or 10 years can generally be counted on to yield similar returns in the future. 
B)  Managed funds generally outperform indexed equity mutual funds. 
C)  An investment strategy that yielded a high rate of return in the past will often yield below-average returns in the future. 
D)  Indexed equity mutual funds are usually tied directly to either the Consumer Price Index or the GDP deflator.

Question 7

During 1982-1997, stock prices increased substantially. Which of the following helped to boost stock prices during this period?

Accepted Answer

A)  higher interest rates and rapid growth of corporate profits 
B)  lower interest rates and rapid growth of corporate profits 
C)  higher interest rates and slow growth of corporate profits 
D)  lower interest rates and slow growth of corporate profits 
A)  higher interest rates and rapid growth of corporate profits 
B)  lower interest rates and rapid growth of corporate profits 
C)  higher interest rates and slow growth of corporate profits 
D)  lower interest rates and slow growth of corporate profits

Question 8

Under the current Social Security system, married persons may draw benefits based on

Accepted Answer

A)  only their own earnings. 
B)  their own earnings or draw 50 percent of the benefits earned by their spouse. 
C)  their own earnings plus 50 percent of their spouse's earnings. 
D)  their own earnings plus 100 percent of their spouse's earnings. 
A)  only their own earnings. 
B)  their own earnings or draw 50 percent of the benefits earned by their spouse. 
C)  their own earnings plus 50 percent of their spouse's earnings. 
D)  their own earnings plus 100 percent of their spouse's earnings.

Question 9

Compared to the situation during the first 125 years of the United States (1790-1915), today total government expenditures are ____ share of the economy, and a greater proportion of those expenditures take place at the ____ level. (Fill in the blanks)

Accepted Answer

A)  a smaller; federal 
B)  about the same; federal 
C)  a larger; federal 
D)  a larger; state and local 
A)  a smaller; federal 
B)  about the same; federal 
C)  a larger; federal 
D)  a larger; state and local

Question 10

Which of the following about stock prices is true?

Accepted Answer

A)  The buyer of a firm's stock is purchasing a fractional share in the firm's future net revenues. 
B)  When investors believe that a business decision by the management of a firm will increase the firm's future earnings, the price of the firm's stock will tend to rise. 
C)  Changing stock prices provide the board of directors and managers of a firm with a strong incentive to make good decisions and undertake productive projects. 
D)  All of the above are true. 
A)  The buyer of a firm's stock is purchasing a fractional share in the firm's future net revenues. 
B)  When investors believe that a business decision by the management of a firm will increase the firm's future earnings, the price of the firm's stock will tend to rise. 
C)  Changing stock prices provide the board of directors and managers of a firm with a strong incentive to make good decisions and undertake productive projects. 
D)  All of the above are true.

Question 11

The theory that stock prices reflect all available information and that the future movement of stock prices is unpredictable is called the

Accepted Answer

A)  random walk theory. 
B)  inefficient market theory. 
C)  technical analysis theory. 
D)  charting theory. 
A)  random walk theory. 
B)  inefficient market theory. 
C)  technical analysis theory. 
D)  charting theory.

Question 12

According to Friedrich Hayek and his followers, the booms and busts of the business cycle are primarily the result of

Accepted Answer

A)  fluctuations in aggregate demand. 
B)  the "animal spirits" of private investors. 
C)  excessive credit expansion and artificially low interest rates that trigger malinvestment. 
D)  the unwillingness of political decision-makers to follow the advice of macroeconomists who know how to alter fiscal policy in a manner that would virtually eliminate the ups and downs of the business cycle. 
A)  fluctuations in aggregate demand. 
B)  the "animal spirits" of private investors. 
C)  excessive credit expansion and artificially low interest rates that trigger malinvestment. 
D)  the unwillingness of political decision-makers to follow the advice of macroeconomists who know how to alter fiscal policy in a manner that would virtually eliminate the ups and downs of the business cycle.

Question 13

The Social Security system of the United States is based on the pay-as-you-go principle. This indicates that funding of the benefits paid to current retirees comes primarily from

Accepted Answer

A)  the income generated by the system's ownership of stock. 
B)  the tax payments of current workers. 
C)  the funds that current retirees paid into their personal savings accounts during their working years. 
D)  money created by the Federal Reserve system. 
A)  the income generated by the system's ownership of stock. 
B)  the tax payments of current workers. 
C)  the funds that current retirees paid into their personal savings accounts during their working years. 
D)  money created by the Federal Reserve system.

Question 14

Between 2001 and 2005, sub-prime (including Atl-A) mortgages ____________ as a share of the total.

Accepted Answer

A)  fell from 30 percent to less than 10 percent 
B)  rose from 5 percent to 10 percent 
C)  rose from 10 percent to more than 30 percent 
D)  fell from more than 20 percent to less than 10 percent 
A)  fell from 30 percent to less than 10 percent 
B)  rose from 5 percent to 10 percent 
C)  rose from 10 percent to more than 30 percent 
D)  fell from more than 20 percent to less than 10 percent

Question 15

Economists who believe that market economies are inherently unstable argue that the crisis of 2008 was primarily the result of

Accepted Answer

A)  the expansionary policies of the Fed that caused the housing boom. 
B)  housing regulations that undermined sound lending practices. 
C)  the leveraged lending practices of banks and the fear that retarded both consumption and investment in the latter half of 2008. 
D)  persistently high interest rates during the decade leading up to the crisis. 
A)  the expansionary policies of the Fed that caused the housing boom. 
B)  housing regulations that undermined sound lending practices. 
C)  the leveraged lending practices of banks and the fear that retarded both consumption and investment in the latter half of 2008. 
D)  persistently high interest rates during the decade leading up to the crisis.

Question 16

Which of the following would tend to increase the value of a future stream of income?

Accepted Answer

A)  an increase in the rate of inflation 
B)  an increase in the interest rate 
C)  a reduction in the interest rate 
D)  a reduction in the size of the expected future income 
A)  an increase in the rate of inflation 
B)  an increase in the interest rate 
C)  a reduction in the interest rate 
D)  a reduction in the size of the expected future income

Question 17

The administrative, enforcement, and compliance costs of collecting taxes in the United States sum to

Accepted Answer

A)  between 1 and 2 percent of the revenues collected. 
B)  between 5 and 6 percent of the revenues collected. 
C)  between 12 and 15 percent of the revenues collected. 
D)  more than half of the revenues collected. 
A)  between 1 and 2 percent of the revenues collected. 
B)  between 5 and 6 percent of the revenues collected. 
C)  between 12 and 15 percent of the revenues collected. 
D)  more than half of the revenues collected.

Question 18

Which of the following contributed to the severity of the Great Depression in the 1930s?

Accepted Answer

A)  Constant structural changes that created uncertainty and undermined markets. 
B)  The Fed's policy of rapid monetary expansion during the early 1930s. 
C)  A reduction in tariffs protecting many U.S. industries. 
D)  A substantial tax rate reduction, which led to large deficits and high interest rates during the early 1930s. 
A)  Constant structural changes that created uncertainty and undermined markets. 
B)  The Fed's policy of rapid monetary expansion during the early 1930s. 
C)  A reduction in tariffs protecting many U.S. industries. 
D)  A substantial tax rate reduction, which led to large deficits and high interest rates during the early 1930s.

Question 19

An analysis of large declines in the stock market since the Great Depression indicates that

Accepted Answer

A)  the stock market crash in October 1929 was more severe than subsequent crashes. 
B)  a prolonged recession will always follow a large decline in the stock market. 
C)  almost all stock market crashes since the Great Depression were followed by short recessions of 12 to 18 months, and in some cases, no recession at all. 
D)  the only way to recover from a stock market crash is through government spending, increased regulation, and tax-increases. 
A)  the stock market crash in October 1929 was more severe than subsequent crashes. 
B)  a prolonged recession will always follow a large decline in the stock market. 
C)  almost all stock market crashes since the Great Depression were followed by short recessions of 12 to 18 months, and in some cases, no recession at all. 
D)  the only way to recover from a stock market crash is through government spending, increased regulation, and tax-increases.

Question 20

The Smoot-Hawley trade bill of 1930, designed to save jobs and increase revenue for the federal government, resulted in

Accepted Answer

A)  an increase in both employment and federal tax revenue. 
B)  a sharp reduction in trade and a decline in federal tax revenue. 
C)  the protection of jobs while maintaining the level of trade, but it did not increase federal tax revenue. 
D)  a decline in the volume of trade, but an increase in revenue from tariffs, which made it possible for the federal government to balance its budget. 
A)  an increase in both employment and federal tax revenue. 
B)  a sharp reduction in trade and a decline in federal tax revenue. 
C)  the protection of jobs while maintaining the level of trade, but it did not increase federal tax revenue. 
D)  a decline in the volume of trade, but an increase in revenue from tariffs, which made it possible for the federal government to balance its budget.

Adjustable rate mortgages became increasingly attractive and grew as a percentage of total outstanding mortgages during 2002 to 2004 because

Given the current structure of the Social Security and Medicare programs, the retirement of the baby boom generation during the years following 2012 will be most likely to

The mortgage default rate is

Which of the following is true about the Great Depression?

Among the 23 long-standing members of the Organization for Economic Cooperation and Development (OECD), the highest rates of economic growth during recent decades have been achieved by

Which of the following is true?

During 1982-1997, stock prices increased substantially. Which of the following helped to boost stock prices during this period?

Under the current Social Security system, married persons may draw benefits based on

Compared to the situation during the first 125 years of the United States (1790-1915), today total government expenditures are share of the economy, and a greater proportion of those expenditures take place at the level. (Fill in the blanks)

Which of the following about stock prices is true?

The theory that stock prices reflect all available information and that the future movement of stock prices is unpredictable is called the

According to Friedrich Hayek and his followers, the booms and busts of the business cycle are primarily the result of

The Social Security system of the United States is based on the pay-as-you-go principle. This indicates that funding of the benefits paid to current retirees comes primarily from

Between 2001 and 2005, sub-prime (including Atl-A) mortgages ____________ as a share of the total.

Economists who believe that market economies are inherently unstable argue that the crisis of 2008 was primarily the result of

Which of the following would tend to increase the value of a future stream of income?

The administrative, enforcement, and compliance costs of collecting taxes in the United States sum to

Which of the following contributed to the severity of the Great Depression in the 1930s?

An analysis of large declines in the stock market since the Great Depression indicates that

The Smoot-Hawley trade bill of 1930, designed to save jobs and increase revenue for the federal government, resulted in

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad--As Model

Fiscal Policy: The Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy: Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters

Exam 20: Special Topics

Adjustable rate mortgages became increasingly attractive and grew as a percentage of total outstanding mortgages during 2002 to 2004 because

Given the current structure of the Social Security and Medicare programs, the retirement of the baby boom generation during the years following 2012 will be most likely to

The mortgage default rate is

Which of the following is true about the Great Depression?

Among the 23 long-standing members of the Organization for Economic Cooperation and Development (OECD), the highest rates of economic growth during recent decades have been achieved by

Which of the following is true?

During 1982-1997, stock prices increased substantially. Which of the following helped to boost stock prices during this period?

Under the current Social Security system, married persons may draw benefits based on

Compared to the situation during the first 125 years of the United States (1790-1915), today total government expenditures are ____ share of the economy, and a greater proportion of those expenditures take place at the ____ level. (Fill in the blanks)

Which of the following about stock prices is true?

The theory that stock prices reflect all available information and that the future movement of stock prices is unpredictable is called the

According to Friedrich Hayek and his followers, the booms and busts of the business cycle are primarily the result of

The Social Security system of the United States is based on the pay-as-you-go principle. This indicates that funding of the benefits paid to current retirees comes primarily from

Between 2001 and 2005, sub-prime (including Atl-A) mortgages ____________ as a share of the total.

Economists who believe that market economies are inherently unstable argue that the crisis of 2008 was primarily the result of

Which of the following would tend to increase the value of a future stream of income?

The administrative, enforcement, and compliance costs of collecting taxes in the United States sum to

Which of the following contributed to the severity of the Great Depression in the 1930s?

An analysis of large declines in the stock market since the Great Depression indicates that

The Smoot-Hawley trade bill of 1930, designed to save jobs and increase revenue for the federal government, resulted in

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad--As Model

Fiscal Policy: The Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy: Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters

Compared to the situation during the first 125 years of the United States (1790-1915), today total government expenditures are share of the economy, and a greater proportion of those expenditures take place at the level. (Fill in the blanks)