Sol Drescher

1185 WordsMar 10, 20125 Pages
Quiz 4 Econ 430 Money & Banking Spring 2012 Prof. Drescher MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Please place your answers for this section on the answer sheet for Quiz 2 template (see Course Content for the answer sheet). 1 An increase in autonomous consumer expenditure causes the equilibrium level of aggregate output to ________ at any given interest rate and shifts the ________ curve to the ________, everything else held constant. A) rise; LM; right B) rise; IS; right C) fall; LM; left D) fall; IS; left 2 An autonomous depreciation of the U.S. dollar makes American goods ________ relative to foreign goods and results in a ________ in U.S. net…show more content…
A) were not; could borrow abroad B) were not; could not borrow abroad C) were; could borrow abroad D) were; could not borrow abroad 17 In emerging market countries, many firms have debt denominated in foreign currency like the dollar or yen. A depreciation of the domestic currency A) results in increases in the firm's indebtedness in domestic currency terms, even though the value of their assets remains unchanged. B) results in an increase in the value of the firm's assets. C) means that the firm does not owe as much on their foreign debt. D) strengthens their balance sheet in terms of the domestic currency. 18 A ________ pays out cash flows from subprime mortgage-backed securities in different tranches, with the highest-rated tranch paying out first, while lower ones paid out less if there were losses on the mortgage-backed securities. A) Discount bond B) Adjustable-rate mortgage C) Negotiable CD D) Collateralized debt obligation (CDO) 19 The economy recovers quickly from most recessions, but the increase in adverse selection and moral hazard problems in the credit markets caused by ________ led to the severe economic contraction known as The Great Depression. A) debt deflation B) illiquidity C) an improvement in banks' balance sheets D) increases in bond prices 20 When financial intermediaries deleverage, firms cannot fund investment opportunities resulting in A) a contraction of economic activity. B) an economic

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