6 Frederic S. Mishkin ? Economics of Money, Banking, and Financial Markets, Seventh Edition
25) A declining stock market index due to lower share prices
(a) reduces people’s wealth and as a result may reduce their willingness to spend. (b) increases people’s wealth and as a result may increase their willingness to spend.
(c) decreases the amount of funds that business firms can raise by selling newly-issued stock. (d) both (a) and (c) of the above. (e) both (b) and (c) of the above.
Answer: D
Question Status: Previous Edition
26) Changes in stock prices
(a) affect people’s wealth and their willingness to spend
(b) affect firms’ decisions to sell stock to finance investment spending. (c) are characterized by considerable fluctuations. (d) all of the above.
(e) only (a) and (b) of the above. Answer: D
Question Status: Previous Edition
27) Fear of a major recession causes stock prices to fall, which in turn causes consumer spending to
(a) increase.
(b) remain unchanged. (c) decrease.
(d) cannot be determined. (e) none of the above. Answer: C
Question Status: Study Guide 28) A common stock is a claim on a corporation’s
(a) debt. (b) liabilities. (c) expenses. (d) employees.
(e) earnings and assets.
Answer: E
Question Status: New
29) The decline in stock prices from 2000 through 2002
(a) increased individuals’ willingness to spend. (b) had no effect on individual spending. (c) reduced individual’s willingness to spend. (d) increased individual wealth. (e) both (a) and (d) are correct.
Answer: C
Question Status: New
Chapter 1 Why Study Money, Banking, and Financial Markets? 7
30) The price of one country’s currency in terms of another’s is called
(a) the exchange rate. (b) the interest rate.
(c) the Dow Jones industrial average. (d) none of the above. Answer: A
Question Status: Previous Edition 31) Everything else constant, a stronger dollar will mean that
(a) vacationing in England becomes more expensive. (b) vacationing in England becomes less expensive. (c) French cheese becomes more expensive. (d) Japanese cars become more expensive. Answer: B
Question Status: Previous Edition
32) All else constant, as the dollar becomes stronger,
(a) Americans will purchase fewer foreign goods.
(b) U.S. goods exported abroad will cost less in foreign countries, and so foreigners will buy more
of them.
(c) the U.S. is unquestionably made better off. (d) none of the above.
Answer: D
Question Status: Previous Edition
33) Which of the following is most likely to result from a stronger dollar?
(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.
Answer: C
Question Status: Previous Edition
34) A change in the exchange rate has a direct effect on Americans because it affects
(a) the price of foreign goods to American consumers. (b) the price of American goods to foreign consumers. (c) the price Americans will pay to travel abroad. (d) the price foreigners will pay to travel to the U.S. (e) all of the above. Answer: E
Question Status: Previous Edition
8 Frederic S. Mishkin ? Economics of Money, Banking, and Financial Markets, Seventh Edition
35) A stronger dollar will likely hurt
(a) textile producers in South Carolina. (b) wheat farmers in Montana.
(c) automobile manufacturers in Michigan.
(d) all of the above since their exports will decline. (e) none of the above since their exports will increase.
Answer: D
Question Status: Previous Edition
36) A weaker dollar will likely hurt
(a) textile producers in South Carolina. (b) wheat farmers in Montana.
(c) automobile manufacturers in Michigan.
(d) all of the above since their exports will decline. (e) none of the above since their exports will increase. Answer: E
Question Status: Previous Edition 37) A stronger dollar benefits _____ and hurts _____.
(a) American businesses; American consumers (b) American businesses; foreign businesses (c) American consumers; American businesses (d) foreign businesses; American consumers
Answer: C
Question Status: Previous Edition
38) A weaker dollar benefits _____ and hurts _____.
(a) American businesses; American consumers (b) American businesses; foreign consumers (c) American consumers; American businesses (d) foreign businesses; American consumers
Answer: A
Question Status: Previous Edition
39) From 1980 to early 1985 the dollar appreciated in value, thereby benefiting _____ and harming
_____.
(a) American businesses; American consumers (b) American businesses; foreign businesses (c) American consumers; American businesses (d) foreign businesses; American consumers Answer: C
Question Status: Previous Edition
Chapter 1 Why Study Money, Banking, and Financial Markets? 9
40) From 1980 to early 1985 the dollar _____ in value, thereby benefiting American _____.
(a) appreciated; consumers (b) appreciated, businesses (c) depreciated; consumers (d) depreciated, businesses Answer: A
Question Status: Previous Edition 41) From 1980 to 1985 the dollar appreciated relative to the British pound. Holding everything else
constant, one would expect that, when compared to 1980, (a) more Americans traveled to England in 1985.
(b) Americans imported more Shetland sweaters from England in 1985. (c) Britons imported more wine from California in 1985. (d) all of the above.
(e) only (a) and (b) of the above. Answer: E
Question Status: Previous Edition 42) From 1980 to 1985 the dollar appreciated relative to the British pound. Holding everything else
constant, one would expect that, when compared to 1980, (a) more Britons traveled to the United States in 1985. (b) Britons imported more wine from California in 1985.
(c) Americans imported more Shetland sweaters from England in 1985. (d) only (a) and (b) of the above. Answer: C
Question Status: Previous Edition 43) From 1980 to 1985 the dollar appreciated relative to the British pound. Holding everything else
constant, one would expect that, when compared to 1980, (a) more Britons traveled to the United States in 1985. (b) Britons imported more wine from California in 1985. (c) Americans exported more wheat to England in 1985. (d) all of the above. (e) none of the above. Answer: E
Question Status: Previous Edition 44) From 1980 to 1985 the dollar appreciated relative to the British pound. Holding everything else
constant, one would expect that, when compared to 1980, (a) fewer Britons traveled to the United States in 1985. (b) Britons imported more wine from California in 1985. (c) Americans exported more wheat to England in 1985. (d) more Britons traveled to the United States in 1985.
Answer: A
Question Status: Previous Edition
10 Frederic S. Mishkin ? Economics of Money, Banking, and Financial Markets, Seventh Edition
45) When in 1980 a British pound cost approximately $2.40, a Shetland sweater that cost 50 British
pounds would have cost $120. With a stronger dollar, the same Shetland sweater would have cost (a) less than $120. (b) more than $120.
(c) $120, since the exchange rate does not affect the prices that American consumers pay for foreign
goods.
(d) $120, since the demand for Shetland sweaters will decrease to prevent an increase in price due
to the stronger dollar.
Answer: A
Question Status: Previous Edition
46) When in 1985 a British pound cost approximately $1.30, a Shetland sweater that cost 100 British
pounds would have cost $130. With a weaker dollar, the same Shetland sweater would have cost (a) less than $130. (b) more than $130.
(c) $130, since the exchange rate does not affect the prices that American consumers pay for foreign
goods.
(d) $130, since the demand for Shetland sweaters will decrease to prevent an increase in price due
to the stronger dollar. Answer: B
Question Status: Previous Edition 47) In 1980 a Shetland sweater would have cost $120. With a stronger dollar, the same Shetland sweater
would have cost (a) less than $120. (b) more than $120.
(c) $120, since the exchange rate does not affect the prices that American consumers pay for foreign
goods.
(d) $120, since the demand for Shetland sweaters will decrease to prevent an increase in price due
to the stronger dollar.
Answer: A
Question Status: Previous Edition
48) In 1985 a Shetland sweater would have cost $130. With a weaker dollar, the same Shetland sweater
would have cost (a) less than $130. (b) more than $130.
(c) $130, since the exchange rate does not affect the prices that American consumers pay for foreign
goods.
(d) $130, since the demand for Shetland sweaters will decrease to prevent an increase in price due
to the stronger dollar.
Answer: B
Question Status: Previous Edition