Under the assumptions of time series regression, which of the following statements will be true of the following model: yt= 
0+ 1dt + ut?
A. d can have a lagged effect on y.
B. ut can be correlated with past and future values of d.
C. Changes in the error term cannot cause future changes in d.
D. Changes in d cannot cause changes in y at the same point of time.
Answer: C
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Assume a required reserve ratio of .4. An increase in excess reserves of $60 can potentially lead to a demand deposit expansion of
A) $50. B) $100. C) $125. D) $150.
If two events are perfectly positively correlated, then
A) diversification is not necessary since there is no risk. B) diversification eliminates all risk. C) diversification does not reduce risk at all. D) diversification only cuts the risk in half.
If the Mexican economy is using all of its available resources to produce goods, it means that the Mexican economy is producing at a point
a. located at one of the endpoints of the production possibilities curve b. beyond (exterior to) its production possibilities curve c. on its production possibilities curve d. inside (interior to) its production possibilities curve e. closer to the origin than its production possibilities curve
According to the structural stagnation hypothesis, expansionary macro policy tends to lead to:
A. goods inflation. B. goods deflation. C. low exchange rates. D. asset price inflation.