Interest-rate risk would not matter to which of the following bondholders?
A. A holder of a U.S. government bond.
B. A holder of a U.S. government bond that plans on holding it until it matures.
C. A holder of a U.S. government bond who plans on selling it in one year.
D. A holder of a U.S. government bond indexed for inflation.
Answer: B
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If it is said that a currency is undervalued against the dollar, it is meant that:
A) the dollar is worth more of that currency than it would have been under a fixed exchange rate regime. B) the dollar is worth more of that currency than it would have been under a flexible exchange rate regime. C) the dollar is worth less of that currency than it would have been under a fixed exchange rate regime. D) the dollar is worth more of that currency than it would have been under a managed exchange rate regime.
Because the products of firms in a monopolistically competitive market are not homogeneous, the
A) demand curve for the industry is the same for the firm. B) demand curve for the firm's product is horizontal. C) demand curve for the firm's product is downward sloping. D) demand curve for the firm's product is upward sloping.
Proponents of the interest-rate-based monetary policy transmission mechanism argue that when the Federal Reserve buys bonds, there will be
A) an increase in investment spending. B) a decrease in the money supply. C) a decrease in nominal Gross Domestic Product (GDP), but not in real income. D) a decrease in the price of outstanding bonds.
Adverse selection is a problem that arises:
A. before the parties have entered into an agreement. B. after the parties have voluntarily entered into an agreement. C. either before or after the parties have entered into an agreement. D. rarely in any market.