1.

It is a corporation or a trust through which individuals invest in diversified,

professionally managed portfolios of securities by pooling their funds with those of other
investors.
[a] Investment banks
[b] Insurance companies
[C] Investment companies
[D] None of the above

2.______ is a pricing strategy that regulators impose on certain businesses to limit what
they are able to charge consumers for its products or services to a price equal to the costs
necessary to create the product or service.

[a] Price Ceiling

[b] Average Cost Pricing

[c] Rate-of-return Regulation

[d] Price Capping by Regulators

3. All of the following statements describe oligopoly except

[a] high barriers to entry
[b] few sellers but many buyers
[c] sellers are price takers
[d] products are often nearly identical

4. In order to achieve full employment, government should

[a] Increase it’s spending
[b] Increase the personal income taxes
[c] Employ a combination of decreasing government spending and increasing taxes
[d] None of the above

5. Which of the following statements is incorrect?

[a] Contractionary fiscal policy reduces the aggregate demand of the economy.
[b] Increasing taxes would result in excess buying of products resulting in inflation. [c]
To increase aggregate demand, personal income taxes and business taxes should be
reduced.
[d] Expansionary fiscal policy increases the level of production

6. (I) Debt markets are often referred to generically as the bond market.
(II) A bond is a security that is a claim on the earnings and assets of a corporation.

[a] (I) is true, (II) false.

[b] (I) is false, (II) true.
[c] Both are true.
[d] Both are false.
7. I. Government bonds cannot be bought or sold in the capital markets.
II. The third market is made up of transactions that take place between large institutions
while the fourth market comprises OTC transactions between broker-dealers and large
institutions.
[a] I is true, II is false
[b] I is false, II is true
[c] both are false
[d] both are true

8. Which policy pursued by a central bank represents a contractionary monetary policy?

[a] a reduction in the interest rate at which it will lend to banks
[b] a reduction in the minimum cash to deposit ratios of banks
[c] the purchase of foreign currency to influence the country's exchange rate
[d] the sale of government bonds in the open market

9. S1: Public investment programs often give more adequate weight to environmental
objectives as compared to efficiency and poverty alleviation.
S2: The main purpose of Public investment/expenditure reviews is to provide
recommendations to governments on the size and composition of their spending
programs and on ways to strengthen local institutions in ways that enhance country
capabilities to design and implement such programs.
[a] Both are true
[b] Both are false
[c] Only statement 1 is true
[d] Only statement 2 is true

10. If Fiscal Policy is trying to promote stability and economic growth through tax cuts,
what type of policy is Fiscal policy using?
[a] Expansionary Fiscal Policy
[b] Contractionary Fiscal Policy
[c] Easy Money Policy
[d] Tight Money Policy

11. S1: Outright transactions is a monetary policy instrument where there is a clear intent
by the government to reverse the action of their buying/selling of monetary securities.
S2: Money Supply Indicator or Money Aggregates are used by economists to confirm
their expectations and help forecast trends in consumer price inflation
[a]. S1 is true and S2 is false
[b] S1 is false and S2 is true
[c] Both statements are true
[d] Both statements are false

12. S1: Brokerage firms are financial institutions that help you buy and sell securities. A
full service brokerage firm provides customers with financial planning services as well as
consulting services.
S2: “Shadow banking” contains the pejorative connotation of back alley loan sharks.
[a] Only S1 is true
[b] Only S2 is true
[c] Both are true
[d] Both are false

13. S1: Aggregate Demand reflects the real domestic output available at each possible
price level.
S2: Aggregate Supply reflects the real domestic output demanded at each possible price
level.
[a] Only statement 1 is incorrect
[b] Only statement 2 is incorrect
[c] Both statements are correct
[d] Both statements are incorrect

14. S1: Contractionary monetary policy can lead to increased unemployment and
depressed borrowing and spending by consumers and businesses.
S2: If this policy is implemented to vigorously, it can eventually result in an economic
inflation.
[a] Only S1 is true
[b] Only S2 is true
[c] Both statements are true
[d] Both statements are false

15. S1: Money Supply Indicators are Narrow Money, Broad Money and Liquidity Money
only.
S2: Monetary policy can be implemeted by changing the size of the monetary base which
directly changes the total amount of money circulating in the economy.
[a] Only Statement 1 is correct
[b] Only Statement 2 is correct
[c] Both Statements are correct
[d] Both Statements are incorrect

16. Which of the following market structure/s may collusion occur?

(A) Perfect Competition
(B) Monopoly
(C) Oligopoly
(D) B and C

17. I. Under the inflation targeting, the target is to keep inflation, under a particular
definition such as CPI, at a particular level.
II. The fixed exchange rate is based on maintaining a fixed exchange rate with a foreign
currency.
[A] Only Statement 1 is correct
[B] Only Statement 2 is correct
[C] Both Statements are correct
[D] Both Statements are incorrect
18. It says that the benefits of energy efficiency might be reduced as people change their
behavior.
[A] Permit Market
[B] Rebound Effect
[C]Cap and Trade
[D]Price Incentives

19. I. The four components of aggregate demand are consumer spending, investment
spending, government spending, and net exports.

II. Fiscal policy influences all of the four components of aggregate demand
[A] Only statement 1 is incorrect
[B] Only statement 2 is incorrect
[C] Both statements are correct
[D] Both statements are incorrect

20. Which of the following statements is false?

[A] Fiscal and Monetary Policies, structural adjustment programs, and stabilization
measures all effect the natural resource base.
[B] Improving the efficiency of industrial or energy related activities would reduce both
economic waste and environmental pollution.
[C] The expenditure reviews are used to appropriately elevate environmental concerns
and thereby help to avoid making investments that have some of the serious long term
environmental consequences.
[D] Structural adjustment programs address a well-defined set of reform areas which
includes establishing an appropriate macroeconomic framework for growth and
integrating the domestic economy into the world economy.

21. This is a collection of investment banks, hedge funds, insurers and other non-bank
financial institutions that replicate some of the activities of regulated banks, but do not
operate in the same regulatory environment.
[A] Credit Union
[B] Shadow Banks
[C] Nonbank Financial Institutions
[D] None of the above

22. Monetary policy can be implemented by

[A] Changing the tax rates
[B] Changing the proportion of the total assets that banks must hold in reserve with the
central bank
[C] Both A and B
[D] None of the above

23. The key macroeconomic variables in adjustment programs are the following, except:
[A] Investment Savings Gap
 [B] Fiscal Deficit
[C] Trade Deficit
[D] Tax Incidence

24. Statement 1: Greater profits are generated by a perfectly competitive firm than a
monopolistic one.
Statement 2: Barriers to entry include patents, copyrights and government regulations.
Which statement/s is/are true?
[A] Only Statement 1 is correct
[B] Only Statement 2 in correct
[C] Both Statements are correct
[D] Both Statements are incorrect

25. Statement 1: Liquidity trap is a situation in which there are zero nominal interest
rates, persistent deflation and deflation expectations.
Statement 2: Given high budget deficits, the government is concerned about: not wanting
to pay very high interest on its borrowings and it wants to crowd out the market.
[A] Both statements are true.
[B] Both statements are false.
[C] Only statement 1 is true.
[D] Only statement 2 is true.