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1.1WhyStudyFinancialMarkets?

1）Financialmarketspromoteeconomicefficiencyby

A）channelingfundsfrominvestorstosavers.

B）creatinginflation.

C）channelingfundsfromsaverstoinvestors.

D）reducinginvestment.

2）Financialmarketspromotegreatereconomicefficiencybychannelingfundsfrom________to________.

A）investors;savers

B）borrowers;savers

C）savers;borrowers

D）savers;lenders

3）Well-functioningfinancialmarketspromote

A）inflation.

B）deflation.

C）unemployment.

D）growth.

4）Marketsinwhichfundsaretransferredfromthosewhohaveexcessfundsavailabletothosewhohaveashortageofavailablefundsarecalled

A）commoditymarkets.

B）fund-availablemarkets.

C）derivativeexchangemarkets.

D）financialmarkets.

5）________marketstransferfundsfrompeoplewhohaveanexcessofavailablefundstopeoplewhohaveashortage.

A）Commodity

B）Fund-available

C）Financial

D）Derivativeexchange

6）Poorlyperformingfinancialmarketscanbethecauseof

A）wealth.

B）poverty.

C）financialstability.

D）financialexpansion.

7）Thebondmarketsareimportantbecausetheyare

A）easilythemostwidelyfollowedfinancialmarketsintheUnitedStates.

B）themarketswhereforeignexchangeratesaredetermined.

C）themarketswhereinterestratesaredetermined.

D）themarketswhereallborrowersgettheirfunds.

8）Thepricepaidfortherentalofborrowedfunds（usuallyexpressedasapercentageoftherentalof$100peryear）iscommonlyreferredtoasthe

A）inflationrate.

B）exchangerate.

C）interestrate.

D）aggregatepricelevel.

9）Comparedtointerestratesonlong-termU.S.governmentbonds,interestratesonthree-monthTreasurybillsfluctuate________andare________onaverage.

A）more;lower

B）less;lower

C）more;higher

D）less;higher

10）TheinterestrateonBaa（mediumquality）corporatebondsis________,onaverage,thanotherinterestrates,andthespreadbetweenitandotherratesbecame________inthe1970s.

A）lower;smaller

B）lower;larger

C）higher;smaller

D）higher;larger

11）Everythingelseheldconstant,adeclineininterestrateswillcausespendingonhousingto

A）fall.

B）remainunchanged.

C）eitherrise,fall,orremainthesame.

D）rise.

12）Anincreaseininterestratesmight________savingbecausemorecanbeearnedininterestincome.

A）encourage

B）discourage

C）disallow

D）invalidate

13）Everythingelseheldconstant,anincreaseininterestratesonstudentloans

A）increasesthecostofacollegeeducation.

B）reducesthecostofacollegeeducation.

C）hasnoeffectoneducationalcosts.

D）increasescostsforstudentswithnoloans.

14）Highinterestratesmightcauseacorporationto________buildinganewplantthatwouldprovidemorejobs.

A）complete

B）consider

C）postpone

D）contemplate

15）Thestockmarketisimportantbecauseitis

A）whereinterestratesaredetermined.

B）themostwidelyfollowedfinancialmarketintheUnitedStates.

C）whereforeignexchangeratesaredetermined.

D）themarketwheremostborrowersgettheirfunds.

16）Stockpricessincethe1950shavebeen

A）relativelystabletrendingupwardatasteadypace.

B）relativelystabletrendingdownwardatamoderaterate.

C）extremelyvolatile.

D）unstabletrendingdownwardatamoderaterate.

17）Arisingstockmarketindexduetohighershareprices

A）increasespeople'swealth,butisunlikelytoincreasetheirwillingnesstospend.

B）increasespeople'swealthandasaresultmayincreasetheirwillingnesstospend.

C）decreasestheamountoffundsthatbusinessfirmscanraisebysellingnewly-issuedstock.

D）decreasespeople'swealth,butisunlikelytoincreasetheirwillingnesstospend.

18）Whenstockpricesfall

A）anindividual'swealthisnotaffectednoristheirwillingnesstospend.

B）abusinessfirmwillbemorelikelytosellstocktofinanceinvestmentspending.

C）anindividual'swealthmaydecreasebuttheirwillingnesstospendisnotaffected.

D）anindividual'swealthmaydecreaseandtheirwillingnesstospendmaydecrease.

19）Changesinstockprices

A）donotaffectpeople'swealthandtheirwillingnesstospend

B）affectfirms'decisionstosellstocktofinanceinvestmentspending.

C）occurinregularpatterns.

D）areunimportanttodecisionmakers.

20）Anincreaseinstockprices________thesizeofpeople'swealthandmay________theirwillingnesstospend,everythingelseheldconstant.

A）increases;increase

B）increases;decrease

C）decreases;increase

D）decreases;decrease

21）Fearofamajorrecessioncausesstockpricestofall,everythingelseheldconstant,whichinturncausesconsumerspendingto

A）increase.

B）remainunchanged.

C）decrease.

D）cannotbedetermined.

22）Acommonstockisaclaimonacorporation's

A）debt.

B）liabilities.

C）expenses.

D）earningsandassets.

23）On________,October19,1987,themarketexperienceditsworstone-daydropinitsentirehistorywiththeDIJAfallingbymorethan500points.

A）"TerribleTuesday"

B）"WoefulWednesday"

C）"FreakyFriday"

D）"BlackMonday"

24）Thedeclineinstockpricesfrom2000through2002

A）increasedindividuals'willingnesstospend.

B）hadnoeffectonindividualspending.

C）reducedindividuals'willingnesstospend.

D）increasedindividualwealth.

25）TheDowreachedapeakofover11,000beforethecollapseofthe________bubblein2000.

A）housing

B）manufacturing

C）high-tech

D）banking

26）Thepriceofonecountry'scurrencyintermsofanothercountry'scurrencyiscalledthe

A）exchangerate.

B）interestrate.

C）DowJonesindustrialaverage.

D）primerate.

27）Themarketwhereonecurrencyisconvertedintoanothercurrencyiscalledthe________market.

A）stock

B）bond

C）derivatives

D）foreignexchange

28）Everythingelseconstant,astrongerdollarwillmeanthat

A）vacationinginEnglandbecomesmoreexpensive.

B）vacationinginEnglandbecomeslessexpensive.

C）Frenchcheesebecomesmoreexpensive.

D）Japanesecarsbecomemoreexpensive.

29）Whichofthefollowingismostlikelytoresultfromastrongerdollar?

A）U.S.goodsexportedaboardwillcostlessinforeigncountries,andsoforeignerswillbuymoreofthem.

B）U.S.goodsexportedaboardwillcostmoreinforeigncountriesandsoforeignerswillbuymoreofthem.

C）U.S.goodsexportedabroadwillcostmoreinforeigncountries,andsoforeignerswillbuyfewerofthem.

D）Americanswillpurchasefewerforeigngoods.

30）Everythingelseheldconstant,aweakerdollarwilllikelyhurt

A）textileexportersinSouthCarolina.

B）wheatfarmersinMontanathatselldomestically.

C）automobilemanufacturersinMichiganthatusedomesticallyproducedinputs.

D）furnitureimportersinCalifornia.

31）Everythingelseheldconstant,astrongerdollarbenefits________andhurts________.

A）Americanbusinesses;Americanconsumers

B）Americanbusinesses;foreignbusinesses

C）Americanconsumers;Americanbusinesses

D）foreignbusinesses;Americanconsumers

32）From1980toearly1985thedollar________invalue,therebybenefitingAmerican________.

A）appreciated;consumers

B）appreciated,businesses

C）depreciated;consumers

D）depreciated,businesses

33）From1980to1985thedollarappreciatedrelativetotheBritishpound.Holdingeverythingelseconstant,onewouldexpectthat,whencomparedto1980,

A）fewerBritonstraveledtotheUnitedStatesin1985.

B）BritonsimportedmorewinefromCaliforniain1985.

C）AmericansexportedmorewheattoEnglandin1985.

D）moreBritonstraveledtotheUnitedStatesin1985.

34）Whenin1985aBritishpoundcostapproximately$1.30,aShetlandsweaterthatcost100Britishpoundswouldhavecost$130.Withaweakerdollar,thesameShetlandsweaterwouldhavecost

A）lessthan$130.

B）morethan$130.

C）$130,sincetheexchangeratedoesnotaffectthepricesthatAmericanconsumerspayforforeigngoods.

D）$130,sincethedemandforShetlandsweaterswilldecreasetopreventanincreaseinpriceduetothestrongerdollar.

35）Everythingelseheldconstant,adecreaseinthevalueofthedollarrelativetoallforeigncurrenciesmeansthatthepriceofforeigngoodspurchasedbyAmericans

A）increases

B）decreases.

C）remainsunchanged.

D）eitherincreases,decreases,orremainsunchanged.

36）AmericanfarmerswhosellbeeftoEuropebenefitmostfrom

A）adecreaseinthedollarpriceofeuros.

B）anincreaseinthedollarpriceofeuros.

C）aconstantdollarpriceforeuros.

D）aEuropeanbanonimportsofAmericanbeef.

37）Ifthepriceofaeuro（theEuropeancurrency）increasesfrom$1.00to$1.10,then,everythingelseheldconstant,

A）aEuropeanvacationbecomeslessexpensive.

B）aEuropeanvacationbecomesmoreexpensive.

C）thecostofaEuropeanvacationisnotaffected.

D）foreigntravelbecomesimpossible.

38）Everythingelseheldconstant,AmericanswholoveFrenchwinebenefitmostfrom

A）adecreaseinthedollarpriceofeuros.

B）anincreaseinthedollarpriceofeuros.

C）aconstantdollarpriceforeuros.

D）abanonimportsfromEurope.

39）Whatisastock?

Howdostocksaffecttheeconomy?

Answer:

Astockrepresentsashareofownershipofacorporation,oraclaimonafirm'searnings/assets.Stocksarepartofwealth,andchangesintheirvalueaffectpeople'swillingnesstospend.Changesinstockpricesaffectafirm'sabilitytoraisefunds,andthustheirinvestment.

QuesStatus:

PreviousEdition

1.2WhyStudyBankingandFinancialInstitutions?

1）Channelingfundsfromindividualswithsurplus