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moneyandbanktestbankchap01
TheEconomicsofMoney,Banking,andFinancialMarkets,9e(Mishkin)
Chapter1WhyStudyMoney,Banking,andFinancialMarkets?
1.1WhyStudyFinancialMarkets?
1)Financialmarketspromoteeconomicefficiencyby
A)channelingfundsfrominvestorstosavers.
B)creatinginflation.
C)channelingfundsfromsaverstoinvestors.
D)reducinginvestment.
Answer:
C
QuesStatus:
PreviousEdition
2)Financialmarketspromotegreatereconomicefficiencybychannelingfundsfrom________to________.
A)investors;savers
B)borrowers;savers
C)savers;borrowers
D)savers;lenders
Answer:
C
QuesStatus:
PreviousEdition
3)Well-functioningfinancialmarketspromote
A)inflation.
B)deflation.
C)unemployment.
D)growth.
Answer:
D
QuesStatus:
PreviousEdition
4)Akeyfactorinproducinghigheconomicgrowthis
A)eliminatingforeigntrade.
B)well-functioningfinancialmarkets.
C)highinterestrates.
D)stockmarketvolatility.
Answer:
B
QuesStatus:
New
5)Marketsinwhichfundsaretransferredfromthosewhohaveexcessfundsavailabletothosewhohaveashortageofavailablefundsarecalled
A)commoditymarkets.
B)fund-availablemarkets.
C)derivativeexchangemarkets.
D)financialmarkets.
Answer:
D
QuesStatus:
PreviousEdition
6)________marketstransferfundsfrompeoplewhohaveanexcessofavailablefundstopeoplewhohaveashortage.
A)Commodity
B)Fund-available
C)Financial
D)Derivativeexchange
Answer:
C
QuesStatus:
PreviousEdition
7)Poorlyperformingfinancialmarketscanbethecauseof
A)wealth.
B)poverty.
C)financialstability.
D)financialexpansion.
Answer:
B
QuesStatus:
PreviousEdition
8)Thebondmarketsareimportantbecausetheyare
A)easilythemostwidelyfollowedfinancialmarketsintheUnitedStates.
B)themarketswhereforeignexchangeratesaredetermined.
C)themarketswhereinterestratesaredetermined.
D)themarketswhereallborrowersgettheirfunds.
Answer:
C
QuesStatus:
PreviousEdition
9)Thepricepaidfortherentalofborrowedfunds(usuallyexpressedasapercentageoftherentalof$100peryear)iscommonlyreferredtoasthe
A)inflationrate.
B)exchangerate.
C)interestrate.
D)aggregatepricelevel.
Answer:
C
QuesStatus:
PreviousEdition
10)Comparedtointerestratesonlong-termU.S.governmentbonds,interestratesonthree-monthTreasurybillsfluctuate________andare________onaverage.
A)more;lower
B)less;lower
C)more;higher
D)less;higher
Answer:
A
QuesStatus:
PreviousEdition
11)TheinterestrateonBaa(mediumquality)corporatebondsis________,onaverage,thanotherinterestrates,andthespreadbetweenitandotherratesbecame________inthe1970s.
A)lower;smaller
B)lower;larger
C)higher;smaller
D)higher;larger
Answer:
D
QuesStatus:
PreviousEdition
12)Everythingelseheldconstant,adeclineininterestrateswillcausespendingonhousingto
A)fall.
B)remainunchanged.
C)eitherrise,fall,orremainthesame.
D)rise.
Answer:
D
QuesStatus:
PreviousEdition
13)Highinterestratesmight________purchasingahouseorcarbutatthesametimehighinterestratesmight________saving.
A)discourage;encourage
B)discourage;discourage
C)encourage;encourage
D)encourage;discourage
Answer:
A
QuesStatus:
New
14)Anincreaseininterestratesmight________savingbecausemorecanbeearnedininterestincome.
A)encourage
B)discourage
C)disallow
D)invalidate
Answer:
A
QuesStatus:
PreviousEdition
15)Everythingelseheldconstant,anincreaseininterestratesonstudentloans
A)increasesthecostofacollegeeducation.
B)reducesthecostofacollegeeducation.
C)hasnoeffectoneducationalcosts.
D)increasescostsforstudentswithnoloans.
Answer:
A
QuesStatus:
PreviousEdition
16)Highinterestratesmightcauseacorporationto________buildinganewplantthatwouldprovidemorejobs.
A)complete
B)consider
C)postpone
D)contemplate
Answer:
C
QuesStatus:
PreviousEdition
17)Thestockmarketisimportantbecauseitis
A)whereinterestratesaredetermined.
B)themostwidelyfollowedfinancialmarketintheUnitedStates.
C)whereforeignexchangeratesaredetermined.
D)themarketwheremostborrowersgettheirfunds.
Answer:
B
QuesStatus:
PreviousEdition
18)Stockpricesare
A)relativelystabletrendingupwardatasteadypace.
B)relativelystabletrendingdownwardatamoderaterate.
C)extremelyvolatile.
D)unstabletrendingdownwardatamoderaterate.
Answer:
C
QuesStatus:
Revised
19)Arisingstockmarketindexduetohighershareprices
A)increasespeople'swealth,butisunlikelytoincreasetheirwillingnesstospend.
B)increasespeople'swealthandasaresultmayincreasetheirwillingnesstospend.
C)decreasestheamountoffundsthatbusinessfirmscanraisebysellingnewly-issuedstock.
D)decreasespeople'swealth,butisunlikelytoincreasetheirwillingnesstospend.
Answer:
B
QuesStatus:
PreviousEdition
20)Whenstockpricesfall
A)anindividual'swealthisnotaffectednoristheirwillingnesstospend.
B)abusinessfirmwillbemorelikelytosellstocktofinanceinvestmentspending.
C)anindividual'swealthmaydecreasebuttheirwillingnesstospendisnotaffected.
D)anindividual'swealthmaydecreaseandtheirwillingnesstospendmaydecrease.
Answer:
D
QuesStatus:
PreviousEdition
21)Changesinstockprices
A)donotaffectpeople'swealthandtheirwillingnesstospend.
B)affectfirms'decisionstosellstocktofinanceinvestmentspending.
C)occurinregularpatterns.
D)areunimportanttodecisionmakers.
Answer:
B
QuesStatus:
PreviousEdition
22)Anincreaseinstockprices________thesizeofpeople'swealthandmay________theirwillingnesstospend,everythingelseheldconstant.
A)increases;increase
B)increases;decrease
C)decreases;increase
D)decreases;decrease
Answer:
A
QuesStatus:
PreviousEdition
23)Lowstockmarketpricesmight________consumerswillingnesstospendandmight________businesseswillingnesstoundertakeinvestmentprojects.
A)increase;increase
B)increase;decrease
C)decrease;decrease
D)decrease;increase
Answer:
C
QuesStatus:
New
24)Fearofamajorrecessioncausesstockpricestofall,everythingelseheldconstant,whichinturncausesconsumerspendingto
A)increase.
B)remainunchanged.
C)decrease.
D)cannotbedetermined.
Answer:
C
QuesStatus:
PreviousEdition
25)Ashareofcommonstockisaclaimonacorporation's
A)debt.
B)liabilities.
C)expenses.
D)earningsandassets.
Answer:
D
QuesStatus:
Revised
26)On________,October19,1987,themarketexperienceditsworstone-daydropinitsentirehistorywiththeDIJAfallingbymorethan500points.
A)"TerribleTuesday"
B)"WoefulWednesday"
C)"FreakyFriday"
D)"BlackMonday"
Answer:
D
QuesStatus:
PreviousEdition
27)Thedeclineinstockpricesfrom2000through2002
A)increasedindividuals'willingnesstospend.
B)hadnoeffectonindividualspending.
C)reducedindividuals'willingnesstospend.
D)increasedindividualwealth.
Answer:
C
QuesStatus:
PreviousEdition
28)TheDowreachedapeakofover11,000beforethecollapseofthe________bubblein2000.
A)housing
B)manufacturing
C)high-tech
D)banking
Answer:
C
QuesStatus:
PreviousEdition
29)Whatisastock?
Howdostocksaffecttheeconomy?
Answer:
Astockrepresentsashareofownershipofacorporation,oraclaimonafirm'searnings/assets.Stocksarepartofwealth,andchangesintheirvalueaffectpeople'swillingnesstospend.Changesinstockpricesaffectafirm'sabilitytoraisefunds,andthustheirinvestment.
QuesStatus:
PreviousEdition
30)Whyisitimportanttounderstandthebondmarket?
Answer:
Thebondmarketsupportseconomicactivitybyenablingthegovernmentandcorporationstoborrowtoundertaketheirprojectsanditisthemarketwhereinterestratesaredetermined.
QuesStatus:
New
1.2WhyStudyFinancialInstitutionsandBanking?
1)Channelingfundsfromindividualswithsurplusfundstothosedesiringfundswhenthesaverdoesnotpurchasetheborrower'ssecurityisknownas
A)barter.
B)redistribution.
C)financialintermediation.
D)taxation.
Answer:
C
QuesStatus:
PreviousEdition
2)Afinancialcrisisis
A)notpossibleinthemodernfinancialenvironment.
B)amajordisruptioninthefinancialmarkets.
C)afeatureofdevelopingeconomiesonly.
D)typicallyfollowedbyaneconomicboom.
Answer:
B
QuesStatus:
New
3)Banksareimportanttothestudyofmoneyandtheeconomybecausethey
A)channelfundsfrominvestorstosavers.
B)havebeenasourceofrapidfinancialinnovation.
C)aretheonlyimportantfinancialinstitutionintheU.S.economy.
D)createinflation.
Answer:
B
QuesStatus:
PreviousEdition
4)Financialintermediaries
A)provideachannelforlinkingthosewhowanttosavewiththosewhowanttoinvest.
B)producenothingofvalueandarethereforeadrainonsociety'sresources.
C)canhurttheperformanceoftheeconomy.
D)holdverylittleoftheaverageAmerican'swealth.
Answer:
A
QuesStatus:
Revised
5)Banks,savingsandloanassociations,mutualsavingsbanks,andcreditunions
A)arenolongerimportantplayersinfinancialintermediation.
B)sincederegulationnowprovideservicesonlytosmalldepositors.
C)havebeenadeptatinnovatinginresponsetochangesintheregulatoryenvironment.
D)producenothingofvalueandarethereforeadrainonsociety'sresources.
Answer:
C
QuesStatus:
PreviousEdition
6)Financialinstitutionssearchfor________hasresultedinmanyfinancialinnovations.
A)higherprofits
B)regulations
C)respect
D)higherrisk
Answer:
A
QuesStatus:
New
7)Banksa