Question 1

A short-term debt instrument issued by well-known corporations is called

Accepted Answer

A) commercial paper. 
B) corporate bonds. 
C) municipal bonds. 
D) commercial mortgages. 
A) commercial paper. 
B) corporate bonds. 
C) municipal bonds. 
D) commercial mortgages.

Question 2

Describe the two methods of organizing a secondary market.

Accepted Answer

A secondary market can be organized as a

Question 3

The purpose of the disclosure requirements of the Securities and Exchange Commission is to

Accepted Answer

A) increase the information available to investors. 
B) prevent bank panics. 
C) improve monetary control. 
D) protect investors against financial losses. 
A) increase the information available to investors. 
B) prevent bank panics. 
C) improve monetary control. 
D) protect investors against financial losses.

Question 4

Distinguish between a foreign bond and a Eurobond.

Accepted Answer

A foreign bond is sold in a fo

Question 5

A corporation acquires new funds only when its securities are sold in the

Accepted Answer

A) secondary market by an investment bank. 
B) primary market by an investment bank. 
C) secondary market by a stock exchange broker. 
D) secondary market by a commercial bank. 
A) secondary market by an investment bank. 
B) primary market by an investment bank. 
C) secondary market by a stock exchange broker. 
D) secondary market by a commercial bank.

Question 6

Equity and debt instruments with maturities greater than one year are called ________ market instruments.

Accepted Answer

A) capital 
B) money 
C) federal 
D) benchmark 
A) capital 
B) money 
C) federal 
D) benchmark

Question 7

Studies of the major developed countries show that when businesses go looking for funds to finance their activities they usually obtain these funds from

Accepted Answer

A) government agencies. 
B) equities markets. 
C) financial intermediaries. 
D) bond markets. 
A) government agencies. 
B) equities markets. 
C) financial intermediaries. 
D) bond markets.

Question 8

Federal funds are

Accepted Answer

A) funds raised by the federal government in the bond market. 
B) loans made by the Federal Reserve System to banks. 
C) loans made by banks to the Federal Reserve System. 
D) loans made by banks to each other. 
A) funds raised by the federal government in the bond market. 
B) loans made by the Federal Reserve System to banks. 
C) loans made by banks to the Federal Reserve System. 
D) loans made by banks to each other.

Question 9

The most liquid securities traded in the capital market are

Accepted Answer

A) corporate bonds. 
B) municipal bonds. 
C) U.S.Treasury bonds. 
D) mortgage-backed securities. 
A) corporate bonds. 
B) municipal bonds. 
C) U.S.Treasury bonds. 
D) mortgage-backed securities.

Question 10

Financial markets improve economic welfare because

Accepted Answer

A) they channel funds from investors to savers. 
B) they allow consumers to time their purchase better. 
C) they weed out inefficient firms. 
D) eliminate the need for indirect finance. 
A) they channel funds from investors to savers. 
B) they allow consumers to time their purchase better. 
C) they weed out inefficient firms. 
D) eliminate the need for indirect finance.

Question 11

The primary assets of credit unions are

Accepted Answer

A) municipal bonds. 
B) business loans. 
C) consumer loans. 
D) mortgages. 
A) municipal bonds. 
B) business loans. 
C) consumer loans. 
D) mortgages.

Question 12

When I purchase ________,I own a portion of a firm and have the right to vote on issues important to the firm and to elect its directors.

Accepted Answer

A) bonds 
B) bills 
C) notes 
D) stock 
A) bonds 
B) bills 
C) notes 
D) stock

Question 13

Forty or so dealers establish a "market" in these securities by standing ready to buy and sell them.

Accepted Answer

A) Secondary stocks 
B) Surplus stocks 
C) U.S.government bonds 
D) Common stocks 
A) Secondary stocks 
B) Surplus stocks 
C) U.S.government bonds 
D) Common stocks

Question 14

One reason for the extraordinary growth of foreign financial markets is

Accepted Answer

A) decreased trade. 
B) increases in the pool of savings in foreign countries. 
C) the recent introduction of the foreign bond. 
D) slower technological innovation in foreign markets. 
A) decreased trade. 
B) increases in the pool of savings in foreign countries. 
C) the recent introduction of the foreign bond. 
D) slower technological innovation in foreign markets.

Question 15

Corporations receive funds when their stock is sold in the primary market.Why do corporations pay attention to what is happening to their stock in the secondary market?

Accepted Answer

The existence of the secondary market ma

Question 16

Which of the following can be described as involving indirect finance?

Accepted Answer

A) You make a loan to your neighbor. 
B) You buy shares in a mutual fund. 
C) You buy a U.S.Treasury bill from the U.S.Treasury. 
D) A corporation buys a short-term security issued by another corporation in the primary market. 
A) You make a loan to your neighbor. 
B) You buy shares in a mutual fund. 
C) You buy a U.S.Treasury bill from the U.S.Treasury. 
D) A corporation buys a short-term security issued by another corporation in the primary market.

Question 17

The primary assets of a pension fund are

Accepted Answer

A) money market instruments. 
B) corporate bonds and stock. 
C) consumer and business loans. 
D) mortgages. 
A) money market instruments. 
B) corporate bonds and stock. 
C) consumer and business loans. 
D) mortgages.

Question 18

Reducing risk through the purchase of assets whose returns do not always move together is

Accepted Answer

A) diversification. 
B) intermediation. 
C) intervention. 
D) discounting. 
A) diversification. 
B) intermediation. 
C) intervention. 
D) discounting.

Question 19

The British Banker's Association average of interbank rates for dollar deposits in the London market is called the

Accepted Answer

A) Libor rate. 
B) federal funds rate. 
C) prime rate. 
D) Treasury Bill rate. 
A) Libor rate. 
B) federal funds rate. 
C) prime rate. 
D) Treasury Bill rate.

Question 20

Well-functioning financial markets

Accepted Answer

A) cause inflation. 
B) eliminate the need for indirect finance. 
C) cause financial crises. 
D) produce an efficient allocation of capital. 
A) cause inflation. 
B) eliminate the need for indirect finance. 
C) cause financial crises. 
D) produce an efficient allocation of capital.

Exam 2: An Overview of the Financial System

A short-term debt instrument issued by well-known corporations is called

Describe the two methods of organizing a secondary market.

The purpose of the disclosure requirements of the Securities and Exchange Commission is to

Distinguish between a foreign bond and a Eurobond.

A corporation acquires new funds only when its securities are sold in the

Equity and debt instruments with maturities greater than one year are called ________ market instruments.

Studies of the major developed countries show that when businesses go looking for funds to finance their activities they usually obtain these funds from

Federal funds are

The most liquid securities traded in the capital market are

Financial markets improve economic welfare because

The primary assets of credit unions are

When I purchase ________,I own a portion of a firm and have the right to vote on issues important to the firm and to elect its directors.

Forty or so dealers establish a "market" in these securities by standing ready to buy and sell them.

One reason for the extraordinary growth of foreign financial markets is

Corporations receive funds when their stock is sold in the primary market.Why do corporations pay attention to what is happening to their stock in the secondary market?

Which of the following can be described as involving indirect finance?

The primary assets of a pension fund are

Reducing risk through the purchase of assets whose returns do not always move together is

The British Banker's Association average of interbank rates for dollar deposits in the London market is called the

Well-functioning financial markets

Why Study Money, banking, and Financial Markets

What Is Money

Understanding Interest Rates

The Behavior of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Financial Crises

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Central Banks and the Federal Reserve System

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory,inflation and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

The ISLM Model

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