Question 1

How do financial institutions evaluate the creditworthiness of potential borrowers?

Accepted Answer

A)  They offer high interest rates because only the best borrowers will be able to afford them. 
B)  They gather information regarding the borrowers' finances. 
C)  They do not evaluate creditworthiness because everyone is treated the same. 
D)  They do not evaluate the creditworthiness because they know the borrower will honor his/her obligation to repay the loan. 
A)  They offer high interest rates because only the best borrowers will be able to afford them. 
B)  They gather information regarding the borrowers' finances. 
C)  They do not evaluate creditworthiness because everyone is treated the same. 
D)  They do not evaluate the creditworthiness because they know the borrower will honor his/her obligation to repay the loan.

Question 2

The primary function of central banks is to:

Accepted Answer

A)  increase risk and volatility to increase compensation. 
B)  control inflation, as well as help reduce the size and frequency of business cycle fluctuations. 
C)  increase the uncertainty that firms face in making investment decisions. 
D)  eliminate the need for banks to collect financial information. 
A)  increase risk and volatility to increase compensation. 
B)  control inflation, as well as help reduce the size and frequency of business cycle fluctuations. 
C)  increase the uncertainty that firms face in making investment decisions. 
D)  eliminate the need for banks to collect financial information.

Question 3

Stock prices are:

Accepted Answer

A)  set by the company issuing the stock. 
B)  set by the central bank. 
C)  determined by market transactions. 
D)  unrelated to the value of the company issuing the stock. 
A)  set by the company issuing the stock. 
B)  set by the central bank. 
C)  determined by market transactions. 
D)  unrelated to the value of the company issuing the stock.

Question 4

A borrower seeking a mortgage today is often presented with the choice between a mortgage whose interest rate and monthly payment stays fixed for the duration of the loan, or a mortgage whose interest rate and monthly payment can change as other interest rates change. Typically the interest rate on the fixed-rate mortgage is higher. Having learned the five core principles, does this make sense?

Accepted Answer

Yes. The lender is shifting risk to the

Question 5

The amount of information an individual would seek before making a decision:

Accepted Answer

A)  is about the same across all individuals. 
B)  varies directly with the importance of the decision. 
C)  is the same across all decisions but varies across individuals. 
D)  depends on how much time it will take to get the information regardless of the decision. 
A)  is about the same across all individuals. 
B)  varies directly with the importance of the decision. 
C)  is the same across all decisions but varies across individuals. 
D)  depends on how much time it will take to get the information regardless of the decision.

Question 6

Identify the six parts of the financial system.

Accepted Answer

They are: money, financial mar

Question 7

Investing in financial instruments in today's economy:

Accepted Answer

A)  is an activity practiced only by the wealthy. 
B)  involves costly transactions. 
C)  requires a relatively large sum of money to invest (more than $100,000). 
D)  is made easier by the use of mutual funds. 
A)  is an activity practiced only by the wealthy. 
B)  involves costly transactions. 
C)  requires a relatively large sum of money to invest (more than $100,000). 
D)  is made easier by the use of mutual funds.

Question 8

Identify which item is not one of the six parts of the financial system.

Accepted Answer

A)  Financial markets 
B)  Central banks 
C)  Credit cards 
D)  Financial institutions 
A)  Financial markets 
B)  Central banks 
C)  Credit cards 
D)  Financial institutions

Question 9

Studying money and banking through five core principles is helpful because:

Accepted Answer

A)  studies have shown students have a difficult time remembering more than five topics. 
B)  everything in economics can be reduced to five core principles. 
C)  money and banking can undergo drastic changes overtime, but the five principles do not. 
D)  these five principles are understood by everyone. 
A)  studies have shown students have a difficult time remembering more than five topics. 
B)  everything in economics can be reduced to five core principles. 
C)  money and banking can undergo drastic changes overtime, but the five principles do not. 
D)  these five principles are understood by everyone.

Question 10

Mutual funds have:

Accepted Answer

A)  been created for very wealthy individuals with a lot of money to invest. 
B)  increased the risks associated with constructing a portfolio. 
C)  reduced the costs associated with gathering information on stocks and bonds. 
D)  increased the transactions costs associated with participating in financial markets. 
A)  been created for very wealthy individuals with a lot of money to invest. 
B)  increased the risks associated with constructing a portfolio. 
C)  reduced the costs associated with gathering information on stocks and bonds. 
D)  increased the transactions costs associated with participating in financial markets.

Question 11

The statement "risk requires compensation" implies that people:

Accepted Answer

A)  do not take risk. 
B)  only accept risk when they absolutely have to. 
C)  will only accept risk when they are rewarded for doing so. 
D)  avoid risk at all cost. 
A)  do not take risk. 
B)  only accept risk when they absolutely have to. 
C)  will only accept risk when they are rewarded for doing so. 
D)  avoid risk at all cost.

How do financial institutions evaluate the creditworthiness of potential borrowers?

The primary function of central banks is to:

Stock prices are:

The amount of information an individual would seek before making a decision:

Identify the six parts of the financial system.

Investing in financial instruments in today's economy:

Identify which item is not one of the six parts of the financial system.

Studying money and banking through five core principles is helpful because:

Mutual funds have:

The statement "risk requires compensation" implies that people:

Money and the Payments System

Financial Instruments, Financial Markets, and Financial Institutions

Future Value, Present Value and Interest Rates

Understanding Risk

Bonds, Bond Prices, and the Determination of Interest Rates

The Risk and Term Structure of Interest Rates

Stocks, Stock Markets and Market Efficiency

Derivatives: Futures, Options, and Swaps

Foreign Exchange

The Economics of Financial Intermediation

Depository Institutions: Banks and Bank Management

Financial Industry Structure

Regulating the Financial System

Central Banks in the World Today

The Structure of Central Banks: The Federal Reserve and the European Central Bank

The Central Bank Balance Sheet and the Money Supply Process

Monetary Policy: Stabilizing the Domestic Economy

Exchange Rate Policy and the Central Bank

Money Growth, Money Demand and Modern Monetary Policy

Output, Inflation, and Monetary Policy

Understanding Business Cycle Fluctuations

Modern Monetary Policy and the Challenges Facing Central Bankers

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Exam 1: An Introduction to Money and the Financial System

How do financial institutions evaluate the creditworthiness of potential borrowers?

The primary function of central banks is to:

Stock prices are:

The amount of information an individual would seek before making a decision:

Identify the six parts of the financial system.

Investing in financial instruments in today's economy:

Identify which item is not one of the six parts of the financial system.

Studying money and banking through five core principles is helpful because:

Mutual funds have:

The statement "risk requires compensation" implies that people:

Money and the Payments System

Financial Instruments, Financial Markets, and Financial Institutions

Future Value, Present Value and Interest Rates

Understanding Risk

Bonds, Bond Prices, and the Determination of Interest Rates

The Risk and Term Structure of Interest Rates

Stocks, Stock Markets and Market Efficiency

Derivatives: Futures, Options, and Swaps

Foreign Exchange

The Economics of Financial Intermediation

Depository Institutions: Banks and Bank Management

Financial Industry Structure

Regulating the Financial System

Central Banks in the World Today

The Structure of Central Banks: The Federal Reserve and the European Central Bank

The Central Bank Balance Sheet and the Money Supply Process

Monetary Policy: Stabilizing the Domestic Economy

Exchange Rate Policy and the Central Bank

Money Growth, Money Demand and Modern Monetary Policy

Output, Inflation, and Monetary Policy

Understanding Business Cycle Fluctuations

Modern Monetary Policy and the Challenges Facing Central Bankers

Filters