Question 1

What is a stock? How do stocks affect the economy?

Accepted Answer

A stock represents a share of ownership

Question 2

Prior to almost all recessions since 1900,there has been a drop in

Accepted Answer

A)  inflation. 
B)  the money stock. 
C)  the growth rate of the money stock. 
D)  interest rates. 
A)  inflation. 
B)  the money stock. 
C)  the growth rate of the money stock. 
D)  interest rates.

Question 3

American companies can borrow funds

Accepted Answer

A)  only in U.S. financial markets. 
B)  only in foreign financial markets. 
C)  in both U.S. and foreign financial markets. 
D)  only from the U.S. government. 
A)  only in U.S. financial markets. 
B)  only in foreign financial markets. 
C)  in both U.S. and foreign financial markets. 
D)  only from the U.S. government.

Question 4

Compared to interest rates on long-term U.S.government bonds,interest rates on three-month Treasury bills fluctuate ________ and are ________ on average.

Accepted Answer

A)  more; lower 
B)  less; lower 
C)  more; higher 
D)  less; higher 
A)  more; lower 
B)  less; lower 
C)  more; higher 
D)  less; higher

Question 5

Financial institutions search for ________ has resulted in many financial innovations.

Accepted Answer

A)  higher profits 
B)  regulations 
C)  respect 
D)  higher risk 
A)  higher profits 
B)  regulations 
C)  respect 
D)  higher risk

Question 6

Which of the following is a true statement?

Accepted Answer

A)  Money or the money supply is defined as Federal Reserve notes. 
B)  The average price of goods and services in an economy is called the aggregate price level. 
C)  The inflation rate is measured as the rate of change in the federal government budget deficit. 
D)  The aggregate price level is measured as the rate of change in the inflation rate. 
A)  Money or the money supply is defined as Federal Reserve notes. 
B)  The average price of goods and services in an economy is called the aggregate price level. 
C)  The inflation rate is measured as the rate of change in the federal government budget deficit. 
D)  The aggregate price level is measured as the rate of change in the inflation rate.

Question 7

The interest rate on Baa (medium quality)corporate bonds is ________,on average,than other interest rates,and the spread between it and other rates became ________ in the 1970s.

Accepted Answer

A)  lower; smaller 
B)  lower; larger 
C)  higher; smaller 
D)  higher; larger 
A)  lower; smaller 
B)  lower; larger 
C)  higher; smaller 
D)  higher; larger

Question 8

Budgets deficits can be a concern because they might

Accepted Answer

A)  ultimately lead to higher inflation. 
B)  lead to lower interest rates. 
C)  lead to a slower rate of money growth. 
D)  lead to higher bond prices. 
A)  ultimately lead to higher inflation. 
B)  lead to lower interest rates. 
C)  lead to a slower rate of money growth. 
D)  lead to higher bond prices.

Question 9

Why is it important to understand the bond market?

Accepted Answer

The bond market supports econo

Question 10

The gross domestic product is the

Accepted Answer

A)  the value of all wealth in an economy. 
B)  the value of all goods and services sold to other nations in a year. 
C)  the market value of all final goods and services produced in an economy in a year. 
D)  the market value of all intermediate goods and services produced in an economy in a year. 
A)  the value of all wealth in an economy. 
B)  the value of all goods and services sold to other nations in a year. 
C)  the market value of all final goods and services produced in an economy in a year. 
D)  the market value of all intermediate goods and services produced in an economy in a year.

Question 11

A share of common stock is a claim on a corporation's

Accepted Answer

A)  debt. 
B)  liabilities. 
C)  expenses. 
D)  earnings and assets. 
A)  debt. 
B)  liabilities. 
C)  expenses. 
D)  earnings and assets.

Question 12

From 1980 to early 1985 the dollar ________ in value,thereby benefiting American ________.

Accepted Answer

A)  appreciated; consumers 
B)  appreciated, businesses 
C)  depreciated; consumers 
D)  depreciated, businesses 
A)  appreciated; consumers 
B)  appreciated, businesses 
C)  depreciated; consumers 
D)  depreciated, businesses

Question 13

The market where one currency is converted into another currency is called the ________ market.

Accepted Answer

A)  stock 
B)  bond 
C)  derivatives 
D)  foreign exchange 
A)  stock 
B)  bond 
C)  derivatives 
D)  foreign exchange

Question 14

A budget ________ occurs when government expenditures exceed tax revenues for a particular time period.

Accepted Answer

A)  deficit 
B)  surplus 
C)  surge 
D)  surfeit 
A)  deficit 
B)  surplus 
C)  surge 
D)  surfeit

Question 15

The price paid for the rental of borrowed funds (usually expressed as a percentage of the rental of $100 per year)is commonly referred to as the

Accepted Answer

A)  inflation rate. 
B)  exchange rate. 
C)  interest rate. 
D)  aggregate price level. 
A)  inflation rate. 
B)  exchange rate. 
C)  interest rate. 
D)  aggregate price level.

Question 16

Everything else held constant,a decline in interest rates will cause spending on housing to

Accepted Answer

A)  fall. 
B)  remain unchanged. 
C)  either rise, fall, or remain the same. 
D)  rise. 
A)  fall. 
B)  remain unchanged. 
C)  either rise, fall, or remain the same. 
D)  rise.

Question 17

Financial intermediaries

Accepted Answer

A)  provide a channel for linking those who want to save with those who want to invest. 
B)  produce nothing of value and are therefore a drain on society's resources. 
C)  can hurt the performance of the economy. 
D)  hold very little of the average American's wealth. 
A)  provide a channel for linking those who want to save with those who want to invest. 
B)  produce nothing of value and are therefore a drain on society's resources. 
C)  can hurt the performance of the economy. 
D)  hold very little of the average American's wealth.

Question 18

Which of the following is not a financial institution?

Accepted Answer

A)  a life insurance company 
B)  a pension fund 
C)  a credit union 
D)  a business college 
A)  a life insurance company 
B)  a pension fund 
C)  a credit union 
D)  a business college

Question 19

Everything else held constant,a weaker dollar will likely hurt

Accepted Answer

A)  textile exporters in South Carolina. 
B)  wheat farmers in Montana that sell domestically. 
C)  automobile manufacturers in Michigan that use domestically produced inputs. 
D)  furniture importers in California. 
A)  textile exporters in South Carolina. 
B)  wheat farmers in Montana that sell domestically. 
C)  automobile manufacturers in Michigan that use domestically produced inputs. 
D)  furniture importers in California.

Question 20

Low stock market prices might ________ consumers willingness to spend and might ________ businesses willingness to undertake investment projects.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; decrease 
D)  decrease; increase 
A)  increase; increase 
B)  increase; decrease 
C)  decrease; decrease 
D)  decrease; increase

Exam 1: Why Study Money, banking, and Financial Markets

What is a stock? How do stocks affect the economy?

Prior to almost all recessions since 1900,there has been a drop in

American companies can borrow funds

Compared to interest rates on long-term U.S.government bonds,interest rates on three-month Treasury bills fluctuate ________ and are ________ on average.

Financial institutions search for ________ has resulted in many financial innovations.

Which of the following is a true statement?

The interest rate on Baa (medium quality)corporate bonds is ________,on average,than other interest rates,and the spread between it and other rates became ________ in the 1970s.

Budgets deficits can be a concern because they might

Why is it important to understand the bond market?

The gross domestic product is the

A share of common stock is a claim on a corporation's

From 1980 to early 1985 the dollar ________ in value,thereby benefiting American ________.

The market where one currency is converted into another currency is called the ________ market.

A budget ________ occurs when government expenditures exceed tax revenues for a particular time period.

The price paid for the rental of borrowed funds (usually expressed as a percentage of the rental of $100 per year)is commonly referred to as the

Everything else held constant,a decline in interest rates will cause spending on housing to

Financial intermediaries

Which of the following is not a financial institution?

Everything else held constant,a weaker dollar will likely hurt

Low stock market prices might ________ consumers willingness to spend and might ________ businesses willingness to undertake investment projects.

An Overview of the Financial System

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

Filters

Compared to interest rates on long-term U.S.government bonds,interest rates on three-month Treasury bills fluctuate and are on average.

The interest rate on Baa (medium quality)corporate bonds is ,on average,than other interest rates,and the spread between it and other rates became in the 1970s.

From 1980 to early 1985 the dollar in value,thereby benefiting American .

Low stock market prices might consumers willingness to spend and might businesses willingness to undertake investment projects.