Question 1

Changes in stock prices ________.

Accepted Answer

A) do not affect people's wealth and their willingness to spend 
B) affect firms' decisions to sell stock to finance investment spending 
C) are predictable 
D) are unimportant to decision makers 
A) do not affect people's wealth and their willingness to spend 
B) affect firms' decisions to sell stock to finance investment spending 
C) are predictable 
D) are unimportant to decision makers

Question 2

A sharp increase in the growth of the money supply is likely followed by ________.

Accepted Answer

A) a recession 
B) a depression 
C) an increase in the inflation rate 
D) no change in the economy 
A) a recession 
B) a depression 
C) an increase in the inflation rate 
D) no change in the economy

Question 3

Poorly performing financial markets can be the cause of ________.

Accepted Answer

A) wealth 
B) poverty 
C) financial stability 
D) financial expansion 
A) wealth 
B) poverty 
C) financial stability 
D) financial expansion

Question 4

It is true that inflation is a ________.

Accepted Answer

A) continual increase in the money supply 
B) continuous fall in prices 
C) decline in interest rates 
D) continual increase in the price level 
A) continual increase in the money supply 
B) continuous fall in prices 
C) decline in interest rates 
D) continual increase in the price level

Question 5

Budget deficits are important because deficits ________.

Accepted Answer

A) cause bank failures 
B) always cause interest rates to fall 
C) may lead to a financial crisis 
D) always cause prices to fall 
A) cause bank failures 
B) always cause interest rates to fall 
C) may lead to a financial crisis 
D) always cause prices to fall

Question 6

A security is also known as ________.

Accepted Answer

A) a financial instrument 
B) a contingent claim 
C) the interest rate 
D) a liability 
A) a financial instrument 
B) a contingent claim 
C) the interest rate 
D) a liability

Question 7

Why is the real GDP a better measure of economic activity than nominal GDP?

Accepted Answer

Real GDP is a more r

Question 8

If the CPI in 2012 is 200, and in 2013 the CPI is 180, the rate of inflation from 2012 to 2013 is ________.

Accepted Answer

A) 20 percent 
B) 10 percent 
C) 0 percent 
D) -10 percent 
A) 20 percent 
B) 10 percent 
C) 0 percent 
D) -10 percent

Question 9

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 10

Inflation ________.

Accepted Answer

A) can be explained by changes in the price level and money supply 
B) cannot be explained historically 
C) is unrelated to monetary variables 
D) changes in government policy 
A) can be explained by changes in the price level and money supply 
B) cannot be explained historically 
C) is unrelated to monetary variables 
D) changes in government policy

Question 11

Compared to interest rates on long-term 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 12

The term "bank" generally includes all of the following institutions except ________.

Accepted Answer

A) chartered banks 
B) credit unions 
C) trust and mortgage loan companies 
D) finance companies 
A) chartered banks 
B) credit unions 
C) trust and mortgage loan companies 
D) finance companies

Question 13

Financial innovation can lead to ________ and ________.

Accepted Answer

A) phishing; financial gain 
B) higher interest rates; higher inflation 
C) higher profits; financial disasters 
D) lower interest rates; lower inflation 
A) phishing; financial gain 
B) higher interest rates; higher inflation 
C) higher profits; financial disasters 
D) lower interest rates; lower inflation

Question 14

Evidence from Canada and other foreign countries indicates that ________.

Accepted Answer

A) there is a strong positive association between inflation and growth rate of money supply over long periods of time 
B) there is little support for the assertion that "inflation is always and everywhere a monetary phenomenon" 
C) countries with low monetary growth rates tend to experience higher rates of inflation, all else being constant 
D) money growth is clearly unrelated to inflation 
A) there is a strong positive association between inflation and growth rate of money supply over long periods of time 
B) there is little support for the assertion that "inflation is always and everywhere a monetary phenomenon" 
C) countries with low monetary growth rates tend to experience higher rates of inflation, all else being constant 
D) money growth is clearly unrelated to inflation

Question 15

Everything else constant, a stronger Canadian dollar will mean that ________.

Accepted Answer

A) vacationing in England becomes more expensive 
B) vacationing in England becomes less expensive 
C) French cheese becomes more expensive 
D) Japanese cars become more expensive 
A) vacationing in England becomes more expensive 
B) vacationing in England becomes less expensive 
C) French cheese becomes more expensive 
D) Japanese cars become more expensive

Question 16

If the aggregate price level at time t is denoted by Pt, the inflation rate from time t - 1 to t is defined as

Accepted Answer

A)  $ \pi_{t}=\left(P_{t}-P_{t}-1\right) / P_{t-1} $ 
B)  $ \pi_{\mathrm{t}}=\left(\mathrm{Pt}+1-\mathrm{Pt}_{\mathrm{t}}-1\right) / \mathrm{Pt}-1 $ 
C)  $ \pi_{t}=\left(P_{t}+1-P_{t}\right) P_{t} $ 
D)  $ \pi_{\mathrm{t}}=\left(\mathrm{Pt}_{\mathrm{t}}-\mathrm{Pt}_{\mathrm{t}}-1\right) / \mathrm{Pt} $ 
A)  $ \pi_{t}=\left(P_{t}-P_{t}-1\right) / P_{t-1} $ 
B)  $ \pi_{\mathrm{t}}=\left(\mathrm{Pt}+1-\mathrm{Pt}_{\mathrm{t}}-1\right) / \mathrm{Pt}-1 $ 
C)  $ \pi_{t}=\left(P_{t}+1-P_{t}\right) P_{t} $ 
D)  $ \pi_{\mathrm{t}}=\left(\mathrm{Pt}_{\mathrm{t}}-\mathrm{Pt}_{\mathrm{t}}-1\right) / \mathrm{Pt} $

Question 17

Evidence from business cycle fluctuations in Canada indicates that ________.

Accepted Answer

A) a negative relationship between money growth and general economic activity exists 
B) recessions have been preceded by declines in share prices on the stock exchange 
C) recessions have been preceded by dollar depreciation 
D) recessions have been preceded by a decline in the growth rate of money 
A) a negative relationship between money growth and general economic activity exists 
B) recessions have been preceded by declines in share prices on the stock exchange 
C) recessions have been preceded by dollar depreciation 
D) recessions have been preceded by a decline in the growth rate of money

Question 18

A common stock ________.

Accepted Answer

A) cannot be purchased by individuals 
B) is also known as a debt security 
C) is a share of ownership in a corporation 
D) is a claim on assets 
A) cannot be purchased by individuals 
B) is also known as a debt security 
C) is a share of ownership in a corporation 
D) is a claim on assets

Question 19

The bond markets are important because they are ________.

Accepted Answer

A) easily the most widely followed financial markets in Canada 
B) the markets where foreign exchange rates are determined 
C) where corporations and governments borrow to finance their activities 
D) the markets where all borrowers get their funds 
A) easily the most widely followed financial markets in Canada 
B) the markets where foreign exchange rates are determined 
C) where corporations and governments borrow to finance their activities 
D) the markets where all borrowers get their funds

Question 20

Why is the study of financial innovation important?

Accepted Answer

Financial innovation shows how

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

Changes in stock prices ________.

A sharp increase in the growth of the money supply is likely followed by ________.

Poorly performing financial markets can be the cause of ________.

It is true that inflation is a ________.

Budget deficits are important because deficits ________.

A security is also known as ________.

Why is the real GDP a better measure of economic activity than nominal GDP?

If the CPI in 2012 is 200, and in 2013 the CPI is 180, the rate of inflation from 2012 to 2013 is ________.

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

Inflation ________.

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

The term "bank" generally includes all of the following institutions except ________.

Financial innovation can lead to ________ and ________.

Evidence from Canada and other foreign countries indicates that ________.

Everything else constant, a stronger Canadian dollar will mean that ________.

If the aggregate price level at time t is denoted by Pt, the inflation rate from time t - 1 to t is defined as

Evidence from business cycle fluctuations in Canada indicates that ________.

A common stock ________.

The bond markets are important because they are ________.

Why is the study of financial innovation important?

An Overview of the Financial System

What Is Money

Understanding Interest Rates

The Behaviour 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

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

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

Financial Crises in Emerging Markets

The ISLM Model

Non-Bank Finance

Filters

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

Financial innovation can lead to and .