Question 1

The financial system performs the role of communicating information by

Accepted Answer

A) constantly increasing the liquidity of most assets. 
B) constantly reducing the riskiness of most assets. 
C) incorporating all available information into the prices of financial assets. 
D) providing to investors for a nominal charge all government reports available about a particular company. 
A) constantly increasing the liquidity of most assets. 
B) constantly reducing the riskiness of most assets. 
C) incorporating all available information into the prices of financial assets. 
D) providing to investors for a nominal charge all government reports available about a particular company.

Question 2

Which of the following is NOT a financial intermediary?

Accepted Answer

A) NASDAQ 
B) Allstate Insurance Company 
C) Bank of America 
D) Vanguard Total Stock Market Index Fund 
A) NASDAQ 
B) Allstate Insurance Company 
C) Bank of America 
D) Vanguard Total Stock Market Index Fund

Question 3

Economists define liquidity as

Accepted Answer

A) the difference between the return on the asset and the return on a long-term U.S. Treasury bond. 
B) the fraction the asset makes up of an investor's portfolio. 
C) the ease with which an asset can be exchanged for money. 
D) the difference between the total demand for an asset and the total supply of the asset. 
A) the difference between the return on the asset and the return on a long-term U.S. Treasury bond. 
B) the fraction the asset makes up of an investor's portfolio. 
C) the ease with which an asset can be exchanged for money. 
D) the difference between the total demand for an asset and the total supply of the asset.

Question 4

All of the following accurately describe microlending EXCEPT:

Accepted Answer

A) it involves small loans 
B) lending is primarily undertaken by the government 
C) the borrowers are people who are attempting to start or expand a small business 
D) many economists think it has aided economic growth in many low-income countries 
A) it involves small loans 
B) lending is primarily undertaken by the government 
C) the borrowers are people who are attempting to start or expand a small business 
D) many economists think it has aided economic growth in many low-income countries

Question 5

The Troubled Asset Relief Program (TARP)allowed

Accepted Answer

A) the Treasury to inject funds into commercial banks in return for stock in the banks. 
B) the Fed to provide funds to commercial banks in return for stock. 
C) the Treasury to insure bank deposits at major U.S. banks. 
D) the Fed to make loans to banks as the lender of last resort. 
A) the Treasury to inject funds into commercial banks in return for stock in the banks. 
B) the Fed to provide funds to commercial banks in return for stock. 
C) the Treasury to insure bank deposits at major U.S. banks. 
D) the Fed to make loans to banks as the lender of last resort.

Question 6

Economists define risk as

Accepted Answer

A) the difference between the interest rate borrowers pay and the interest rate lenders receive. 
B) the chance that the value of financial assets will change from what you expect. 
C) the ease with which an asset can be exchanged for other assets or for goods and services. 
D) the difference between the return on common stock and the return on corporate bonds. 
A) the difference between the interest rate borrowers pay and the interest rate lenders receive. 
B) the chance that the value of financial assets will change from what you expect. 
C) the ease with which an asset can be exchanged for other assets or for goods and services. 
D) the difference between the return on common stock and the return on corporate bonds.

Question 7

Which of the following does NOT describe the relationship between banks and small business during the 2000s (prior to the financial crisis)?

Accepted Answer

A) Banks typically applied fixed guidelines for granting loans, leaving little room for personal judgment. 
B) Fewer small businesses received loans as banks shifted their focus to mortgages. 
C) Many small businesses were receiving loans from regional and national banks. 
D) More banks became convinced that it would be profitable to loosen their loan guidelines to make more borrowers eligible to receive credit. 
A) Banks typically applied fixed guidelines for granting loans, leaving little room for personal judgment. 
B) Fewer small businesses received loans as banks shifted their focus to mortgages. 
C) Many small businesses were receiving loans from regional and national banks. 
D) More banks became convinced that it would be profitable to loosen their loan guidelines to make more borrowers eligible to receive credit.

Question 8

Economists define money as

Accepted Answer

A) cash in circulation. 
B) deposits in commercial banks. 
C) anything that people are willing to accept in payment for goods and services or to pay off debts. 
D) bonds issued by large corporations. 
A) cash in circulation. 
B) deposits in commercial banks. 
C) anything that people are willing to accept in payment for goods and services or to pay off debts. 
D) bonds issued by large corporations.

Question 9

Why did some economists and policymakers criticize the Fed and Treasury for arranging the sale of Bear Stearns to JP Morgan Chase in 2008?

Accepted Answer

The main concern was with the moral haza

Question 10

Borrowers who stated but did not document their incomes are referred to as:

Accepted Answer

A) subprime 
B) alt A 
C) adjustable 
D) securitized 
A) subprime 
B) alt A 
C) adjustable 
D) securitized

Question 11

The Federal Reserve System

Accepted Answer

A) is in charge of managing the New York Stock Exchange. 
B) is headed by the Secretary of the Treasury. 
C) is the central bank of the United States. 
D) is responsible for conducting fiscal policy for the United States. 
A) is in charge of managing the New York Stock Exchange. 
B) is headed by the Secretary of the Treasury. 
C) is the central bank of the United States. 
D) is responsible for conducting fiscal policy for the United States.

Question 12

What was the intent behind the intervention of the Fed and Treasury in financial markets during the Financial Crisis of 2007-2009?

Accepted Answer

The actions by the Fed and Treasury were

Question 13

Liquidity

Accepted Answer

A) is the best available measure of the riskiness of an asset. 
B) is a characteristic of money, and of no other asset. 
C) is the ease with which an asset can be exchanged for money. 
D) was declining for many financial assets during the 1990s. 
A) is the best available measure of the riskiness of an asset. 
B) is a characteristic of money, and of no other asset. 
C) is the ease with which an asset can be exchanged for money. 
D) was declining for many financial assets during the 1990s.

Question 14

In the United States, monetary policy is carried out by

Accepted Answer

A) the Federal Reserve System. 
B) Congress. 
C) the President. 
D) Congress and the President acting together. 
A) the Federal Reserve System. 
B) Congress. 
C) the President. 
D) Congress and the President acting together.

Question 15

Funds flow from lenders to borrowers

Accepted Answer

A) indirectly through financial markets. 
B) directly through financial intermediaries. 
C) indirectly through financial intermediaries. 
D) primarily through government agencies. 
A) indirectly through financial markets. 
B) directly through financial intermediaries. 
C) indirectly through financial intermediaries. 
D) primarily through government agencies.

Question 16

Securitization is the process of

Accepted Answer

A) issuing stocks to finance capital spending. 
B) issuing bonds to finance purchases of equipment and structures. 
C) reducing risk by decreasing corporate debt loads. 
D) converting loans into securities. 
A) issuing stocks to finance capital spending. 
B) issuing bonds to finance purchases of equipment and structures. 
C) reducing risk by decreasing corporate debt loads. 
D) converting loans into securities.

Question 17

Which president said, "Prosperity is just around the corner"?

Accepted Answer

A) Herbert Hoover near the start of the Great Depression 
B) Franklin Delano Roosevelt near the start of the Great Depression 
C) George W. Bush near the start of the Great Recession 
D) Barack Obama near the start of the Great Recession 
A) Herbert Hoover near the start of the Great Depression 
B) Franklin Delano Roosevelt near the start of the Great Depression 
C) George W. Bush near the start of the Great Recession 
D) Barack Obama near the start of the Great Recession

Question 18

Financial intermediaries

Accepted Answer

A) include banks and other depository institutions. 
B) include the New York and American Stock exchanges. 
C) directly issue claims on individual borrowers to savers. 
D) are owned and operated by the federal government. 
A) include banks and other depository institutions. 
B) include the New York and American Stock exchanges. 
C) directly issue claims on individual borrowers to savers. 
D) are owned and operated by the federal government.

Question 19

Which of the following is NOT a key financial service provided by the financial system?

Accepted Answer

A) risk sharing 
B) profitability 
C) liquidity 
D) information 
A) risk sharing 
B) profitability 
C) liquidity 
D) information

Question 20

At the beginning of the financial crisis, banks were hurt by all of the following EXCEPT

Accepted Answer

A) declines in the value of mortgage-backed securities. 
B) defaults on mortgages by those with subprime mortgages. 
C) holding too many Treasury bonds. 
D) not being repaid on loans to real estate developers. 
A) declines in the value of mortgage-backed securities. 
B) defaults on mortgages by those with subprime mortgages. 
C) holding too many Treasury bonds. 
D) not being repaid on loans to real estate developers.

The financial system performs the role of communicating information by

Which of the following is NOT a financial intermediary?

Economists define liquidity as

All of the following accurately describe microlending EXCEPT:

The Troubled Asset Relief Program (TARP)allowed

Economists define risk as

Which of the following does NOT describe the relationship between banks and small business during the 2000s (prior to the financial crisis)?

Economists define money as

Why did some economists and policymakers criticize the Fed and Treasury for arranging the sale of Bear Stearns to JP Morgan Chase in 2008?

Borrowers who stated but did not document their incomes are referred to as:

The Federal Reserve System

What was the intent behind the intervention of the Fed and Treasury in financial markets during the Financial Crisis of 2007-2009?

Liquidity

In the United States, monetary policy is carried out by

Funds flow from lenders to borrowers

Securitization is the process of

Which president said, "Prosperity is just around the corner"?

Financial intermediaries

Which of the following is NOT a key financial service provided by the financial system?

At the beginning of the financial crisis, banks were hurt by all of the following EXCEPT

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, Information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, Asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, Mutual Funds, Hedge Funds, and the Shadow Banking System

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I: The Aggregate Demand and Aggregate Supply Model

Monetary Theory II: The IS-MP Model

Filters

Exam 1: Introducing Money and the Financial System

The financial system performs the role of communicating information by

Which of the following is NOT a financial intermediary?

Economists define liquidity as

All of the following accurately describe microlending EXCEPT:

The Troubled Asset Relief Program (TARP)allowed

Economists define risk as

Which of the following does NOT describe the relationship between banks and small business during the 2000s (prior to the financial crisis)?

Economists define money as

Why did some economists and policymakers criticize the Fed and Treasury for arranging the sale of Bear Stearns to JP Morgan Chase in 2008?

Borrowers who stated but did not document their incomes are referred to as:

The Federal Reserve System

What was the intent behind the intervention of the Fed and Treasury in financial markets during the Financial Crisis of 2007-2009?

Liquidity

In the United States, monetary policy is carried out by

Funds flow from lenders to borrowers

Securitization is the process of

Which president said, "Prosperity is just around the corner"?

Financial intermediaries

Which of the following is NOT a key financial service provided by the financial system?

At the beginning of the financial crisis, banks were hurt by all of the following EXCEPT

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, Information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, Asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, Mutual Funds, Hedge Funds, and the Shadow Banking System

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I: The Aggregate Demand and Aggregate Supply Model

Monetary Theory II: The IS-MP Model

Filters