Question 1

The purpose of diversification is to

Accepted Answer

A) increase the liquidity of a financial portfolio. 
B) reduce the brokerage fees involved in managing a financial portfolio. 
C) reduce risk. 
D) reduce tax liability. 
A) increase the liquidity of a financial portfolio. 
B) reduce the brokerage fees involved in managing a financial portfolio. 
C) reduce risk. 
D) reduce tax liability.

Question 2

Financial markets

Accepted Answer

A) channel funds indirectly between borrowers and lenders. 
B) channel funds directly from lenders to borrowers. 
C) act as go-betweens by holding a portfolio of assets and issuing claims based on that portfolio to savers. 
D) generally provide lenders with lower returns than do financial intermediaries. 
A) channel funds indirectly between borrowers and lenders. 
B) channel funds directly from lenders to borrowers. 
C) act as go-betweens by holding a portfolio of assets and issuing claims based on that portfolio to savers. 
D) generally provide lenders with lower returns than do financial intermediaries.

Question 3

Which of the following is NOT a financial intermediary?

Accepted Answer

A) mutual fund 
B) bank 
C) stock exchange 
D) insurance company 
A) mutual fund 
B) bank 
C) stock exchange 
D) insurance company

Question 4

The leading federal regulatory body for financial markets in the United States is the

Accepted Answer

A) Federal Bureau of Investigation. 
B) Securities and Exchange Commission. 
C) Federal Financial Market Bureau. 
D) Investors Protection Agency. 
A) Federal Bureau of Investigation. 
B) Securities and Exchange Commission. 
C) Federal Financial Market Bureau. 
D) Investors Protection Agency.

Question 5

All of the following took place during the economic crisis that began in 2007 EXCEPT:

Accepted Answer

A) the financial system was disrupted 
B) large portions of the U.S. economy were cut off from the funds they needed to thrive 
C) there was a devastating decline in the production of goods and services throughout the economy 
D) unlike households, most businesses still had easy access to funds 
A) the financial system was disrupted 
B) large portions of the U.S. economy were cut off from the funds they needed to thrive 
C) there was a devastating decline in the production of goods and services throughout the economy 
D) unlike households, most businesses still had easy access to funds

Question 6

Diversification refers to the

Accepted Answer

A) splitting of wealth into many assets. 
B) difference between the liquidity of an asset and its risk. 
C) difficulty of converting investments in common stocks into investments in bonds. 
D) difficulty of selling common stocks in a weak market. 
A) splitting of wealth into many assets. 
B) difference between the liquidity of an asset and its risk. 
C) difficulty of converting investments in common stocks into investments in bonds. 
D) difficulty of selling common stocks in a weak market.

Question 7

Which of the following best describes a "bubble"?

Accepted Answer

A) when the price of an asset reaches a new high 
B) an unsustainable increase in the price of a class of assets 
C) rapid increases in inflation 
D) when bond prices rise more quickly than stock prices 
A) when the price of an asset reaches a new high 
B) an unsustainable increase in the price of a class of assets 
C) rapid increases in inflation 
D) when bond prices rise more quickly than stock prices

Question 8

Investment banks do NOT engage in which of the following?

Accepted Answer

A) proprietary trading 
B) securitization 
C) lending to households 
D) underwriting 
A) proprietary trading 
B) securitization 
C) lending to households 
D) underwriting

Question 9

All of the following represent returns to savers EXCEPT:

Accepted Answer

A) dividends on stocks 
B) fees on loans 
C) interest on deposits 
D) coupon payments on bonds 
A) dividends on stocks 
B) fees on loans 
C) interest on deposits 
D) coupon payments on bonds

Question 10

What made the recession of 2007-2009 different than any other recession since the Great Depression?

Accepted Answer

A) the government did not implement a fiscal stimulus 
B) the Fed failed to reduce interest rates 
C) it was accompanied by a financial crisis 
D) the impact was primarily limited to the financial sector 
A) the government did not implement a fiscal stimulus 
B) the Fed failed to reduce interest rates 
C) it was accompanied by a financial crisis 
D) the impact was primarily limited to the financial sector

Question 11

Owners of small firms in countries with weak banking systems have to rely on funds from all of the following EXCEPT:

Accepted Answer

A) their own savings 
B) local lenders who charge high interest rates 
C) global investors 
D) the savings of relatives and friends 
A) their own savings 
B) local lenders who charge high interest rates 
C) global investors 
D) the savings of relatives and friends

Question 12

How are interest payments on mortgages distributed to investors who own mortgage-backed securities?

Accepted Answer

The banks that grants, or originates, th

Question 13

Which of the following forms the largest share of household holdings of financial assets?

Accepted Answer

A) corporate equities 
B) bank deposits 
C) pension funds reserves 
D) life insurance 
A) corporate equities 
B) bank deposits 
C) pension funds reserves 
D) life insurance

Question 14

The financial system is primarily a means by which

Accepted Answer

A) funds are transferred from savers to borrowers. 
B) money is put into circulation. 
C) the government puts into operation its plans for the economy. 
D) business firms distribute their goods. 
A) funds are transferred from savers to borrowers. 
B) money is put into circulation. 
C) the government puts into operation its plans for the economy. 
D) business firms distribute their goods.

Question 15

The distinguishing feature of a well-functioning financial market is the

Accepted Answer

A) continual increase in the liquidity of most assets. 
B) continual reduction in the riskiness of most assets. 
C) increased ease of converting common stocks into bonds. 
D) incorporation of available information into asset prices. 
A) continual increase in the liquidity of most assets. 
B) continual reduction in the riskiness of most assets. 
C) increased ease of converting common stocks into bonds. 
D) incorporation of available information into asset prices.

Question 16

All of the following were significant changes in the mortgage market in the 2000s EXCEPT

Accepted Answer

A) investment banks became significant participants in the secondary mortgage market. 
B) lenders loosened lending standards. 
C) mortgage-backed securities became more popular with investors. 
D) borrowers tended to increase the amount of their down payments. 
A) investment banks became significant participants in the secondary mortgage market. 
B) lenders loosened lending standards. 
C) mortgage-backed securities became more popular with investors. 
D) borrowers tended to increase the amount of their down payments.

Question 17

Which of the following assets is the least liquid?

Accepted Answer

A) money market mutual fund 
B) stock 
C) treasury bond 
D) house 
A) money market mutual fund 
B) stock 
C) treasury bond 
D) house

Question 18

Monetary policy refers to the government's

Accepted Answer

A) decisions on how much money to spend. 
B) decisions on how much money to collect in taxes. 
C) plans for retiring the national debt. 
D) management of the money supply and interest rates to achieve macroeconomic objectives. 
A) decisions on how much money to spend. 
B) decisions on how much money to collect in taxes. 
C) plans for retiring the national debt. 
D) management of the money supply and interest rates to achieve macroeconomic objectives.

Question 19

The financial system provides risk sharing by allowing

Accepted Answer

A) borrowers to obtain funds either directly or indirectly. 
B) savers to earn interest tax-free. 
C) borrowers to convert liabilities into assets. 
D) savers to hold many assets. 
A) borrowers to obtain funds either directly or indirectly. 
B) savers to earn interest tax-free. 
C) borrowers to convert liabilities into assets. 
D) savers to hold many assets.

Question 20

Increased liquidity in recent decades has reduced interest rates on which of the following assets (holding constant all other things that affect interest rates)?

Accepted Answer

A) U)S. government bonds 
B) bonds issued by large corporations 
C) business loans 
D) bonds issued by state governments 
A) U)S. government bonds 
B) bonds issued by large corporations 
C) business loans 
D) bonds issued by state governments

The purpose of diversification is to

Financial markets

Which of the following is NOT a financial intermediary?

The leading federal regulatory body for financial markets in the United States is the

All of the following took place during the economic crisis that began in 2007 EXCEPT:

Diversification refers to the

Which of the following best describes a "bubble"?

Investment banks do NOT engage in which of the following?

All of the following represent returns to savers EXCEPT:

What made the recession of 2007-2009 different than any other recession since the Great Depression?

Owners of small firms in countries with weak banking systems have to rely on funds from all of the following EXCEPT:

How are interest payments on mortgages distributed to investors who own mortgage-backed securities?

Which of the following forms the largest share of household holdings of financial assets?

The financial system is primarily a means by which

The distinguishing feature of a well-functioning financial market is the

All of the following were significant changes in the mortgage market in the 2000s EXCEPT

Which of the following assets is the least liquid?

Monetary policy refers to the government's

The financial system provides risk sharing by allowing

Increased liquidity in recent decades has reduced interest rates on which of the following assets (holding constant all other things that affect interest rates)?

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 purpose of diversification is to

Financial markets

Which of the following is NOT a financial intermediary?

The leading federal regulatory body for financial markets in the United States is the

All of the following took place during the economic crisis that began in 2007 EXCEPT:

Diversification refers to the

Which of the following best describes a "bubble"?

Investment banks do NOT engage in which of the following?

All of the following represent returns to savers EXCEPT:

What made the recession of 2007-2009 different than any other recession since the Great Depression?

Owners of small firms in countries with weak banking systems have to rely on funds from all of the following EXCEPT:

How are interest payments on mortgages distributed to investors who own mortgage-backed securities?

Which of the following forms the largest share of household holdings of financial assets?

The financial system is primarily a means by which

The distinguishing feature of a well-functioning financial market is the

All of the following were significant changes in the mortgage market in the 2000s EXCEPT

Which of the following assets is the least liquid?

Monetary policy refers to the government's

The financial system provides risk sharing by allowing

Increased liquidity in recent decades has reduced interest rates on which of the following assets (holding constant all other things that affect interest rates)?

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