Question 1

The predominant form of household debt is

Accepted Answer

A) consumer installment debt. 
B) collateralized debt. 
C) unsecured debt. 
D) unrestricted debt. 
A) consumer installment debt. 
B) collateralized debt. 
C) unsecured debt. 
D) unrestricted debt.

Question 2

A clause in a debt contract requiring that the borrower purchase insurance against loss of the asset financed with the loan is called a

Accepted Answer

A) collateral-insurance clause. 
B) prescription covenant. 
C) restrictive covenant. 
D) proscription covenant. 
A) collateral-insurance clause. 
B) prescription covenant. 
C) restrictive covenant. 
D) proscription covenant.

Question 3

The ________ problem helps to explain why the private production and sale of information cannot eliminate ________.

Accepted Answer

A) free-rider; adverse selection 
B) free-rider; moral hazard 
C) principal-agent; adverse selection 
D) principal-agent; moral hazard 
A) free-rider; adverse selection 
B) free-rider; moral hazard 
C) principal-agent; adverse selection 
D) principal-agent; moral hazard

Question 4

The analysis of how asymmetric information problems affect economic behavior is called ________ theory.

Accepted Answer

A) uneven 
B) parallel 
C) principal 
D) agency 
A) uneven 
B) parallel 
C) principal 
D) agency

Question 5

Of the following sources of external finance for American nonfinancial businesses,the least important is

Accepted Answer

A) loans from banks. 
B) stocks. 
C) bonds and commercial paper. 
D) loans from other financial intermediaries. 
A) loans from banks. 
B) stocks. 
C) bonds and commercial paper. 
D) loans from other financial intermediaries.

Question 6

Direct finance involves the sale to ________ of marketable securities such as stocks and bonds.

Accepted Answer

A) households 
B) insurance companies 
C) pension funds 
D) financial intermediaries 
A) households 
B) insurance companies 
C) pension funds 
D) financial intermediaries

Question 7

Financial intermediaries develop ________ in things such as computer technology which allows them to lower transactions costs.

Accepted Answer

A) expertise 
B) diversification 
C) regulations 
D) equity 
A) expertise 
B) diversification 
C) regulations 
D) equity

Question 8

Which of the following statements concerning external sources of financing for nonfinancial businesses in the United States are true?

Accepted Answer

A) Issuing marketable securities is the primary way that they finance their activities. 
B) Bonds are the least important source of external funds to finance their activities. 
C) Stocks are a relatively unimportant source of finance for their activities. 
D) Selling bonds directly to the American household is a major source of funding for American businesses. 
A) Issuing marketable securities is the primary way that they finance their activities. 
B) Bonds are the least important source of external funds to finance their activities. 
C) Stocks are a relatively unimportant source of finance for their activities. 
D) Selling bonds directly to the American household is a major source of funding for American businesses.

Question 9

A key finding of the economic analysis of financial structure is that

Accepted Answer

A) the existence of the free-rider problem for traded securities helps to explain why banks play a predominant role in financing the activities of businesses. 
B) while free-rider problems limit the extent to which securities markets finance some business activities,nevertheless the majority of funds going to businesses are channeled through securities markets. 
C) given the great extent to which securities markets are regulated,free-rider problems are not of significant economic consequence in these markets. 
D) economists do not have a very good explanation for why securities markets are so heavily regulated. 
A) the existence of the free-rider problem for traded securities helps to explain why banks play a predominant role in financing the activities of businesses. 
B) while free-rider problems limit the extent to which securities markets finance some business activities,nevertheless the majority of funds going to businesses are channeled through securities markets. 
C) given the great extent to which securities markets are regulated,free-rider problems are not of significant economic consequence in these markets. 
D) economists do not have a very good explanation for why securities markets are so heavily regulated.

Question 10

Nonfinancial businesses in Germany,Japan,and Canada raise most of their funds

Accepted Answer

A) by issuing stock. 
B) by issuing bonds. 
C) from nonbank loans. 
D) from bank loans. 
A) by issuing stock. 
B) by issuing bonds. 
C) from nonbank loans. 
D) from bank loans.

Question 11

The free-rider problem occurs because

Accepted Answer

A) people who pay for information use it freely. 
B) people who do not pay for information use it. 
C) information can never be sold at any price. 
D) it is never profitable to produce information. 
A) people who pay for information use it freely. 
B) people who do not pay for information use it. 
C) information can never be sold at any price. 
D) it is never profitable to produce information.

Question 12

The reduction in transactions costs per dollar of investment as the size of transactions increases is

Accepted Answer

A) discounting. 
B) economies of scale. 
C) economies of trade. 
D) diversification. 
A) discounting. 
B) economies of scale. 
C) economies of trade. 
D) diversification.

Question 13

The concept of adverse selection helps to explain

Accepted Answer

A) why collateral is not a common feature of many debt contracts. 
B) why large,well-established corporations find it so difficult to borrow funds in securities markets. 
C) why financial markets are among the most heavily regulated sectors of the economy. 
D) why stocks are the most important source of external financing for businesses. 
A) why collateral is not a common feature of many debt contracts. 
B) why large,well-established corporations find it so difficult to borrow funds in securities markets. 
C) why financial markets are among the most heavily regulated sectors of the economy. 
D) why stocks are the most important source of external financing for businesses.

Question 14

Regulation of the financial system

Accepted Answer

A) occurs only in the United States. 
B) protects the jobs of employees of financial institutions. 
C) protects the wealth of owners of financial institutions. 
D) ensures the stability of the financial system. 
A) occurs only in the United States. 
B) protects the jobs of employees of financial institutions. 
C) protects the wealth of owners of financial institutions. 
D) ensures the stability of the financial system.

The predominant form of household debt is

A clause in a debt contract requiring that the borrower purchase insurance against loss of the asset financed with the loan is called a

The problem helps to explain why the private production and sale of information cannot eliminate .

The analysis of how asymmetric information problems affect economic behavior is called ________ theory.

Of the following sources of external finance for American nonfinancial businesses,the least important is

Direct finance involves the sale to ________ of marketable securities such as stocks and bonds.

Financial intermediaries develop ________ in things such as computer technology which allows them to lower transactions costs.

Which of the following statements concerning external sources of financing for nonfinancial businesses in the United States are true?

A key finding of the economic analysis of financial structure is that

Nonfinancial businesses in Germany,Japan,and Canada raise most of their funds

The free-rider problem occurs because

The reduction in transactions costs per dollar of investment as the size of transactions increases is

The concept of adverse selection helps to explain

Regulation of the financial system

Why Study Money, Banking, and Financial Markets

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

Financial Crises and the Subprime Meltdown

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 for Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

The Demand for Money

The Islm Model

Monetary and Fiscal Policy in the ISLM Model

Aggregate Demand and Supply Analysis

Transmission Mechanisms of Monetary Policy: The Evidence

Money and Inflation

Rational Expectations: Implications for Policy

Filters

Exam 8: An Economic Analysis of Financial Structure

The predominant form of household debt is

A clause in a debt contract requiring that the borrower purchase insurance against loss of the asset financed with the loan is called a

The ________ problem helps to explain why the private production and sale of information cannot eliminate ________.

The analysis of how asymmetric information problems affect economic behavior is called ________ theory.

Of the following sources of external finance for American nonfinancial businesses,the least important is

Direct finance involves the sale to ________ of marketable securities such as stocks and bonds.

Financial intermediaries develop ________ in things such as computer technology which allows them to lower transactions costs.

Which of the following statements concerning external sources of financing for nonfinancial businesses in the United States are true?

A key finding of the economic analysis of financial structure is that

Nonfinancial businesses in Germany,Japan,and Canada raise most of their funds

The free-rider problem occurs because

The reduction in transactions costs per dollar of investment as the size of transactions increases is

The concept of adverse selection helps to explain

Regulation of the financial system

Why Study Money, Banking, and Financial Markets

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

Financial Crises and the Subprime Meltdown

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 for Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

The Demand for Money

The Islm Model

Monetary and Fiscal Policy in the ISLM Model

Aggregate Demand and Supply Analysis

Transmission Mechanisms of Monetary Policy: The Evidence

Money and Inflation

Rational Expectations: Implications for Policy

Filters

The problem helps to explain why the private production and sale of information cannot eliminate .