Question 1

A declining stock market index due to lower share prices

Accepted Answer

A) reduces people's wealth and as a result may reduce their willingness to spend. 
B) increases people's wealth and as a result may increase their willingness to spend. 
C) decreases the amount of funds that business firms can raise by selling newly issued stock. 
D) both A and C of the above. 
E) both B and C of the above. 
A) reduces people's wealth and as a result may reduce their willingness to spend. 
B) increases people's wealth and as a result may increase their willingness to spend. 
C) decreases the amount of funds that business firms can raise by selling newly issued stock. 
D) both A and C of the above. 
E) both B and C of the above.

Question 2

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 3

Money is anything accepted by anyone as payment for services or goods.

Accepted Answer

A) True 
 B)False

Question 4

Banks are important to the study of money and the economy because they

Accepted Answer

A) provide a channel for linking those who want to save with those who want to invest. 
B) have been a source of financial innovation that is expanding the alternatives available to those wanting to invest their money. 
C) are the only financial institution to play a role in determining the quantity of money in the economy. 
D) do all of the above. 
E) do only A and B of the above. 
A) provide a channel for linking those who want to save with those who want to invest. 
B) have been a source of financial innovation that is expanding the alternatives available to those wanting to invest their money. 
C) are the only financial institution to play a role in determining the quantity of money in the economy. 
D) do all of the above. 
E) do only A and B of the above.

Question 5

The largest one-day drop in the history of the American stock markets occurred in

Accepted Answer

A) 1929. 
B) 1987. 
C) 2000. 
D) 2001. 
A) 1929. 
B) 1987. 
C) 2000. 
D) 2001.

Question 6

Financial market activities affect

Accepted Answer

A) personal wealth. 
B) spending decisions by individuals and business firms. 
C) the economy's location in the business cycle. 
D) all of the above. 
A) personal wealth. 
B) spending decisions by individuals and business firms. 
C) the economy's location in the business cycle. 
D) all of the above.

Question 7

A security

Accepted Answer

A) is a claim or price of property that is subject to ownership. 
B) promises that payments will be made periodically for a specified period of time. 
C) is the price paid for the usage of funds. 
D) is a claim on the issuer's future income. 
A) is a claim or price of property that is subject to ownership. 
B) promises that payments will be made periodically for a specified period of time. 
C) is the price paid for the usage of funds. 
D) is a claim on the issuer's future income.

Question 8

(I)A bond is a debt security that promises to make payments periodically for a specified period of time. (II)A stock is a security that is a claim on the earnings and assets of a corporation.

Accepted Answer

A) (I)is true, (II)false. 
B) (I)is false, (II)true. 
C) Both are true. 
D) Both are false. 
A) (I)is true, (II)false. 
B) (I)is false, (II)true. 
C) Both are true. 
D) Both are false.

Question 9

Typically, increasing interest rates

Accepted Answer

A) discourages individuals from saving. 
B) discourages corporate investments. 
C) encourages corporate expansion. 
D) encourages corporate borrowing. 
E) none of the above. 
A) discourages individuals from saving. 
B) discourages corporate investments. 
C) encourages corporate expansion. 
D) encourages corporate borrowing. 
E) none of the above.

Question 10

A financial intermediary borrows funds from people who have saved.

Accepted Answer

A) True 
 B)False

Question 11

Monetary policy is chiefly concerned with

Accepted Answer

A) how much money businesses earn. 
B) the level of interest rates and the nation's money supply. 
C) how much money people pay in taxes. 
D) whether people have saved enough money for retirement. 
A) how much money businesses earn. 
B) the level of interest rates and the nation's money supply. 
C) how much money people pay in taxes. 
D) whether people have saved enough money for retirement.

Question 12

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

Accepted Answer

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

Question 13

Economists group commercial banks, savings and loan associations, credit unions, mutual funds, mutual savings banks, insurance companies, pension funds, and finance companies together under the heading financial intermediaries. Financial intermediaries

Accepted Answer

A) act as middlemen, borrowing funds from those who have saved and lending these funds to others. 
B) produce nothing of value and are therefore a drain on society's resources. 
C) help promote a more efficient and dynamic economy. 
D) do all of the above. 
E) do only A and C of the above. 
A) act as middlemen, borrowing funds from those who have saved and lending these funds to others. 
B) produce nothing of value and are therefore a drain on society's resources. 
C) help promote a more efficient and dynamic economy. 
D) do all of the above. 
E) do only A and C of the above.

Question 14

The organization responsible for the conduct of monetary policy in the United States is the

Accepted Answer

A) Comptroller of the Currency. 
B) U)S. Treasury. 
C) Federal Reserve System. 
D) Bureau of Monetary Affairs. 
A) Comptroller of the Currency. 
B) U)S. Treasury. 
C) Federal Reserve System. 
D) Bureau of Monetary Affairs.

Question 15

Interest rates can be accurately described as the rental price of money.

Accepted Answer

A) True 
 B)False

Question 16

What is monetary policy and who is responsible for its implementation?

Accepted Answer

The answer of What is monetary policy and who is...

Question 17

Financial markets are what makes financial institutions work.

Accepted Answer

A) True 
 B)False

Question 18

A rising stock market index due to higher share prices

Accepted Answer

A) increases people's wealth and as a result may increase their willingness to spend. 
B) increases the amount of funds that business firms can raise by selling newly issued stock. 
C) decreases the amount of funds that business firms can raise by selling newly issued stock. 
D) both A and B of the above. 
A) increases people's wealth and as a result may increase their willingness to spend. 
B) increases the amount of funds that business firms can raise by selling newly issued stock. 
C) decreases the amount of funds that business firms can raise by selling newly issued stock. 
D) both A and B of the above.

Question 19

Monetary policy affects interest rates but has little effect on inflation or business cycles.

Accepted Answer

A) True 
 B)False

Question 20

Interest rates are important to financial institutions since an interest rate increase ________ the cost of acquiring funds and ________ the income from assets.

Accepted Answer

A) decreases; decreases 
B) increases; increases 
C) decreases; increases 
D) increases; decreases 
A) decreases; decreases 
B) increases; increases 
C) decreases; increases 
D) increases; decreases

Exam 1: Why Study Financial Markets and Institutions

A declining stock market index due to lower share prices

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

Money is anything accepted by anyone as payment for services or goods.

Banks are important to the study of money and the economy because they

The largest one-day drop in the history of the American stock markets occurred in

Financial market activities affect

A security

(I)A bond is a debt security that promises to make payments periodically for a specified period of time. (II)A stock is a security that is a claim on the earnings and assets of a corporation.

Typically, increasing interest rates

A financial intermediary borrows funds from people who have saved.

Monetary policy is chiefly concerned with

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

Economists group commercial banks, savings and loan associations, credit unions, mutual funds, mutual savings banks, insurance companies, pension funds, and finance companies together under the heading financial intermediaries. Financial intermediaries

The organization responsible for the conduct of monetary policy in the United States is the

Interest rates can be accurately described as the rental price of money.

What is monetary policy and who is responsible for its implementation?

Financial markets are what makes financial institutions work.

A rising stock market index due to higher share prices

Monetary policy affects interest rates but has little effect on inflation or business cycles.

Interest rates are important to financial institutions since an interest rate increase ________ the cost of acquiring funds and ________ the income from assets.

Overview of the Financial System

What Do Interest Rates Mean and What Is Their Role in Valuation

Why Do Interest Rates Change

How Do Risk and Term Structure Affect Interest Rates

Are Financial Markets Efficient

Why Do Financial Institutions Exist

Why Do Financial Crises Occur and Why Are They so Damaging to the Economy

Central Banks and the Federal Reserve System

Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics

The Money Markets

The Bond Market

The Stock Market

The Mortgage Markets

The Foreign Exchange Market

The International Financial System

Banking and the Management of Financial Institutions

Financial Regulation

Banking Industry: Structure and Competition

The Mutual Fund Industry

Insurance Companies and Pension Funds

Investment Banks, Security Brokers and Dealers, and Venture Capital Firms

Risk Management in Financial Institutions

Hedging With Financial Derivatives

Savings Associations and Credit Unions

Finance Companies

Filters

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

Interest rates are important to financial institutions since an interest rate increase the cost of acquiring funds and the income from assets.