Question 1

Markets in which funds are transferred from those who have excess funds available to those who have a shortage of available funds are called

Accepted Answer

A) commodity markets. 
B) funds markets. 
C) derivative exchange markets. 
D) financial markets. 
A) commodity markets. 
B) funds markets. 
C) derivative exchange markets. 
D) financial markets.

Question 2

The stock market is important because

Accepted Answer

A) it is where interest rates are determined. 
B) it is the most widely followed financial market in the United States. 
C) it is where foreign exchange rates are determined. 
D) all of the above. 
A) it is where interest rates are determined. 
B) it is the most widely followed financial market in the United States. 
C) it is where foreign exchange rates are determined. 
D) all of the above.

Question 3

Why should consumers be concerned with movements in foreign exchange rates?

Accepted Answer

The answer of Why should consumers be concerned with movements...

Question 4

What is the central bank and what does it do?

Accepted Answer

The answer of What is the central bank and what...

Question 5

Financial markets are what makes financial institutions work.

Accepted Answer

A) True 
 B)False

Question 6

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 7

(I)Banks are financial intermediaries that accept deposits and make loans. (II)The term "banks" includes firms such as commercial banks, savings and loan associations, mutual savings banks, credit unions, insurance companies, and pension funds.

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 8

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 9

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 10

The bond markets are important because

Accepted Answer

A) they are easily the most widely followed financial markets in the United States. 
B) they are the markets where interest rates are determined. 
C) they are the markets where foreign exchange rates are determined. 
D) all of the above. 
A) they are easily the most widely followed financial markets in the United States. 
B) they are the markets where interest rates are determined. 
C) they are the markets where foreign exchange rates are determined. 
D) all of the above.

Question 11

In recent years, financial markets have become more stable and less risky.

Accepted Answer

A) True 
 B)False

Question 12

Compared to interest rates on long-term U.S. government 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 13

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

Accepted Answer

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

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Changes in stock prices

Accepted Answer

A) affect people's wealth and their willingness to spend. 
B) affect firms' decisions to sell stock to finance investment spending. 
C) are characterized by considerable fluctuations. 
D) all of the above. 
E) only A and B of the above. 
A) affect people's wealth and their willingness to spend. 
B) affect firms' decisions to sell stock to finance investment spending. 
C) are characterized by considerable fluctuations. 
D) all of the above. 
E) only A and B of the above.

Question 16

Have interest rates been more or less volatile in recent years? Why?

Accepted Answer

The answer of Have interest rates been more or less...

Question 17

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 18

________ was the stock market's worst one-day drop in history in the 1980s.

Accepted Answer

A) Black Friday 
B) Black Monday 
C) Blackout Day 
D) none of the above 
A) Black Friday 
B) Black Monday 
C) Blackout Day 
D) none of the above

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Holding everything else constant, as the dollar weakens vacations abroad become less attractive.

Accepted Answer

A) True 
 B)False

Exam 1: Why Study Financial Markets and Institutions

Markets in which funds are transferred from those who have excess funds available to those who have a shortage of available funds are called

The stock market is important because

Why should consumers be concerned with movements in foreign exchange rates?

What is the central bank and what does it do?

Financial markets are what makes financial institutions work.

Typically, increasing interest rates

(I)Banks are financial intermediaries that accept deposits and make loans. (II)The term "banks" includes firms such as commercial banks, savings and loan associations, mutual savings banks, credit unions, insurance companies, and pension funds.

A declining stock market index due to lower share prices

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

The bond markets are important because

In recent years, financial markets have become more stable and less risky.

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

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

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

Changes in stock prices

Have interest rates been more or less volatile in recent years? Why?

Financial market activities affect

________ was the stock market's worst one-day drop in history in the 1980s.

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

Holding everything else constant, as the dollar weakens vacations abroad become less attractive.

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

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