Test Bank: The Economics of Money, Banking, and Financial Markets, Exams of Nursing

Download Test Bank: The Economics of Money, Banking, and Financial Markets and more Exams Nursing in PDF only on Docsity! Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets Collections of Test Banks covered chapter 1,2,3,4, and 5. To all my colleagues who study this important subject from all over the world I present you a collection of test banks which covers five chapters Hopefully, will help you as it helped me in my study! With my best wishes, Mohamed Bagoul. Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. 2 Mishkin · The Economics of Money, Banking, and Financial Markets, 9th Edition 1) markets transfer funds from people who have an excess of available funds to people who have a shortage. A) Commodity B) Fund- available C) Financial D) Derivative exchange Answer: C Ques Status: Previous Edition 2) Poorly performing financial markets can be the cause of A) wealth. B) poverty. C) financial stability. D) financial expansion. Answer: B Ques Status: Previous Edition 3) The bond markets are important because they are A) easily the most widely followed financial markets in the United States. B) the markets where foreign exchange rates are determined. C) the markets where interest rates are determined. D) the markets where all borrowers get their funds. Answer: C Ques Status: Previous Edition 4) 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 A) inflation rate. B) exchange rate. C) interest rate. D) aggregate price level. Answer: C Ques Status: Previous Edition 5) Compared to interest rates on long-term U.S. government bonds, interest rates on three - month Treasury bills fluctuate and are on average. A) more; lower B) less; lower C) more; higher D) less; higher Answer: A Ques Status: Previous Edition Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. Chapter 1 Why Study Money, Banking, and Financial Markets? 3 6) The interest rate on Baa (medium quality) corporate bonds is , on average, than other interest rates, and the spread between it and other rates became in the 1970s. A) lower; smaller B) lower; larger C) higher; smaller D) higher; larger Answer: D Ques Status: Previous Edition 7) Everything else held constant, a decline in interest rates will cause spending on housing to A) fall. B) remain unchanged. C) either rise, fall, or remain the same. D) rise. Answer: D Ques Status: Previous Edition 8) High interest rates might purchasing a house or car but at the same time high interest rates might saving. A) discourage; encourage B) discourage; discourage C) encourage; encourage D) encourage; discourage Answer: A Ques Status: New 9) An increase in interest rates might saving because more can be earned in interest income. A) encourage B) discourage C) disallow D) invalidate Answer: A Ques Status: Previous Edition 10)Everything else held constant, an increase in interest rates on student loans A) increases the cost of a college education. B) reduces the cost of a college education. C) has no effect on educational costs. D) increases costs for students with no loans. Answer: A Ques Status: Previous Edition Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. Chapter 1 Why Study Money, Banking, and Financial Markets? 5 17)An increase in stock prices the size of people's wealth and may their willingness to spend, everything else held constant. A) increases; increase B) increases; decrease C) decreases; increase D) decreases; decrease Answer: A Ques Status: Previous Edition 18)Low stock market prices might consumers willingness to spend and might businesses willingness to undertake investment projects. A) increase; increase B) increase; decrease C) decrease; decrease D) decrease; increase Answer: C Ques Status: New 19)Fear of a major recession causes stock prices to fall, everything else held constant, which in turn causes consumer spending to A) increase. B) remain unchanged. C) decrease. D) cannot be determined. Answer: C Ques Status: Previous Edition 20)A share of common stock is a claim on a corporation's A) debt. B) liabilities. C) expenses. D) earnings and assets. Answer: D Ques Status: Revised 21)On , October 19, 1987, the market experienced its worst one -day drop in its entire history with the DIJA falling by more than 500 points. A) "Terrible Tuesday" B) "Woeful Wednesday" C) "Freaky Friday" D) "Black Monday" Answer: D Ques Status: Previous Edition Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. Chapter 1 Why Study Money, Banking, and Financial Markets? 7 3) Banks are important to the study of money and the economy because they A) channel funds from investors to savers. B) have been a source of rapid financial innovation. C) are the only important financial institution in the U.S. economy. D) create inflation. Answer: B Ques Status: Previous Edition 4) Financial intermediaries A) provide a channel for linking those who want to save with those who want to invest. B) produce nothing of value and are therefore a drain on society's resources. C) can hurt the performance of the economy. D) hold very little of the average American's wealth. Answer: A Ques Status: Revised 5) Banks, savings and loan associations, mutual savings banks, and credit unions A) are no longer important players in financial intermediation. B) since deregulation now provide services only to small depositors. C) have been adept at innovating in response to changes in the regulatory environment. D) produce nothing of value and are therefore a drain on society's resources. Answer: C Ques Status: Previous Edition 6) Financial institutions search for has resulted in many financial innovations. A) higher profits B) regulations C) respect D) higher risk Answer: A Ques Status: New 7) Banks and other financial institutions engage in financial intermediation, which A) can hurt the performance of the economy. B) can benefit economic performance. C) has no effect on economic performance. D) involves borrowing from investors and lending to savers. Answer: B Ques Status: Previous Edition 8) Financial institutions that accept deposits and make loans are called . A) exchanges B) banks C) over-the-counter markets D) finance companies Answer: B Ques Status: Previous Edition Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. 8 Mishkin · The Economics of Money, Banking, and Financial Markets, 9th Edition 9) The financial intermediaries that the average person interacts with most frequently are . A) exchanges B) over-the-counter markets C) finance companies D) banks Answer: D Ques Status: Previous Edition 10)Which of the following is not a financial institution? A) a life insurance company B) a pension fund C) a credit union D) a business college Answer: D Ques Status: Previous Edition 11)The delivery of financial services electronically is called . A) e-business B) e-commerce C) e-finance D) e-possible Answer: C Ques Status: Previous Edition 12)What crucial role do financial intermediaries perform in an economy? Answer: Financial intermediaries borrow funds from people who have saved and make loans to other individuals and businesses and thus improve the efficiency of the economy. Ques Status: New 2.3 Why Study Money and Monetary Policy? 1) Money is defined as A) bills of exchange. B) anything that is generally accepted in payment for goods and services or in the repayment of debt. C) a risk-free repository of spending power. D) the unrecognized liability of governments. Answer: B Ques Status: Previous Edition 2) The upward and downward movement of aggregate output produced in the economy is referred to as the . A) roller coaster B) see saw C) business cycle D) shock wave Answer: C Ques Status: Previous Edition Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. 10 Mishkin · The Economics of Money, Banking, and Financial Markets, 9th Edition 9) It is true that inflation is a A) continuous increase in the money supply. B) continuous fall in prices. C) decline in interest rates. D) continually rising price level. Answer: D Ques Status: Previous Edition 10)Which of the following is a true statement? A) Money or the money supply is defined as Federal Reserve notes. B) The average price of goods and services in an economy is called the aggregate price level. C) The inflation rate is measured as the rate of change in the federal government budget deficit. D) The aggregate price level is measured as the rate of change in the inflation rate. Answer: B Ques Status: Previous Edition 11)If ten years ago the prices of the items bought last month by the average consumer would have been much higher, then one can likely conclude that A) the aggregate price level has declined during this ten-year period. B) the average inflation rate for this ten -year period has been positive. C) the average rate of money growth for this ten-year period has been positive. D) the aggregate price level has risen during this ten- year period. Answer: A Ques Status: Previous Edition 12)From 1950-2008 the price level in the United States increased more than . A) twofold B) threefold C) sixfold D) ninefold Answer: C Ques Status: Revised 13)Complete Milton Friedman's famous statement, "Inflation is always and everywhere a phenomenon." A) recessionary B) discretionary C) repressionary D) monetary Answer: D Ques Status: Previous Edition 14)There is a association between inflation and the growth rate of money . A) positive; demand B) positive; supply C) negative; demand D) negative; supply Answer: B Ques Status: New Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. 12 Mishkin · The Economics of Money, Banking, and Financial Markets, 9th Edition 20) policy involves decisions about government spending and taxation. A) Monetary B) Fiscal C) Financial D) Systemic Answer: B Ques Status: Previous Edition 21)When tax revenues are greater than government expenditures, the government has a budget . A) crisis B) deficit C) surplus D) revision Answer: C Ques Status: Previous Edition 22)A budget time period. A) deficit B) surplus C) surge D) surfeit Answer: A Ques Status: New occurs when government expenditures exceed tax revenues for a particular 23)Budgets deficits can be a concern because they might A) ultimately lead to higher inflation. B) lead to lower interest rates. C) lead to a slower rate of money growth. D) lead to higher bond prices. Answer: A Ques Status: Previous Edition 24)Budget deficits are important because deficits A) cause bank failures. B) always cause interest rates to fall. C) can result in higher rates of monetary growth. D) always cause prices to fall. Answer: C Ques Status: Previous Edition 25)What happens to economic growth and unemployment during a business cycle recession? What is the relationship between the money growth rate and a business cycle recession? Answer: During a recession, output declines and unemployment increases. Prior to every recession in the U.S. the money growth rate has declined, however, not every decline is followed by a recession. Ques Status: Previous Edition Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. Chapter 1 Why Study Money, Banking, and Financial Markets? 13 1.4 Why Study International Finance? 1) American companies can borrow funds A) only in U.S. financial markets. B) only in foreign financial markets. C) in both U.S. and foreign financial markets. D) only from the U.S. government. Answer: C Ques Status: New 2) The price of one country's currency in terms of another country's currency is called the A) exchange rate. B) interest rate. C) Dow Jones industrial average. D) prime rate. Answer: A Ques Status: Previous Edition 3) The market where one currency is converted into another currency is called the market. A) stock B) bond C) derivatives D) foreign exchange Answer: D Ques Status: Previous Edition 4) Everything else constant, a stronger dollar will mean that A) vacationing in England becomes more expensive. B) vacationing in England becomes less expensive. C) French cheese becomes more expensive. D) Japanese cars become more expensive. Answer: B Ques Status: Previous Edition 5) Which of the following is most likely to result from a stronger dollar? A) U.S. goods exported aboard will cost less in foreign countries, and so foreigners will buy more of them. B) U.S. goods exported aboard will cost more in foreign countries and so foreigners will buy more of them. C) U.S. goods exported abroad will cost more in foreign countries, and so foreigners will buy fewer of them. D) Americans will purchase fewer foreign goods. Answer: C Ques Status: Previous Edition Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. Chapter 1 Why Study Money, Banking, and Financial Markets? 15 11)Everything else held constant, a decrease in the value of the dollar relative to all foreign currencies means that the price of foreign goods purchased by Americans A) increases B) decreases. C) remains unchanged. D) either increases, decreases, or remains unchanged. Answer: A Ques Status: Previous Edition 12)American farmers who sell beef to Europe benefit most from A) a decrease in the dollar price of euros. B) an increase in the dollar price of euros. C) a constant dollar price for euros. D) a European ban on imports of American beef. Answer: B Ques Status: Previous Edition 13)If the price of a euro (the European currency) increases from $1.00 to $1.10, then, everything else held constant, A) a European vacation becomes less expensive. B) a European vacation becomes more expensive. C) the cost of a European vacation is not affected. D) foreign travel becomes impossible. Answer: B Ques Status: Previous Edition 14)Everything else held constant, Americans who love French wine benefit most from A) a decrease in the dollar price of euros. B) an increase in the dollar price of euros. C) a constant dollar price for euros. D) a ban on imports from Europe. Answer: A Ques Status: Previous Edition 15)From 1980- 1985, the dollar strengthened in value against other currencies. Who was helped and who was hurt by this strong dollar? Answer: American consumers benefitted because imports were cheaper and consumers could purchase more. American businesses and workers in those businesses were hurt as domestic and foreign sales of American products fell. Ques Status: New Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. Chapter 1 Why Study Money, Banking, and Financial Markets? 17 6) Nominal GDP is output measured in prices while real GDP is output measured in prices. A) current; current B) current; fixed C) fixed; fixed D) fixed; current Answer: B Ques Status: New 7) GDP measured with constant prices is referred to as A) real GDP. B) nominal GDP. C) the GDP deflator. D) industrial production. Answer: A Ques Status: Previous Edition 8) If your nominal income in 2002 was $50,000, and prices doubled between 2002 and 2008, to have the same real income, your nominal income in 2008 must be A) $50,000. B) $75,000. C) $90,000. D) $100,000. Answer: D Ques Status: Revised 9) If your nominal income in 1998 is $50,000, and prices increase by 50% between 1998 and 2008, then to have the same real income, your nominal income in 2008 must be A) $50,000. B) $75,000. C) $100,000. D) $150,000. Answer: B Ques Status: Revised 10)To convert a nominal GDP to a real GDP, you would use A) the PCE deflator. B) the CPI measure. C) the GDP deflator. D) the PPI measure. Answer: C Ques Status: New Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. 18 Mishkin · The Economics of Money, Banking, and Financial Markets, 9th Edition 11)If nominal GDP in 2001 is $9 trillion, and 2001 real GDP in 1996 prices is $6 trillion, the GDP deflator price index is A) 7. B) 100. C) 150. D) 200. Answer: C Ques Status: Previous Edition 12)When prices are measured in terms of fixed (base-year) prices they are called prices. A) nominal B) real C) inflated D) aggregate Answer: B Ques Status: Previous Edition 13)The measure of the aggregate price level that is most frequently reported in the media is the . A) GDP deflator B) producer price index C) consumer price index D) household price index Answer: C Ques Status: Previous Edition 14)To calculate the growth rate of a variable, you will A) calculate the percentage change from one time period to the next. B) calculate the difference between the two variables. C) add the ending value to the beginning value. D) divide the increase by the number of time periods. Answer: A Ques Status: New 15)If real GDP grows from $10 trillion in 2002 to $10.5 trillion in 2003, the growth rate for real GDP is A) 5%. B) 10%. C) 50%. D) 0.5%. Answer: A Ques Status: Previous Edition Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. Chapter 2 An Overview of the Financial System 2.1 Function of Financial Markets 1) Every financial market has the following characteristic: A) It determines the level of interest rates. B) It allows common stock to be traded. C) It allows loans to be made. D) It channels funds from lenders- savers to borrowers-spenders. Answer: D Ques Status: Previous Edition 2) Financial markets have the basic function of A) getting people with funds to lend together with people who want to borrow funds. B) assuring that the swings in the business cycle are less pronounced. C) assuring that governments need never resort to printing money. D) providing a risk-free repository of spending power. Answer: A Ques Status: Previous Edition 3) Financial markets improve economic welfare because A) they channel funds from investors to savers. B) they allow consumers to time their purchase better. C) they weed out inefficient firms. D) eliminate the need for indirect finance. Answer: B Ques Status: Previous Edition 4) Well-functioning financial markets A) cause inflation. B) eliminate the need for indirect finance. C) cause financial crises. D) produce an efficient allocation of capital. Answer: D Ques Status: Previous Edition 5) A breakdown of financial markets can result in A) financial stability. B) rapid economic growth. C) political instability. D) stable prices. Answer: C Ques Status: Previous Edition Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. 22 Mishkin · The Economics of Money, Banking, and Financial Markets, 9th Edition 12)Which of the following can be described as involving indirect finance? A) You make a loan to your neighbor. B) A corporation buys a share of common stock issued by another corporation in the primary market. C) You buy a U.S. Treasury bill from the U.S. Treasury. D) You make a deposit at a bank. Answer: D Ques Status: Previous Edition 13)Which of the following can be described as involving indirect finance? A) You make a loan to your neighbor. B) You buy shares in a mutual fund. C) You buy a U.S. Treasury bill from the U.S. Treasury. D) A corporation buys a short- term security issued by another corporation in the primary market. Answer: B Ques Status: Previous Edition 14)Securities are for the person who buys them, but are for the individual or firm that issues them. A) assets; liabilities B) liabilities; assets C) negotiable; nonnegotiable D) nonnegotiable; negotiable Answer: A Ques Status: Previous Edition 15)With finance, borrowers obtain funds from lenders by selling them securities in the financial markets. A) active B) determined C) indirect D) direct Answer: D Ques Status: Previous Edition 16)With direct finance funds are channeled through the financial market from the directly to the . A) savers, spenders B) spenders, investors C) borrowers, savers D) investors, savers Answer: A Ques Status: Previous Edition Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. Chapter 2 An Overview of the Financial System 23 17)Distinguish between direct finance and indirect finance. Which of these is the most important source of funds for corporations in the United States? Answer: With direct finance, funds flow directly from the lender/saver to the borrower. With indirect finance, funds flow from the lender/saver to a financial intermediary who then channels the funds to the borrower/investor. Financial intermediaries (indirect finance) are the major source of funds for corporations in the U.S. Ques Status: Previous Edition 2.2 Structure of Financial Markets 1) Which of the following statements about the characteristics of debt and equity is false? A) They can both be long- term financial instruments. B) They can both be short-term financial instruments. C) They both involve a claim on the issuer's income. D) They both enable a corporation to raise funds. Answer: B Ques Status: Previous Edition 2) Which of the following statements about the characteristics of debt and equities is true? A) They can both be long- term financial instruments. B) Bond holders are residual claimants. C) The income from bonds is typically more variable than that from equities. D) Bonds pay dividends. Answer: A Ques Status: Previous Edition 3) Which of the following statements about financial markets and securities is true? A) A bond is a long-term security that promises to make periodic payments called dividends to the firm's residual claimants. B) A debt instrument is intermediate term if its maturity is less than one year. C) A debt instrument is intermediate term if its maturity is ten years or longer. D) The maturity of a debt instrument is the number of years (term) to that instrument's expiration date. Answer: D Ques Status: Previous Edition 4) Which of the following is an example of an intermediate- term debt? A) A thirty-year mortgage. B) A sixty-month car loan. C) A six month loan from a finance company. D) A Treasury bond. Answer: B Ques Status: Previous Edition Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. Chapter 2 An Overview of the Financial System 25 11)An important financial institution that assists in the initial sale of securities in the primary market is the A) investment bank. B) commercial bank. C) stock exchange. D) brokerage house. Answer: A Ques Status: Previous Edition 12)When an investment bank securities, it guarantees a price for a corporation's securities and then sells them to the public. A) underwrites B) undertakes C) overwrites D) overtakes Answer: A Ques Status: Previous Edition 13)Which of the following is not a secondary market? A) foreign exchange market B) futures market C) options market D) IPO market Answer: D Ques Status: New 14) work in the secondary markets matching buyers with sellers of securities. A) Dealers B) Underwriters C) Brokers D) Claimants Answer: C Ques Status: Previous Edition 15)A corporation acquires new funds only when its securities are sold in the A) primary market by an investment bank. B) primary market by a stock exchange broker. C) secondary market by a securities dealer. D) secondary market by a commercial bank. Answer: A Ques Status: Previous Edition 16)A corporation acquires new funds only when its securities are sold in the A) secondary market by an investment bank. B) primary market by an investment bank. C) secondary market by a stock exchange broker. D) secondary market by a commercial bank. Answer: B Ques Status: Previous Edition Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. Chapter 2 An Overview of the Financial System 27 23)Which of the following statements about financial markets and securities is true? A) Many common stocks are traded over-the-counter, although the largest corporations usually have their shares traded at organized stock exchanges such as the New York Stock Exchange. B) As a corporation gets a share of the broker's commission, a corporation acquires new funds whenever its securities are sold. C) Capital market securities are usually more widely traded than shorter -term securities and so tend to be more liquid. D) Because of their short- terms to maturity, the prices of money market instruments tend to fluctuate wildly. Answer: A Ques Status: Previous Edition 24)A financial market in which only short-term debt instruments are traded is called the market. A) bond B) money C) capital D) stock Answer: B Ques Status: Previous Edition 25)Equity instruments are traded in the market. A) money B) bond C) capital D) commodities Answer: C Ques Status: Previous Edition 26)Corporations receive funds when their stock is sold in the primary market. Why do corporations pay attention to what is happening to their stock in the secondary market? Answer: The existence of the secondary market makes their stock more liquid and the price in the secondary market sets the price that the corporation would receive if they choose to sell more stock in the primary market. Ques Status: Previous Edition 27)Describe the two methods of organizing a secondary market. Answer: A secondary market can be organized as an exchange where buyers and sellers meet in one central location to conduct trades. An example of an exchange is the New York Stock Exchange. A secondary market can also be organized as an over -the-counter market. In this type of market, dealers in different locations buy and sell securities to anyone who comes to them and is willing to accept their prices. An example of an over -the- counter market is the federal funds market. Ques Status: New Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. 28 Mishkin · The Economics of Money, Banking, and Financial Markets, 9th Edition 2.3 Financial Market Instruments 1) Prices of money market instruments undergo the least price fluctuations because of A) the short terms to maturity for the securities. B) the heavy regulations in the industry. C) the price ceiling imposed by government regulators. D) the lack of competition in the market. Answer: A Ques Status: New 2) U.S. Treasury bills pay no interest but are sold at a . That is, you will pay a lower purchase price than the amount you receive at maturity. A) premium B) collateral C) default D) discount Answer: D Ques Status: Previous Edition 3) U.S. Treasury bills are considered the safest of all money market instruments because there is no risk of . A) defeat B) default C) desertion D) demarcation Answer: B Ques Status: Previous Edition 4) A debt instrument sold by a bank to its depositors that pays annual interest of a given amount and at maturity pays back the original purchase price is called A) commercial paper. B) a negotiable certificate of deposit. C) a municipal bond. D) federal funds. Answer: B Ques Status: Revised 5) A short-term debt instrument issued by well- known corporations is called A) commercial paper. B) corporate bonds. C) municipal bonds. D) commercial mortgages. Answer: A Ques Status: New Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. 30 Mishkin · The Economics of Money, Banking, and Financial Markets, 9th Edition 12)Which of the following instruments are traded in a money market? A) Bank commercial loans. B) Commercial paper. C) State and local government bonds. D) Residential mortgages. Answer: B Ques Status: Revised 13)Which of the following instruments is not traded in a money market? A) Residential mortgages. B) U.S. Treasury Bills. C) Negotiable bank certificates of deposit. D) Commercial paper. Answer: A Ques Status: Revised 14)Bonds issued by state and local governments are called bonds. A) corporate B) Treasury C) municipal D) commercial Answer: C Ques Status: Previous Edition 15)Equity and debt instruments with maturities greater than one year are called market instruments. A) capital B) money C) federal D) benchmark Answer: A Ques Status: New 16)Which of the following is a long-term financial instrument? A) A negotiable certificate of deposit. B) A repurchase agreement. C) A U.S. Treasury bond. D) A U.S. Treasury bill. Answer: C Ques Status: Revised 17)Which of the following instruments are traded in a capital market? A) U.S. Government agency securities. B) Negotiable bank CDs. C) Repurchase agreements. D) U.S. Treasury bills. Answer: A Ques Status: Revised Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. 32 Mishkin · The Economics of Money, Banking, and Financial Markets, 9th Edition 4) Bonds that are sold in a foreign country and are denominated in a currency other than that of the country in which it is sold are known as A) foreign bonds. B) Eurobonds. C) equity bonds. D) country bonds. Answer: B Ques Status: Previous Edition 5) If Microsoft sells a bond in London and it is denominated in dollars, the bond is a . A) Eurobond B) foreign bond C) British bond D) currency bond Answer: A Ques Status: Previous Edition 6) U.S. dollar deposits in foreign banks outside the U.S. or in foreign branches of U.S. banks are called . A) Atlantic dollars B) Eurodollars C) foreign dollars D) outside dollars Answer: B Ques Status: Previous Edition 7) Distinguish between a foreign bond and a Eurobond. Answer: A foreign bond is sold in a foreign country and priced in that country's currency. A Eurobond is sold in a foreign country and priced in a currency that is not that country's currency. Ques Status: New 2.5 Function of Financial Intermediaries: Indirect Finance 1) The process of indirect finance using financial intermediaries is called A) direct lending. B) financial intermediation. C) resource allocation. D) financial liquidation. Answer: B Ques Status: Previous Edition 2) In the United States, loans from are far important for corporate finance than are securities markets. A) government agencies; more B) government agencies; less C) financial intermediaries; more D) financial intermediaries; less Answer: C Ques Status: Previous Edition Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. Chapter 2 An Overview of the Financial System 33 3) The time and money spent in carrying out financial transactions are called A) economies of scale. B) financial intermediation. C) liquidity services. D) transaction costs. Answer: D Ques Status: New 4) Economies of scale enable financial institutions to A) reduce transactions costs. B) avoid the asymmetric information problem. C) avoid adverse selection problems. D) reduce moral hazard. Answer: A Ques Status: Previous Edition 5) An example of economies of scale in the provision of financial services is A) investing in a diversified collection of assets. B) providing depositors with a variety of savings certificates. C) spreading the cost of borrowed funds over many customers. D) spreading the cost of writing a standardized contract over many borrowers. Answer: D Ques Status: Previous Edition 6) Financial intermediaries provide customers with liquidity services. Liquidity services A) make it easier for customers to conduct transactions. B) allow customers to have a cup of coffee while waiting in the lobby. C) are a result of the asymmetric information problem. D) are another term for asset transformation. Answer: A Ques Status: New 7) The process where financial intermediaries create and sell low-risk assets and use the proceeds to purchase riskier assets is known as A) risk sharing. B) risk aversion. C) risk neutrality. D) risk selling. Answer: A Ques Status: Previous Edition 8) The process of asset transformation refers to the conversion of A) safer assets into risky assets. B) safer assets into safer liabilities. C) risky assets into safer assets. D) risky assets into risky liabilities. Answer: C Ques Status: Previous Edition Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. Chapter 2 An Overview of the Financial System 35 15)Adverse selection is a problem associated with equity and debt contracts arising from A) the lender's relative lack of information about the borrower's potential returns and risks of his investment activities. B) the lender's inability to legally require sufficient collateral to cover a 100% loss if the borrower defaults. C) the borrower's lack of incentive to seek a loan for highly risky investments. D) the borrower's lack of good options for obtaining funds. Answer: A Ques Status: Previous Edition 16)An example of the problem of is when a corporation uses the funds raised from selling bonds to fund corporate expansion to pay for Caribbean cruises for all of its employees and their families. A) adverse selection B) moral hazard C) risk sharing D) credit risk Answer: B Ques Status: Previous Edition 17)Studies of the major developed countries show that when businesses go looking for funds to finance their activities they usually obtain these funds from A) government agencies. B) equities markets. C) financial intermediaries. D) bond markets. Answer: C Ques Status: Previous Edition 18)The countries that have made the least use of securities markets are and ; in these two countries finance from financial intermediaries has been almost ten times greater than that from securities markets. A) Germany; Japan B) Germany; Great Britain C) Great Britain; Canada D) Canada; Japan Answer: A Ques Status: Previous Edition 19)Although the dominance of over is clear in all countries, the relative importance of bond versus stock markets differs widely. A) financial intermediaries; securities markets B) financial intermediaries; government agencies C) government agencies; financial intermediaries D) government agencies; securities markets Answer: A Ques Status: Previous Edition Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. Chapter 2 An Overview of the Financial System 37 5) Which of the following financial intermediaries is not a depository institution? A) A savings and loan association B) A commercial bank C) A credit union D) A finance company Answer: D Ques Status: Previous Edition 6) The primary assets of credit unions are A) municipal bonds. B) business loans. C) consumer loans. D) mortgages. Answer: C Ques Status: Previous Edition 7) The primary liabilities of a commercial bank are A) bonds. B) mortgages. C) deposits. D) commercial paper. Answer: C Ques Status: Previous Edition 8) The primary liabilities of depository institutions are A) premiums from policies. B) shares. C) deposits. D) bonds. Answer: C Ques Status: Previous Edition 9) institutions are financial intermediaries that acquire funds at periodic intervals on a contractual basis. A) Investment B) Contractual savings C) Thrift D) Depository Answer: B Ques Status: Previous Edition 10)Which of the following is a contractual savings institution? A) A life insurance company B) A credit union C) A savings and loan association D) A mutual fund Answer: A Ques Status: Previous Edition Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. 38 Mishkin · The Economics of Money, Banking, and Financial Markets, 9th Edition 11)Contractual savings institutions include A) mutual savings banks. B) money market mutual funds. C) commercial banks. D) life insurance companies. Answer: D Ques Status: Previous Edition 12)Which of the following are not contractual savings institutions? A) Life insurance companies B) Credit unions C) Pension funds D) State and local government retirement funds Answer: B Ques Status: Previous Edition 13)Which of the following is not a contractual savings institution? A) A life insurance company B) A pension fund C) A savings and loan association D) A fire and casualty insurance company Answer: C Ques Status: Previous Edition 14)The primary assets of a pension fund are A) money market instruments. B) corporate bonds and stock. C) consumer and business loans. D) mortgages. Answer: B Ques Status: Previous Edition 15)Which of the following are investment intermediaries? A) Life insurance companies B) Mutual funds C) Pension funds D) State and local government retirement funds Answer: B Ques Status: Previous Edition 16)An investment intermediary that lends funds to consumers is A) a finance company. B) an investment bank. C) a finance fund. D) a consumer company. Answer: A Ques Status: New Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. 40 Mishkin · The Economics of Money, Banking, and Financial Markets, 9th Edition 23)An investment bank purchases securities from a corporation at a predetermined price and then resells them in the market. This process is called A) underwriting. B) underhanded. C) understanding. D) undertaking. Answer: A Ques Status: New 2.7 Regulation of the Financial System 1) Which of the following is not a goal of financial regulation? A) Ensuring the soundness of the financial system B) Reducing moral hazard C) Reducing adverse selection D) Ensuring that investors never suffer losses Answer: D Ques Status: Previous Edition 2) Increasing the amount of information available to investors helps to reduce the problems of and in the financial markets. A) adverse selection; moral hazard B) adverse selection; risk sharing C) moral hazard; transactions costs D) adverse selection; economies of scale Answer: A Ques Status: New 3) A goal of the Securities and Exchange Commission is to reduce problems arising from A) competition. B) banking panics. C) risk. D) asymmetric information. Answer: D Ques Status: Previous Edition 4) The purpose of the disclosure requirements of the Securities and Exchange Commission is to A) increase the information available to investors. B) prevent bank panics. C) improve monetary control. D) protect investors against financial losses. Answer: A Ques Status: Previous Edition Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. 42 Mishkin · The Economics of Money, Banking, and Financial Markets, 9th Edition 11)Savings and loan associations are regulated by the A) Federal Reserve System. B) Securities and Exchange Commission. C) Office of the Comptroller of the Currency. D) Office of Thrift Supervision. Answer: D Ques Status: Previous Edition 12)The regulatory agency that sets reserve requirements for all banks is A) the Federal Reserve System. B) the Federal Deposit Insurance Corporation. C) the Office of Thrift Supervision. D) the Securities and Exchange Commission. Answer: A Ques Status: New 13)Asymmetric information is a universal problem. This would suggest that financial regulations A) in industrial countries are an unqualified failure. B) differ significantly around the world. C) in industrialized nations are similar. D) are unnecessary. Answer: C Ques Status: Previous Edition 14)How do regulators help to ensure the soundness of financial intermediaries? Answer: Regulators restrict who can set up a financial intermediary, conduct regular examinations, restrict assets, and provide insurance to help ensure the soundness of financial intermediaries. Ques Status: Previous Edition Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. Chapter 3 What Is Money? 3.1 Meaning of Money 1) To an economist, is anything that is generally accepted in payment for goods and services or in the repayment of debt. A) wealth B) income C) money D) credit Answer: C Ques Status: Previous Edition 2) Money is A) anything that is generally accepted in payment for goods and services or in the repayment of debt. B) a flow of earnings per unit of time. C) the total collection of pieces of property that are a store of value. D) always based on a precious metal like gold or silver. Answer: A Ques Status: Previous Edition 3) Currency includes A) paper money and coins. B) paper money, coins, and checks. C) paper money and checks. D) paper money, coins, checks, and savings deposits. Answer: A Ques Status: Previous Edition 4) Even economists have no single, precise definition of money because A) money supply statistics are a state secret. B) the Federal Reserve does not employ or report different measures of the money supply. C) the "moneyness" or liquidity of an asset is a matter of degree. D) economists find disagreement interesting and refuse to agree for ideological reasons. Answer: C Ques Status: Revised 5) The total collection of pieces of property that serve to store value is a person's A) wealth. B) income. C) money. D) credit. Answer: A Ques Status: New Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. Chapter 3 What Is Money? 45 12)Which of the following is a true statement? A) Money and income are flow variables. B) Money is a flow variable. C) Income is a flow variable. D) Money and income are stock variables. Answer: C Ques Status: Revised 13)Which of the following statements uses the economists' definition of money? A) I plan to earn a lot of money over the summer. B) Betsy is rich she has a lot of money. C) I hope that I have enough money to buy my lunch today. D) The job with New Company gave me the opportunity to earn more money. Answer: C Ques Status: Previous Edition 3.2 Functions of Money 1) Of money's three functions, the one that distinguishes money from other assets is its function as a A) store of value. B) unit of account. C) standard of deferred payment. D) medium of exchange. Answer: D Ques Status: Previous Edition 2) If peanuts serve as a medium of exchange, a unit of account, and a store of value, then peanuts are A) bank deposits. B) reserves. C) money. D) loanable funds. Answer: C Ques Status: Previous Edition 3) are the time and resources spent trying to exchange goods and services. A) Bargaining costs. B) Transaction costs. C) Contracting costs. D) Barter costs. Answer: B Ques Status: Previous Edition Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. Chapter 3 What Is Money? 47 10)For a commodity to function effectively as money it must be A) easily standardized, making it easy to ascertain its value. B) difficult to make change. C) deteriorate quickly so that its supply does not become too large. D) hard to carry around. Answer: A Ques Status: Previous Edition 11)All of the following are necessary criteria for a commodity to function as money except A) it must deteriorate quickly. B) it must be divisible. C) it must be easy to carry. D) it must be widely accepted. Answer: A Ques Status: New 12)Whatever a society uses as money, the distinguishing characteristic is that it must A) be completely inflation proof. B) be generally acceptable as payment for goods and services or in the repayment of debt. C) contain gold. D) be produced by the government. Answer: B Ques Status: Previous Edition 13)All but the most primitive societies use money as a medium of exchange, implying that A) the use of money is economically efficient. B) barter exchange is economically efficient. C) barter exchange cannot work outside the family. D) inflation is not a concern. Answer: A Ques Status: Previous Edition 14)Kevin purchasing concert tickets with his debit card is an example of the function of money. A) medium of exchange B) unit of account C) store of value D) specialization Answer: A Ques Status: Previous Edition 15)When money prices are used to facilitate comparisons of value, money is said to function as a A) unit of account. B) medium of exchange. C) store of value. D) payments- system ruler. Answer: A Ques Status: Previous Edition Test_Bank_The_Economics_of_Money_Banking. The Economics of Money, Banking, and Financial Markets This work is collected by: Mohamed Bagoul Test_Bank_The_Economics_of_Money_Banking. 48 Mishkin · The Economics of Money, Banking, and Financial Markets, 9th Edition 16)A problem with barter exchange when there are many goods is that in a barter system A) transactions costs are minimized. B) there exists a multiple number of prices for each good. C) there is only one store of value. D) exchange of services is impossible. Answer: B Ques Status: Previous Edition 17)In a barter economy the number of prices in an economy with N goods is A) [N(N - 1)]/2. B) N(N/2). C) 2N. D) N(N/2) - 1. Answer: A Ques Status: Previous Edition 18)If there are five goods in a barter economy, one needs to know ten prices in order to exchange one good for another. If, however, there are ten goods in a barter economy, then one needs to know prices in order to exchange one good for another. A) 20 B) 25 C) 30 D) 45 Answer: D Ques Status: Previous Edition 19)If there are four goods in a barter economy, then one needs to know prices in order to exchange one good for another. A) 8 B) 6 C) 5 D) 4 Answer: B Ques Status: Previous Edition 20)Because it is a unit of account, money A) increases transaction costs. B) reduces the number of prices that need to be calculated. C) does not earn interest. D) discourages specialization. Answer: B Ques Status: Previous Edition 21)Dennis notices that jackets are on sale for $99. In this case money is functioning as a . A) medium of exchange B) unit of account C) store of value D) payments-system ruler Answer: B Ques Status: Previous Edition