1) Financial markets have the basic function of A
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.
2) Financial markets improve economic welfare because B
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.
3) Secondary markets make financial instruments more C
4) An important financial institution that assists in the initial sale of securities in the primary A market is the
A) investment bank.
B) commercial bank.
C) stock exchange.
D) brokerage house.
5) Which of the following instruments are traded in a money market? B A) State and local government bonds.
B) U.S. Treasury bills.
C) Corporate bonds.
D) U.S. government agency securities.
6) Bonds that are sold in a foreign country and are denominated in the countryʹs currency in A which they are sold are known as
A) foreign bonds.
C) equity bonds.
D) country bonds.
7) Adverse selection is a problem associated with equity and debt contracts arising from A 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. 8) Which of the following are not contractual savings institutions? B A) Life insurance companies
B) Credit unions
C) Pension funds
D) State and local government retirement funds
9) The purpose of the disclosure requirements of the Securities and Exchange Commission is to A A) increase the information available to investors.
B) prevent bank panics.
C) improve monetary control.
D) protect investors against financial losses.
10) Economists find no completely satisfactory way to measure money because C 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. 11) Currency includes A
A) paper money and coins.
B) paper money, coins, and checks.
C) paper money and checks.
D) paper money, coins, checks, and savings deposits.
12) Money is A
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.
13) Which of the following statements uses the economistsʹ definition of money? C 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. 14) Of money’s three functions, the one that distinguishes money from other assets is its function as a D
A) store of value.
B) unit of account.
C) standard of deferred payment.
D) medium of exchange.
15) The conversion of a barter economy to one that uses money C A) increases efficiency by reducing the need to exchange goods and services. B) increases efficiency by reducing the need to specialize.
C) increases efficiency by reducing transactions costs.
D) does not increase economic efficiency.
16) When money prices are used to facilitate comparisons of value, money is said to function as a A A) unit...