econ423hw1

econ423hw1 - Econ 423, Summer 2009 Lauren Heller Homework...

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Econ 423, Summer 2009 Lauren Heller Homework #1, Due 6 - 23 - 09 Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question 1. Financial market activities affect A) the economy's location in the business cycle. B) spending decisions by individuals and business firms. C) personal wealth. D) all of the above. 1. 2. Interest rates are important to financial institutions since an interest rate increase _________ the cost of acquiring funds and _________ the income from assets. A) increases; decreases B) decreases; increases C) decreases; decreases D) increases; increases 2. 3. Typically, increasing interest rates A) discourages corporate investments. B) discourages individuals from saving. C) encourages corporate expansion. D) encourages corporate borrowing. E) none of the above. 3. 4. A rising stock market index due to higher share prices 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. 4. 5. Changes in stock prices A) affect firms' decisions to sell stock to finance investment spending. B) affect people's wealth and their willingness to spend. C) are characterized by considerable fluctuations. D) all of the above. E) only A and B of the above. 5. 6. A stronger dollar benefits _________ and hurts _________ A) American businesses; American consumers. B) foreign businesses; American consumers. C) American consumers; American businesses. D) American businesses; foreign businesses. 6. 1
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Remember: These questions are to be answered on your own , without any assistance from others. 7. 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 A) act as middlemen, borrowing funds from those who have saved and lending these funds to others. B) help promote a more efficient and dynamic economy. C) play an important role in determining the quantity of money in the economy. D) do all of the above. E) do only A and C of the above. 7. 8. (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) (I) is false, (II) true. B) (I) is true, (II) false. C) Both are true. D) Both are false. 8.
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This note was uploaded on 08/31/2009 for the course ECON 423 taught by Professor Vd during the Summer '08 term at UNC.

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econ423hw1 - Econ 423, Summer 2009 Lauren Heller Homework...

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