Questions & Answers - CHAPTER 1(Why study Money...

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CHAPTER 1 (Why study Money, Banking and Financial Markets?) 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 riskless repository of spending power. D. the unrecognized liability of governments. 2- Evidence from the United States and other foreign countries indicates that: A. there is a strong positive association between inflation and the growth rate of money over long periods of time. B. there is little support for the assertion that "inflation is always and everywhere a monetary phenomenon." C. countries with low monetary growth rates tend to experience higher rates of inflation, all else constant. D. money growth is clearly unrelated to inflation. 3- Banks are important to the study of money and the economy because they: A. provide a channel for linking those who want to save with those who want to invest. B. have been a source of rapid financial innovation that is expanding the alternatives available to those wanting to save their money. C. are the only financial institution to play a role in determining the quantity of money in the economy. D. each of the above (A, B, and C) E. only A and B of the above. 4- Bond markets are important because: A. they are easily the most widely followed financial markets in the U.S. B. they are the markets where foreign exchange rates are determined. C. they are the markets where interest rates are determined. D. each of the above. E. only A and B of the above. 5- Which of the following is most likely to result from a stronger dollar? A. U.S. goods exported abroad will cost less in foreign countries, so foreigners will buy more of them. B. U.S. goods exported abroad 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. 6- The organization responsible for the conduct of monetary policy in the United States is the: A. Comptroller of the Currency. B. U.S. Treasury.
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C. Federal Reserve System. D. Bureau of Monetary Affairs. 7- Evidence from business cycle fluctuations in the U.S. indicates that: A. a negative relationship exists between money growth and GDP (i.e., one goes up when the other goes down and vice versa). B. recessions have been preceded by declines in share prices on the stock exchange. C. recessions have been preceded by dollar depreciation. D. recessions have been preceded by a decline in the money growth rate. 8- The stock market is important because: A. it is where interest rates are determined. B. it is the most widely followed financial market in the U.S. C. it is where foreign exchange rates are determined.
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Questions & Answers - CHAPTER 1(Why study Money...

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