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Banking Ans - Chapter1...

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Chapter 1 Why Study Money, Banking, and Financial Markets? 1.1 Why Study Financial Markets? 1) Financial markets promote economic efficiency by A) channeling funds from investors to savers. B) creating inflation. C) channeling funds from savers to investors. D) reducing investment. Answer: C Ques Status: Revised 2) Financial markets promote greater economic efficiency by channeling funds from ________ to ________. A) investors; savers B) borrowers; savers C) savers; borrowers D) savers; lenders Answer: C Ques Status: New 3) Well - functioning financial markets promote A) inflation. B) deflation. C) unemployment. D) growth. Answer: D Ques Status: Revised 4) Markets in which funds are transferred from those who have excess funds available to those who have a shortage of available funds are called A) commodity markets. B) fund - available markets. C) derivative exchange markets. D) financial markets. Answer: D Ques Status: Previous Edition
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· 5) ________ 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: New 6) Poorly performing financial markets can be the cause of A) wealth. B) poverty. C) financial stability. D) financial expansion. Answer: B Ques Status: Revised 7) 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: Revised 8) 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 2 Mishkin Economics of Money, Banking, and Financial Markets , Alternate Edition
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Chapter 1 Why Study Money, Banking, and Financial Markets? 3 9) 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 10) 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 11) 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: Revised 12) 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: New
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· 13) Everything else held constant, an increase in interest rates on student loans A) increases the cost of a college education.
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