ECo-306-ch1-3 - Econ 353 Money, Banking and Financial...

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Econ 353 Money, Banking and Financial Markets Summer 2008 Exam 1 Name ____________________________ ID # ___________________________ Note: Questions 1-19 worth 4 points each; Questions 20-22 worth 6, 8, 10 points each; Write your answers on the exam paper. You are encouraged to write comments and/or derivation and calculations on the exam paper as well. If you have any questions, please ask the instructor and/or comment at the margin of the exam paper. Work on your own and good luck ! Questions 1-19: Choose the correct answer 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. 2. An increase in interest rates might ________ saving because more can be earned in interest income. A) encourage B) discourage C) disallow D) invalidate 3. 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. 4. Which of the following statement is WRONG about secondary market? A) Dealers and brokers facilitate trades in secondary market. B) Borrowing and lending happen in secondary market. C) The existence of secondary market helps increase liquidity in primary market. D) Secondary market is for resale of financial instruments. 1
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5. Which of the following markets are organized as OVER-THE-COUNTER (OTC) markets: A) the New York Stock Exchange B) the secondary market for U.S. government bonds C) the Chicago Board of Trade (CBOT) D) All of the above. 6. The concept of diversification is captured by the statement A) don't look a gift horse in the mouth. B) don't put all your eggs in one basket. C) it never rains, but it pours. D) make hay while the sun shines. 7. Which of the following statements about Financial Intermediaries is WRONG?
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This note was uploaded on 07/07/2011 for the course ECON 306 taught by Professor Nelson during the Spring '11 term at Southern New Hampshire University.

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ECo-306-ch1-3 - Econ 353 Money, Banking and Financial...

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