Practice Questions

Practice Questions - 7. Commercial papers are long term...

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Practice Questions Chapter 1-3 True/False – Explain. 1. Interest rates on Corporate Bonds of the same maturity are typically higher as compared to US-government long term bonds. 2. Common stocks represent a share of ownership in a corporation. 3. Fall in money growth is always followed by a recession. 4. In the US, the relationship between money growth and interest rates is very clear, when money growth rises, interest rates fall. 5. Financial Intermediaries channel funds from Lenders/Savers to Borrowers/Spenders; we call this Direct Finance. 6. Securities are an example of instruments traded in the money market as compared to the capital market.
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Unformatted text preview: 7. Commercial papers are long term debt instruments issued by large corporations (like Microsoft and General Motors). 8. Adverse Selection and Moral Hazard arise because of the one party to the transaction has less information than the other party to the transaction (i.e. because of asymmetric information). 9. The monetary aggregate M1 includes cash, demand deposits and checkable deposits. 10. The monetary aggregate M2 includes M1, savings and money market mutual funds, funds that also include corporate bonds. Econ 500 Fall 2011 Z. Janko...
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