CHAP011 - Chapter 11 The Economics of Financial...

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Chapter 11 The Economics of Financial Intermediation Multiple Choice Questions 1. Financial intermediation: A) Is far less important than direct finance through stock and bond markets. B) Is only a little more important than direct finance in the United States. C) Is much more important than direct finance through stock and bond markets. D) b and c Answer: C LOD: 1 Page: 259 A-Head: The Role of Financial Intermediaries. 2. Financial intermediation exists, in part, because: A) Financial markets work so well. B) Direct finance through stocks and bonds is the dominant form of financing. C) Transaction costs of financial intermediation is always higher than direct finance. D) The transaction costs associated with direct finance can at times be prohibitive. Answer: D LOD: 1 Page: 259 A-Head: The Role of Financial Intermediaries. 3. When the amount of direct and indirect financing are summed, the result is usually: A) Greater than 100% of GDP. B) Equal to GDP. C) Less than GDP D) Approximately 50% of GDP. Answer: A LOD: 1 Page: 261 A-Head: The Role of Financial Intermediaries. 4. Emerging market economies, compared to industrialized economies: A) Have financial markets that differ in composition and size. B) Have financial markets that differ in composition but not in size. C) Have financial markets that are the same in composition but differ in size. D) Have financial markets that are similar in composition and size. Answer: C LOD: 1 Page: 261 A-Head: The Role of Financial Intermediaries. 300 Cecchetti: Money, Banking, and Financial Markets
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Chapter 11 The Economics of Financial Intermediation 5. The reason financial intermediaries play such an important role in economies has to do with: A) Information costs. B) High transaction costs. C) Complexity of a lot of financial transactions. D) All of the above. Answer: D LOD: 1 Page: 263 A-Head: The Role of Financial Intermediaries. 6. Which of the following is not a role of a financial institution acting as a financial intermediary? A) Pooling the resources of small savers. B) Formulating oversight regulations. C) Providing ways to diversify risk. D) Supplying liquidity. E) Collecting and processing information. Answer: B LOD: 2 Page: 263 A-Head: The Role of Financial Intermediaries. 7. Financial Institutions, acting as financial intermediaries, perform all of the following, EXCEPT : A) Provide ways to diversify risk. B) Pooling resources of small savers. C) Increase transactions costs. D) Supply liquidity. E) Provide safekeeping and accounting services. Answer: C LOD: 2 Page: 263 A-Head: The Role of Financial Intermediaries. 8. Financial intermediaries pool the resources of many small savers so that: A) They can charge fees to these small savers and earn substantial income. B) They can obtain the funds necessary to make loans to borrowers seeking large
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This note was uploaded on 02/12/2012 for the course ECON 101 taught by Professor Abrams during the Spring '11 term at Adams State University.

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CHAP011 - Chapter 11 The Economics of Financial...

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