Type:
Test Bank
Resource:
Economics of Money, Banking, and Financial Markets
Edition:
8th Edition
Author(s):
Frederick S. Mishkin Apostolos Serletis
Economics of Money, Banking, and Fin. Markets, 8Ce (Mishkin) Chapter 1 Why Study Money, Banking, and Financial Markets? 1.1 Why Study Financial Markets? 1) Financial markets promote economic efficiency by ________. A) channelling funds from investors to savers B) generating inflationary pressures C) channelling funds to those who have a productive use for them D) reducing investment spending Answer: C Diff: 1 Type: MC Skill: Recall Objective: 1.1 Recognize the importance of financial markets in the economy 2) Well-functioning financial markets are the source of ________. A) inflation B) deflation C) unemployment D) economic growth Answer: D Diff: 1 Type: MC Skill: Recall Objective: 1.1 Recognize the importance of financial markets in the economy 3) A key factor in promoting strong economic growth is ________. A) to reduce foreign trade B) well-functioning financial markets C) high interest rates D) stock market volatility Answer: B Diff: 1 Type: MC Skill: Recall Objective: 1.1 Recognize the importance of financial markets in the economy 4) Markets in which funds are transferred from those who do not have a productive use for them to those who do are called ________. A) commodity markets B) fund-available markets C) derivative exchange markets D) financial markets Answer: D Diff: 1 Type: MC Skill: Recall Objective: 1.1 Recognize the importance of financial markets in the economy
1 .
5) ________ markets transfer funds from people who do not have a productive use for them to people who do. A) Commodity B) Fund-available C) Financial D) Derivative exchange Answer: C Diff: 1 Type: MC Skill: Recall Objective: 1.1 Recognize the importance of financial markets in the economy 6) Poorly performing financial markets can lead to ________. A) increased wealth B) more poverty C) financial stability D) economic growth Answer: B Diff: 1 Type: MC Skill: Recall Objective: 1.1 Recognize the importance of financial markets in the economy 7) The bond markets are important because they are ________. A) easily the most widely followed of the financial markets in Canada B) the markets where foreign exchange rates are determined C) where corporations and governments can borrow to finance their activities D) the markets where all borrowers obtain funds Answer: C Diff: 1 Type: MC Skill: Recall Objective: 1.1 Recognize the importance of financial markets in the economy 8) A security is also known as ________. A) a financial instrument B) a contingent claim C) the interest rate D) a liability Answer: A Diff: 1 Type: MC Skill: Applied Objective: 1.1 Recognize the importance of financial markets in the economy
2 .
9) A bond ________. A) is not as good an investment as stocks B) pays interest sporadically C) never pays interest D) makes periodic payments for a specified period Answer: D Diff: 1 Type: MC Skill: Recall Objective: 1.1 Recognize the importance of financial markets in the economy 10) The fluctuation of interest rates ________. A) never occurs because the central bank is responsible for setting the rate B) is due to changes in stock prices C) cannot occur because there is only one interest rate D) impacts all Canadians Answer: D Diff: 1 Type: MC Skill: Recall Objective: 1.1 Recognize the importance of financial markets in the economy 11) The cost of borrowing funds is commonly referred to as the ________. A) inflation rate B) exchange rate C) interest rate D) aggregate price level Answer: C Diff: 1 Type: MC Skill: Recall Objective: 1.1 Recognize the importance of financial markets in the economy 12) Compared to interest rates on long-term 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 Diff: 1 Type: MC Skill: Applied Objective: 1.1 Recognize the importance of financial markets in the economy
3 .
13) The interest rate on long-term corporate bonds is ________, on average, than other interest rates. The spread between it and other rates ________ over time. A) lower; remains constant B) lower; fluctuates C) higher; remains constant D) higher; fluctuates Answer: D Diff: 1 Type: MC Skill: Applied Objective: 1.1 Recognize the importance of financial markets in the economy 14) Everything else held constant, a rise in interest rates will lead to ________ house sales. A) increased B) unchanged C) either increases, declines, or unchanged D) decreased Answer: D Diff: 2 Type: MC Skill: Applied Objective: 1.1 Recognize the importance of financial markets in the economy 15) High interest rates might ________ purchasing a house or car but at the same time high interest rates might ________ saving. A) discourage; encourage B) discourage; discourage C) encourage; encourage D) encourage; discourage Answer: A Diff: 2 Type: MC Skill: Applied Objective: 1.1 Recognize the importance of financial markets in the economy 16) An increase in interest rates might ________ people to save because more can be earned in interest income. A) encourage B) discourage C) disallow D) invalidate Answer: A Diff: 2 Type: MC Skill: Recall Objective: 1.1 Recognize the importance of financial markets in the economy
4 .