Question 1

Which of the following is a trend towards globalization that has taken place since the 1980s?

Accepted Answer

A) International bank lending has grown by more than twenty-fold. 
B) The market value of multinational corporations is in the trillions of dollars. 
C) Cross-border transactions in stocks and bonds have grown by nearly 30% annually in the 1980s. 
D) All of the above 
A) International bank lending has grown by more than twenty-fold. 
B) The market value of multinational corporations is in the trillions of dollars. 
C) Cross-border transactions in stocks and bonds have grown by nearly 30% annually in the 1980s. 
D) All of the above

Question 2

Changes in the money supply are associated with all of the following EXCEPT changes in

Accepted Answer

A) prices. 
B) interest rates. 
C) output. 
D) taxes. 
A) prices. 
B) interest rates. 
C) output. 
D) taxes.

Question 3

Economic analysis is useful in

Accepted Answer

A) explaining current developments. 
B) predicting future developments. 
C) both explaining current developments and predicting future developments. 
D) explaining current developments, but not in predicting future developments. 
A) explaining current developments. 
B) predicting future developments. 
C) both explaining current developments and predicting future developments. 
D) explaining current developments, but not in predicting future developments.

Question 4

Which of the following assets is the most liquid?

Accepted Answer

A) Money market mutual fund 
B) Computer 
C) Washing machine 
D) U.S. Treasury bond 
A) Money market mutual fund 
B) Computer 
C) Washing machine 
D) U.S. Treasury bond

Question 5

All of the following were events in the financial world in the early 2000s EXCEPT

Accepted Answer

A) fears of deflation in Japan, the Eurozone, and the United States. 
B) governments of Eastern Europe abandoned communism. 
C) Argentina defaulted on its public debt. 
D) the value of the dollar declined significantly. 
A) fears of deflation in Japan, the Eurozone, and the United States. 
B) governments of Eastern Europe abandoned communism. 
C) Argentina defaulted on its public debt. 
D) the value of the dollar declined significantly.

Question 6

If you buy a bond issued by Intel, the bond is a(n):

Accepted Answer

A) liability to Intel and an asset to you. 
B) liability to you and an asset to Intel. 
C) liability to both you and Intel. 
D) asset to both you and Intel. 
A) liability to Intel and an asset to you. 
B) liability to you and an asset to Intel. 
C) liability to both you and Intel. 
D) asset to both you and Intel.

Question 7

Which of the following rankings of sources of funds for businesses from the least important to the most important is correct?

Accepted Answer

A) Stock issues, bond issues, loans from financial institutions 
B) Bond issues, stock issues, loans from financial institutions 
C) Loans from financial institutions, stock issues, bond issues 
D) Loans from financial institutions, bond issues, stock issues 
A) Stock issues, bond issues, loans from financial institutions 
B) Bond issues, stock issues, loans from financial institutions 
C) Loans from financial institutions, stock issues, bond issues 
D) Loans from financial institutions, bond issues, stock issues

Question 8

By providing and communicating information, the financial system

Accepted Answer

A) reduces the difference between the return on three-month U.S. Treasury bills and the return on thirty-year U.S. Treasury bonds. 
B) relieves individual savers from the necessity of searching out individual borrowers. 
C) eliminates the risk in investing in the stock market. 
D) guarantees investors a reasonable return on their money. 
A) reduces the difference between the return on three-month U.S. Treasury bills and the return on thirty-year U.S. Treasury bonds. 
B) relieves individual savers from the necessity of searching out individual borrowers. 
C) eliminates the risk in investing in the stock market. 
D) guarantees investors a reasonable return on their money.

Question 9

During the past twenty years

Accepted Answer

A) the volume of worldwide cross-border transactions in stocks and bonds grew very rapidly, but the volume of international bank lending declined. 
B) the volume of international bank lending grew very rapidly, but the volume of worldwide cross-border transactions in stocks and bonds declined. 
C) the volume of worldwide cross-border transactions in stocks and bonds and the volume of international bank lending both grew rapidly. 
D) global investment in the stock of multinational corporations in 1990 was lower than it had been in 1980. 
A) the volume of worldwide cross-border transactions in stocks and bonds grew very rapidly, but the volume of international bank lending declined. 
B) the volume of international bank lending grew very rapidly, but the volume of worldwide cross-border transactions in stocks and bonds declined. 
C) the volume of worldwide cross-border transactions in stocks and bonds and the volume of international bank lending both grew rapidly. 
D) global investment in the stock of multinational corporations in 1990 was lower than it had been in 1980.

Question 10

The average pay for jobs is highest in which of the following sectors?

Accepted Answer

A) The financial sector 
B) The wholesale and retail trade sector 
C) The manufacturing sector 
D) The construction sector 
A) The financial sector 
B) The wholesale and retail trade sector 
C) The manufacturing sector 
D) The construction sector

Question 11

The best way to determine if the assumptions of an economic model are appropriate is to

Accepted Answer

A) examine whether they are consistent with common sense. 
B) determine whether they are similar to assumptions used in other economic models. 
C) test them by comparing the predictions of the model to actual data. 
D) consider whether the assumptions are simple enough to be understood by users of the model. 
A) examine whether they are consistent with common sense. 
B) determine whether they are similar to assumptions used in other economic models. 
C) test them by comparing the predictions of the model to actual data. 
D) consider whether the assumptions are simple enough to be understood by users of the model.

Question 12

Economists define risk as

Accepted Answer

A) the difference between the interest rate borrowers pay and the interest rate lenders receive. 
B) the degree of uncertainty of an asset's return. 
C) the ease with which an asset can be exchanged for other assets or for goods and services. 
D) the difference between the return on common stock and the return on corporate bonds. 
A) the difference between the interest rate borrowers pay and the interest rate lenders receive. 
B) the degree of uncertainty of an asset's return. 
C) the ease with which an asset can be exchanged for other assets or for goods and services. 
D) the difference between the return on common stock and the return on corporate bonds.

Question 13

Which of the following is the primary way that businesses raise funds externally?

Accepted Answer

A) Loans from financial institutions 
B) Stocks 
C) Bonds 
D) Retained earnings 
A) Loans from financial institutions 
B) Stocks 
C) Bonds 
D) Retained earnings

Question 14

To be useful, an economic theory should

Accepted Answer

A) be based on reasonable assumptions. 
B) generate predictions that can be verified with actual data. 
C) actually have its predictions corroborated with data. 
D) be based on reasonable assumptions, generate predictions that can be verified with actual data, and actually have its predictions corroborated with data. 
A) be based on reasonable assumptions. 
B) generate predictions that can be verified with actual data. 
C) actually have its predictions corroborated with data. 
D) be based on reasonable assumptions, generate predictions that can be verified with actual data, and actually have its predictions corroborated with data.

Question 15

The main role of financial intermediaries is to

Accepted Answer

A) provide funds to the federal government to cover the budget deficit. 
B) borrow funds from savers and lend them to borrowers. 
C) provide advice to consumers on how they should handle their finances. 
D) help ensure that there is enough money in circulation. 
A) provide funds to the federal government to cover the budget deficit. 
B) borrow funds from savers and lend them to borrowers. 
C) provide advice to consumers on how they should handle their finances. 
D) help ensure that there is enough money in circulation.

Question 16

The bond market is important because

Accepted Answer

A) it is the major source of borrowed funds for U.S. business. 
B) it provides a rate of return significantly greater than the stock market. 
C) it provides foreign purchasers of U.S. products a means to exchange their currencies for U.S. dollars. 
D) it provides a way for businesses and governments to borrow funds from savers and it is the market that determines interest rates. 
A) it is the major source of borrowed funds for U.S. business. 
B) it provides a rate of return significantly greater than the stock market. 
C) it provides foreign purchasers of U.S. products a means to exchange their currencies for U.S. dollars. 
D) it provides a way for businesses and governments to borrow funds from savers and it is the market that determines interest rates.

Exam 1: Introducing Money and the Financial System

Which of the following is a trend towards globalization that has taken place since the 1980s?

Changes in the money supply are associated with all of the following EXCEPT changes in

Economic analysis is useful in

Which of the following assets is the most liquid?

All of the following were events in the financial world in the early 2000s EXCEPT

If you buy a bond issued by Intel, the bond is a(n):

Which of the following rankings of sources of funds for businesses from the least important to the most important is correct?

By providing and communicating information, the financial system

During the past twenty years

The average pay for jobs is highest in which of the following sectors?

The best way to determine if the assumptions of an economic model are appropriate is to

Economists define risk as

Which of the following is the primary way that businesses raise funds externally?

To be useful, an economic theory should

The main role of financial intermediaries is to

The bond market is important because

Money and the Payments System

Overview of the Financial System

Interest Rates and Rates of Return

The Theory of Portfolio Allocation

Determining Market Interest Rates

Risk Structure and Term Structure of Interest Rates

The Foreign-Exchange Market and Exchange Rates

Derivative Securities and Derivative Markets

Information and Financial Market Efficiency

Reducing Transactions Costs and Information Costs

What Financial Institutions Do

The Business of Banking

The Banking Industry

Banking Regulation: Crisis and Response

Banking in the International Economy

The Money Supply Process

Changes in the Monetary Base

Organization of Central Banks

Monetary Policy Tools

The Conduct of Monetary Policy

The International Financial System and Monetary Policy

The Demand for Money

Linking the Financial System and the Economy: the Is-Lm-Fe Model

Aggregate Demand and Aggregate Supply

Money and Output in the Short Run

Information Problems and Channels for Monetary Policy

Inflation: Causes and Consequences

Filters