Question 1

The recent Enron and Tyco scandals are an example of

Accepted Answer

A) the free-rider problem. 
B) the adverse selection problem. 
C) the principal-agent problem. 
D) the "lemons problem." 
A) the free-rider problem. 
B) the adverse selection problem. 
C) the principal-agent problem. 
D) the "lemons problem."

Question 2

A key finding of the economic analysis of financial structure is that

Accepted Answer

A) the existence of the free-rider problem for traded securities helps to explain why banks play a predominant role in financing the activities of businesses. 
B) while free-rider problems limit the extent to which securities markets finance some business activities,nevertheless the majority of funds going to businesses are channeled through securities markets. 
C) given the great extent to which securities markets are regulated,free-rider problems are not of significant economic consequence in these markets. 
D) economists do not have a very good explanation for why securities markets are so heavily regulated. 
A) the existence of the free-rider problem for traded securities helps to explain why banks play a predominant role in financing the activities of businesses. 
B) while free-rider problems limit the extent to which securities markets finance some business activities,nevertheless the majority of funds going to businesses are channeled through securities markets. 
C) given the great extent to which securities markets are regulated,free-rider problems are not of significant economic consequence in these markets. 
D) economists do not have a very good explanation for why securities markets are so heavily regulated.

Question 3

A clause in a mortgage loan contract requiring the borrower to purchase homeowner's insurance is an example of a

Accepted Answer

A) proscriptive covenant. 
B) prescriptive covenant. 
C) restrictive covenant. 
D) constraint-imposed covenant. 
A) proscriptive covenant. 
B) prescriptive covenant. 
C) restrictive covenant. 
D) constraint-imposed covenant.

Question 4

The concept of adverse selection helps to explain all of the following except

Accepted Answer

A) why firms are more likely to obtain funds from banks and other financial intermediaries,rather than from the securities markets. 
B) why indirect finance is more important than direct finance as a source of business finance. 
C) why direct finance is more important than indirect finance as a source of business finance. 
D) why the financial system is so heavily regulated. 
A) why firms are more likely to obtain funds from banks and other financial intermediaries,rather than from the securities markets. 
B) why indirect finance is more important than direct finance as a source of business finance. 
C) why direct finance is more important than indirect finance as a source of business finance. 
D) why the financial system is so heavily regulated.

Question 5

Which of the following statements concerning external sources of financing for nonfinancial businesses in the United States are true?

Accepted Answer

A) Stocks are a far more important source of finance than are bonds. 
B) Stocks and bonds,combined,supply less than one-half of the external funds. 
C) Financial intermediaries are the least important source of external funds for businesses. 
D) Since 1970,more than half of the new issues of stock have been sold to American households. 
A) Stocks are a far more important source of finance than are bonds. 
B) Stocks and bonds,combined,supply less than one-half of the external funds. 
C) Financial intermediaries are the least important source of external funds for businesses. 
D) Since 1970,more than half of the new issues of stock have been sold to American households.

Question 6

As information technology improves,the lending role of financial institutions such as banks should

Accepted Answer

A) increase somewhat. 
B) decrease. 
C) stay the same. 
D) increase significantly. 
A) increase somewhat. 
B) decrease. 
C) stay the same. 
D) increase significantly.

Question 7

The ________ problem helps to explain why the private production and sale of information cannot eliminate ________.

Accepted Answer

A) free-rider; adverse selection 
B) free-rider; moral hazard 
C) principal-agent; adverse selection 
D) principal-agent; moral hazard 
A) free-rider; adverse selection 
B) free-rider; moral hazard 
C) principal-agent; adverse selection 
D) principal-agent; moral hazard

Question 8

A ________ is a provision that restricts or specifies certain activities that a borrower can engage in.

Accepted Answer

A) residual claimant 
B) risk hedge 
C) restrictive barrier 
D) restrictive covenant 
A) residual claimant 
B) risk hedge 
C) restrictive barrier 
D) restrictive covenant

Question 9

Of the following sources of external finance for American nonfinancial businesses,the least important is

Accepted Answer

A) loans from banks. 
B) stocks. 
C) bonds and commercial paper. 
D) loans from other financial intermediaries. 
A) loans from banks. 
B) stocks. 
C) bonds and commercial paper. 
D) loans from other financial intermediaries.

The recent Enron and Tyco scandals are an example of

A key finding of the economic analysis of financial structure is that

A clause in a mortgage loan contract requiring the borrower to purchase homeowner's insurance is an example of a

The concept of adverse selection helps to explain all of the following except

Which of the following statements concerning external sources of financing for nonfinancial businesses in the United States are true?

As information technology improves,the lending role of financial institutions such as banks should

The problem helps to explain why the private production and sale of information cannot eliminate .

A ________ is a provision that restricts or specifies certain activities that a borrower can engage in.

Of the following sources of external finance for American nonfinancial businesses,the least important is

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

Understanding Interest Rates

The Behavior of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

Financial Crises

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Central Banks and the Federal Reserve System

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory,inflation and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

The ISLM Model

Filters

Exam 8: An Economic Analysis of Financial Structure

The recent Enron and Tyco scandals are an example of

A key finding of the economic analysis of financial structure is that

A clause in a mortgage loan contract requiring the borrower to purchase homeowner's insurance is an example of a

The concept of adverse selection helps to explain all of the following except

Which of the following statements concerning external sources of financing for nonfinancial businesses in the United States are true?

As information technology improves,the lending role of financial institutions such as banks should

The ________ problem helps to explain why the private production and sale of information cannot eliminate ________.

A ________ is a provision that restricts or specifies certain activities that a borrower can engage in.

Of the following sources of external finance for American nonfinancial businesses,the least important is

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

Understanding Interest Rates

The Behavior of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

Financial Crises

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Central Banks and the Federal Reserve System

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory,inflation and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

The ISLM Model

Filters

The problem helps to explain why the private production and sale of information cannot eliminate .