Question 1

A financial market in which only short-term debt instruments are traded is called the ________ market.

Accepted Answer

A)  bond 
B)  money 
C)  capital 
D)  stock 
A)  bond 
B)  money 
C)  capital 
D)  stock

Question 2

Forty or so dealers establish a "market" in these securities by standing ready to buy and sell them.

Accepted Answer

A)  Secondary stocks 
B)  Surplus stocks 
C)  U.S. government bonds 
D)  Common stocks 
A)  Secondary stocks 
B)  Surplus stocks 
C)  U.S. government bonds 
D)  Common stocks

Question 3

A debt instrument sold by a bank to its depositors that pays annual interest of a given amount and at maturity pays back the original purchase price is called

Accepted Answer

A)  commercial paper. 
B)  a negotiable certificate of deposit. 
C)  a municipal bond. 
D)  federal funds. 
A)  commercial paper. 
B)  a negotiable certificate of deposit. 
C)  a municipal bond. 
D)  federal funds.

Question 4

Bonds that are sold in a foreign country and are denominated in a currency other than that of the country in which it is sold are known as

Accepted Answer

A)  foreign bonds. 
B)  Eurobonds. 
C)  equity bonds. 
D)  country bonds. 
A)  foreign bonds. 
B)  Eurobonds. 
C)  equity bonds. 
D)  country bonds.

Question 5

Which of the following instruments are traded in a money market?

Accepted Answer

A)  Bank commercial loans. 
B)  Commercial paper. 
C)  State and local government bonds. 
D)  Residential mortgages. 
A)  Bank commercial loans. 
B)  Commercial paper. 
C)  State and local government bonds. 
D)  Residential mortgages.

Question 6

One reason for the extraordinary growth of foreign financial markets is

Accepted Answer

A)  decreased trade. 
B)  increases in the pool of savings in foreign countries. 
C)  the recent introduction of the foreign bond. 
D)  slower technological innovation in foreign markets. 
A)  decreased trade. 
B)  increases in the pool of savings in foreign countries. 
C)  the recent introduction of the foreign bond. 
D)  slower technological innovation in foreign markets.

Question 7

The countries that have made the least use of securities markets are ________ and ________; in these two countries finance from financial intermediaries has been almost ten times greater than that from securities markets.

Accepted Answer

A)  Germany; Japan 
B)  Germany; Great Britain 
C)  Great Britain; Canada 
D)  Canada; Japan 
A)  Germany; Japan 
B)  Germany; Great Britain 
C)  Great Britain; Canada 
D)  Canada; Japan

Question 8

Which of the following is a depository institution?

Accepted Answer

A)  A life insurance company 
B)  A mutual savings bank 
C)  A pension fund 
D)  A finance company 
A)  A life insurance company 
B)  A mutual savings bank 
C)  A pension fund 
D)  A finance company

Question 9

Distinguish between direct finance and indirect finance. Which of these is the most important source of funds for corporations in the United States?

Accepted Answer

With direct finance, funds flow directly

Question 10

The purpose of the disclosure requirements of the Securities and Exchange Commission is to

Accepted Answer

A)  increase the information available to investors. 
B)  prevent bank panics. 
C)  improve monetary control. 
D)  protect investors against financial losses. 
A)  increase the information available to investors. 
B)  prevent bank panics. 
C)  improve monetary control. 
D)  protect investors against financial losses.

Question 11

Conflicts of interest are a type of ________ problem that can happen when an institution provides multiple services.

Accepted Answer

A)  adverse selection 
B)  free-riding 
C)  discounting 
D)  moral hazard 
A)  adverse selection 
B)  free-riding 
C)  discounting 
D)  moral hazard

Question 12

The regulatory agency that sets reserve requirements for all banks is

Accepted Answer

A)  the Federal Reserve System. 
B)  the Federal Deposit Insurance Corporation. 
C)  the Office of Thrift Supervision. 
D)  the Securities and Exchange Commission. 
A)  the Federal Reserve System. 
B)  the Federal Deposit Insurance Corporation. 
C)  the Office of Thrift Supervision. 
D)  the Securities and Exchange Commission.

Question 13

Equity holders are a corporation's ________. That means the corporation must pay all of its debt holders before it pays its equity holders.

Accepted Answer

A)  debtors 
B)  brokers 
C)  residual claimants 
D)  underwriters 
A)  debtors 
B)  brokers 
C)  residual claimants 
D)  underwriters

Question 14

Federal funds are

Accepted Answer

A)  funds raised by the federal government in the bond market. 
B)  loans made by the Federal Reserve System to banks. 
C)  loans made by banks to the Federal Reserve System. 
D)  loans made by banks to each other. 
A)  funds raised by the federal government in the bond market. 
B)  loans made by the Federal Reserve System to banks. 
C)  loans made by banks to the Federal Reserve System. 
D)  loans made by banks to each other.

Question 15

Economies of scale enable financial institutions to

Accepted Answer

A)  reduce transactions costs. 
B)  avoid the asymmetric information problem. 
C)  avoid adverse selection problems. 
D)  reduce moral hazard. 
A)  reduce transactions costs. 
B)  avoid the asymmetric information problem. 
C)  avoid adverse selection problems. 
D)  reduce moral hazard.

Question 16

When I purchase ________, I own a portion of a firm and have the right to vote on issues important to the firm and to elect its directors.

Accepted Answer

A)  bonds 
B)  bills 
C)  notes 
D)  stock 
A)  bonds 
B)  bills 
C)  notes 
D)  stock

Question 17

Which of the following can be described as involving direct finance?

Accepted Answer

A)  A corporation takes out loans from a bank. 
B)  People buy shares in a mutual fund. 
C)  A corporation buys a short-term corporate security in a secondary market. 
D)  People buy shares of common stock in the primary markets. 
A)  A corporation takes out loans from a bank. 
B)  People buy shares in a mutual fund. 
C)  A corporation buys a short-term corporate security in a secondary market. 
D)  People buy shares of common stock in the primary markets.

Question 18

Every financial market has the following characteristic:

Accepted Answer

A)  It determines the level of interest rates. 
B)  It allows common stock to be traded. 
C)  It allows loans to be made. 
D)  It channels funds from lenders-savers to borrowers-spenders. 
A)  It determines the level of interest rates. 
B)  It allows common stock to be traded. 
C)  It allows loans to be made. 
D)  It channels funds from lenders-savers to borrowers-spenders.

Question 19

With ________ finance, borrowers obtain funds from lenders by selling them securities in the financial markets.

Accepted Answer

A)  active 
B)  determined 
C)  indirect 
D)  direct 
A)  active 
B)  determined 
C)  indirect 
D)  direct

Question 20

Which of the following is an example of an intermediate-term debt?

Accepted Answer

A)  A thirty-year mortgage. 
B)  A sixty-month car loan. 
C)  A six month loan from a finance company. 
D)  A Treasury bond. 
A)  A thirty-year mortgage. 
B)  A sixty-month car loan. 
C)  A six month loan from a finance company. 
D)  A Treasury bond.

Exam 2: An Overview of the Financial System

A financial market in which only short-term debt instruments are traded is called the ________ market.

Forty or so dealers establish a "market" in these securities by standing ready to buy and sell them.

A debt instrument sold by a bank to its depositors that pays annual interest of a given amount and at maturity pays back the original purchase price is called

Bonds that are sold in a foreign country and are denominated in a currency other than that of the country in which it is sold are known as

Which of the following instruments are traded in a money market?

One reason for the extraordinary growth of foreign financial markets is

The countries that have made the least use of securities markets are ________ and ________; in these two countries finance from financial intermediaries has been almost ten times greater than that from securities markets.

Which of the following is a depository institution?

Distinguish between direct finance and indirect finance. Which of these is the most important source of funds for corporations in the United States?

The purpose of the disclosure requirements of the Securities and Exchange Commission is to

Conflicts of interest are a type of ________ problem that can happen when an institution provides multiple services.

The regulatory agency that sets reserve requirements for all banks is

Equity holders are a corporation's ________. That means the corporation must pay all of its debt holders before it pays its equity holders.

Federal funds are

Economies of scale enable financial institutions to

When I purchase ________, I own a portion of a firm and have the right to vote on issues important to the firm and to elect its directors.

Which of the following can be described as involving direct finance?

Every financial market has the following characteristic:

With ________ finance, borrowers obtain funds from lenders by selling them securities in the financial markets.

Which of the following is an example of an intermediate-term debt?

Why Study Money, Banking, and Financial Markets

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

An Economic Analysis of Financial Structure

Financial Crises

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Nonbank Finance

Financial Derivatives

Conflicts of Interest in the Financial Industry

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

Aggregate Demand and Supply Analysis

Monetary Policy Theory

Transmission Mechanisms of Monetary Policy

Filters

The countries that have made the least use of securities markets are and ; in these two countries finance from financial intermediaries has been almost ten times greater than that from securities markets.