Question 1

An important feature of money market mutual fund shares is ________.

Accepted Answer

A)  deposit insurance 
B)  they offer deposit-type accounts 
C)  the ability to borrow against shareholdings 
D)  claims on shares of corporate stock 
A)  deposit insurance 
B)  they offer deposit-type accounts 
C)  the ability to borrow against shareholdings 
D)  claims on shares of corporate stock

Question 2

Contractual savings institutions include ________.

Accepted Answer

A)  mutual savings banks 
B)  money market mutual funds 
C)  commercial banks 
D)  life insurance companies 
A)  mutual savings banks 
B)  money market mutual funds 
C)  commercial banks 
D)  life insurance companies

Question 3

Which of the following is not a secondary market?

Accepted Answer

A)  Foreign exchange market 
B)  Futures market 
C)  Options market 
D)  Primary market 
A)  Foreign exchange market 
B)  Futures market 
C)  Options market 
D)  Primary market

Question 4

Equity instruments are traded in the ________ market.

Accepted Answer

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

Question 5

Which of the following statements about the characteristics of debt and equity is false?

Accepted Answer

A)  They can both be long-term financial instruments. 
B)  They can both be short-term financial instruments. 
C)  They both involve a claim on the issuer's income. 
D)  They both enable a corporation to raise funds. 
A)  They can both be long-term financial instruments. 
B)  They can both be short-term financial instruments. 
C)  They both involve a claim on the issuer's income. 
D)  They both enable a corporation to raise funds.

Question 6

The process of indirect finance using financial intermediaries is called ________.

Accepted Answer

A)  direct lending 
B)  financial intermediation 
C)  resource allocation 
D)  financial liquidation 
A)  direct lending 
B)  financial intermediation 
C)  resource allocation 
D)  financial liquidation

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 can be described as involving direct finance?

Accepted Answer

A)  A corporation issues new shares of stock. 
B)  People buy shares in a mutual fund. 
C)  A pension fund manager buys a short-term corporate security in the secondary market. 
D)  An insurance company buys shares of common stock in the over-the-counter markets. 
A)  A corporation issues new shares of stock. 
B)  People buy shares in a mutual fund. 
C)  A pension fund manager buys a short-term corporate security in the secondary market. 
D)  An insurance company buys shares of common stock in the over-the-counter markets.

Question 9

The primary assets of money market mutual funds are ________.

Accepted Answer

A)  stocks 
B)  bonds 
C)  money market instruments 
D)  deposits 
A)  stocks 
B)  bonds 
C)  money market instruments 
D)  deposits

Question 10

A breakdown of financial markets can result in ________.

Accepted Answer

A)  financial stability 
B)  rapid economic growth 
C)  political instability 
D)  stable prices 
A)  financial stability 
B)  rapid economic growth 
C)  political instability 
D)  stable prices

Question 11

The primary assets of a finance company are ________.

Accepted Answer

A)  municipal bonds 
B)  corporate stocks and bonds 
C)  consumer and business loans 
D)  mortgages 
A)  municipal bonds 
B)  corporate stocks and bonds 
C)  consumer and business loans 
D)  mortgages

Question 12

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

Accepted Answer

A)  Provincial government bonds 
B)  Treasury bills 
C)  Corporate bonds 
D)  Government agency securities 
A)  Provincial government bonds 
B)  Treasury bills 
C)  Corporate bonds 
D)  Government agency securities

Question 13

Secondary markets make financial instruments more ________.

Accepted Answer

A)  solid 
B)  vapid 
C)  liquid 
D)  risky 
A)  solid 
B)  vapid 
C)  liquid 
D)  risky

Question 14

Which of the following is not a goal of financial regulation?

Accepted Answer

A)  Ensuring the soundness of the financial system 
B)  Reducing moral hazard 
C)  Reducing adverse selection 
D)  Ensuring that investors never suffer losses 
A)  Ensuring the soundness of the financial system 
B)  Reducing moral hazard 
C)  Reducing adverse selection 
D)  Ensuring that investors never suffer losses

Question 15

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

Accepted Answer

A)  You make a loan to your neighbor. 
B)  A corporation buys a share of common stock issued by another corporation in the primary market. 
C)  You buy a Canadian Treasury bill from the Bank of Canada. 
D)  You make a deposit at a bank. 
A)  You make a loan to your neighbor. 
B)  A corporation buys a share of common stock issued by another corporation in the primary market. 
C)  You buy a Canadian Treasury bill from the Bank of Canada. 
D)  You make a deposit at a bank.

Question 16

Typically, borrowers have superior information relative to lenders about the potential returns and risks associated with an investment project. The difference in information is called ________.

Accepted Answer

A)  moral selection 
B)  risk sharing 
C)  asymmetric information 
D)  adverse hazard 
A)  moral selection 
B)  risk sharing 
C)  asymmetric information 
D)  adverse hazard

Question 17

Financial markets improve economic welfare because ________.

Accepted Answer

A)  they channel funds from investors to savers 
B)  they allow consumers to time their purchase better 
C)  they weed out inefficient firms 
D)  eliminate the need for indirect finance 
A)  they channel funds from investors to savers 
B)  they allow consumers to time their purchase better 
C)  they weed out inefficient firms 
D)  eliminate the need for indirect finance

Question 18

Which of the following instruments is not traded in a money market?

Accepted Answer

A)  Residential mortgages 
B)  Treasury Bills 
C)  Negotiable bank certificates of deposit 
D)  Commercial paper 
A)  Residential mortgages 
B)  Treasury Bills 
C)  Negotiable bank certificates of deposit 
D)  Commercial paper

Question 19

Collateral is ________ the lender receives if the borrower does not pay back the loan.

Accepted Answer

A)  a liability 
B)  an asset 
C)  a present 
D)  an offering 
A)  a liability 
B)  an asset 
C)  a present 
D)  an offering

Question 20

A financial market in which previously issued securities can be resold is called a ________ market.

Accepted Answer

A)  primary 
B)  secondary 
C)  tertiary 
D)  used securities 
A)  primary 
B)  secondary 
C)  tertiary 
D)  used securities

Exam 2: An Overview of the Financial System

An important feature of money market mutual fund shares is ________.

Contractual savings institutions include ________.

Which of the following is not a secondary market?

Equity instruments are traded in the ________ market.

Which of the following statements about the characteristics of debt and equity is false?

The process of indirect finance using financial intermediaries is called ________.

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 can be described as involving direct finance?

The primary assets of money market mutual funds are ________.

A breakdown of financial markets can result in ________.

The primary assets of a finance company are ________.

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

Secondary markets make financial instruments more ________.

Which of the following is not a goal of financial regulation?

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

Typically, borrowers have superior information relative to lenders about the potential returns and risks associated with an investment project. The difference in information is called ________.

Financial markets improve economic welfare because ________.

Which of the following instruments is not traded in a money market?

Collateral is ________ the lender receives if the borrower does not pay back the loan.

A financial market in which previously issued securities can be resold is called a ________ market.

Why Study Money, Banking, and Financial Markets

What Is Money

The Meaning of Interest Rates

The Behaviour 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

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Financial Crises

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

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

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.