Question 1

An example of direct finance would be

Accepted Answer

A) your professors deposits his or her salary in a checking account. 
B) you purchase stock in IBM from a stock broker. 
C) you use your ATM card to get cash on the weekend. 
D) your employer makes a contribution to your pension fund. 
A) your professors deposits his or her salary in a checking account. 
B) you purchase stock in IBM from a stock broker. 
C) you use your ATM card to get cash on the weekend. 
D) your employer makes a contribution to your pension fund. B

Question 2

If you spend more on your consumption or investment goods than the amount of your current income then you are called a

Accepted Answer

A) loanshark 
B) investment expenditure 
C) net borrower 
D) uninformed consumer 
A) loanshark 
B) investment expenditure 
C) net borrower 
D) uninformed consumer C

Question 3

Which institutions are central to the process of determining the nation's money supply?

Accepted Answer

A) Commercial banks, savings and loan associations, credit unions, and mutual savings banks 
B) Insurance companies 
C) Private and public pension funds 
D) None of the above; the amount of gold determines nation's money supply 
A) Commercial banks, savings and loan associations, credit unions, and mutual savings banks 
B) Insurance companies 
C) Private and public pension funds 
D) None of the above; the amount of gold determines nation's money supply A

Question 4

Which of the following would best describe the Federal Reserve's most important function?

Accepted Answer

A) To influence the general health and performance of the economy 
B) To lower interest rates always 
C) To increase the volume of funds transferred from net borrowers to net lenders 
D) To print and circulate money 
A) To influence the general health and performance of the economy 
B) To lower interest rates always 
C) To increase the volume of funds transferred from net borrowers to net lenders 
D) To print and circulate money

Question 5

Credit card balances are considered which of the following?

Accepted Answer

A) Money 
B) Loans 
C) Cash 
D) None of the above 
A) Money 
B) Loans 
C) Cash 
D) None of the above

Question 6

Monetary policy is determined by whom?

Accepted Answer

A) depository institutions 
B) Congress and the president 
C) the Federal Reserve System 
D) spending decisions of households and firms 
A) depository institutions 
B) Congress and the president 
C) the Federal Reserve System 
D) spending decisions of households and firms

Question 7

Which would be considered a use of saving?

Accepted Answer

A) Buying stock in IBM 
B) Buying a newly constructed vacation home in Idaho 
C) Buying a new tractor for the farm 
D) All of the above are uses of saving 
A) Buying stock in IBM 
B) Buying a newly constructed vacation home in Idaho 
C) Buying a new tractor for the farm 
D) All of the above are uses of saving

Question 8

The financial system is regulated and supervised to promote which of the following?

Accepted Answer

A) Competition and efficiency 
B) A smooth-running financial system 
C) The system's overall health and stability 
D) All of the above 
A) Competition and efficiency 
B) A smooth-running financial system 
C) The system's overall health and stability 
D) All of the above

Question 9

Which of the following financial intermediaries do not issue contingent liabilities?

Accepted Answer

A) finance companies 
B) casualty insurance companies 
C) pension funds 
D) life insurance companies 
A) finance companies 
B) casualty insurance companies 
C) pension funds 
D) life insurance companies

Question 10

Prior to the Great Depression of the 1930s, many economists viewed the economy as

Accepted Answer

A) self-correcting. 
B) inherently stable. 
C) usually operating at full employment equilibrium. 
D) All of the above. 
A) self-correcting. 
B) inherently stable. 
C) usually operating at full employment equilibrium. 
D) All of the above.

Question 11

Saving is

Accepted Answer

A) income not spent on consumption. 
B) income spent on investment goods and financial assets. 
C) income invested in financial assets only. 
D) None of the above. 
A) income not spent on consumption. 
B) income spent on investment goods and financial assets. 
C) income invested in financial assets only. 
D) None of the above.

Question 12

The government's economic policy prior to the Great Depression of the 1930s was one of

Accepted Answer

A) activist stabilization. 
B) Keynesian theory. 
C) laissez faire. 
D) recession. 
A) activist stabilization. 
B) Keynesian theory. 
C) laissez faire. 
D) recession.

Question 13

Which of the following is a depository institution?

Accepted Answer

A) Insurance companies 
B) Finance Companies 
C) Pension Plans 
D) Commercial banks 
A) Insurance companies 
B) Finance Companies 
C) Pension Plans 
D) Commercial banks

Question 14

The principal source of funds for depository institutions consists of which of the following?

Accepted Answer

A) Deposits of domestic and foreign individuals, business firms, and governments 
B) Loans from the Federal Reserve 
C) Loans from foreigners 
D) U.S. Government notes 
A) Deposits of domestic and foreign individuals, business firms, and governments 
B) Loans from the Federal Reserve 
C) Loans from foreigners 
D) U.S. Government notes

Question 15

Nguyen's income is $40,000. If Nguyen spends $36,000 on consumption, $4,000 on a newly-constructed vacation home, then Nguyen

Accepted Answer

A) Is not saving. 
B) Has saving equal to $4,000. 
C) Has surplus funds of $4,000. 
D) Has saving of an indeterminate amount. 
A) Is not saving. 
B) Has saving equal to $4,000. 
C) Has surplus funds of $4,000. 
D) Has saving of an indeterminate amount.

Question 16

Default on a loan occurs when

Accepted Answer

A) the borrower is unable to make principal or interest payments when due. 
B) the borrower pays off the loan early. 
C) The true risks of making the loan were not considered. 
D) The borrower pays the principal early but not the interest payments. 
A) the borrower is unable to make principal or interest payments when due. 
B) the borrower pays off the loan early. 
C) The true risks of making the loan were not considered. 
D) The borrower pays the principal early but not the interest payments.

Question 17

The primary role of the financial system is to

Accepted Answer

A) allow the Fed to conduct monetary policy. 
B) act as fiscal agent for the U.S. government. 
C) print money. 
D) channel the flow of funds from net lenders to net borrowers 
A) allow the Fed to conduct monetary policy. 
B) act as fiscal agent for the U.S. government. 
C) print money. 
D) channel the flow of funds from net lenders to net borrowers

Question 18

The study of economics is most concerned with which of the following?

Accepted Answer

A) What gets produced, how it gets produced and who gets what 
B) How to make a lot of money 
C) Why stock prices fluctuate 
D) What determines who owns the capital in society 
A) What gets produced, how it gets produced and who gets what 
B) How to make a lot of money 
C) Why stock prices fluctuate 
D) What determines who owns the capital in society

Question 19

Which of the following is not true?

Accepted Answer

A) The Federal Reserve is a quasi-independent government agency that serves as our nation's central bank. 
B) The Fed's influence begins with the depository institutions and their role in the money supply process and then spreads to other intermediaries and financial markets in general. 
C) The Fed implements fiscal policy which is all the attempts by the Fed to affect the level of economic activity. 
D) The Fed affects the total volume of funds available for lending in the economy. 
A) The Federal Reserve is a quasi-independent government agency that serves as our nation's central bank. 
B) The Fed's influence begins with the depository institutions and their role in the money supply process and then spreads to other intermediaries and financial markets in general. 
C) The Fed implements fiscal policy which is all the attempts by the Fed to affect the level of economic activity. 
D) The Fed affects the total volume of funds available for lending in the economy.

Question 20

If Moe purchases a newly issued share of stock in a well-known corporation, then he is engaging in which of the following?

Accepted Answer

A) Deficit spending 
B) Indirect finance 
C) Direct finance 
D) Discrete finance 
A) Deficit spending 
B) Indirect finance 
C) Direct finance 
D) Discrete finance

Exam 1: Introduction and Overview

An example of direct finance would be

If you spend more on your consumption or investment goods than the amount of your current income then you are called a

Which institutions are central to the process of determining the nation's money supply?

Which of the following would best describe the Federal Reserve's most important function?

Credit card balances are considered which of the following?

Monetary policy is determined by whom?

Which would be considered a use of saving?

The financial system is regulated and supervised to promote which of the following?

Which of the following financial intermediaries do not issue contingent liabilities?

Prior to the Great Depression of the 1930s, many economists viewed the economy as

Saving is

The government's economic policy prior to the Great Depression of the 1930s was one of

Which of the following is a depository institution?

The principal source of funds for depository institutions consists of which of the following?

Nguyen's income is $40,000. If Nguyen spends $36,000 on consumption, $4,000 on a newly-constructed vacation home, then Nguyen

Default on a loan occurs when

The primary role of the financial system is to

The study of economics is most concerned with which of the following?

Which of the following is not true?

If Moe purchases a newly issued share of stock in a well-known corporation, then he is engaging in which of the following?

Money and Its Role in the Economy

The Overseer: the Federal Reserve System

Financial Markets, Instruments, and Market Makers

Interest Rates and Bond Prices

The Structure of Interest Rates

Market Efficiency and the Flow of Funds Among Sectors

An Introduction to Financial Intermediaries and Risk

Commercial Banking Structure, Regulation, and Performance

Financial Innovation

Financial Instability and Strains on the Financial System

Regulation of the Banking System and the Financial Services Industry

The Debt Markets

The Stock Market

Securities Firms, Mutual Funds, and Financial Conglomerates

How Exchange Rates Are Determined

Forward, Futures, and Options Agreements

The International Financial System

The Fed, Depository Institutions, and the Money Supply Process

The Demand for Real Money Balances and Market Equilibrium

Financial Aspects of the Household, Business, Government, and Rest-Of-The-World Sectors

Aggregate Demand and Aggregate Supply

The Challenges of Monetary Policy

The Process of Monetary Policy Formation

Policy Implementation

Monetary Policy in a Globalized Financial System

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