Question 1

Economics is typically broken down into microeconomics and macroeconomics. Which of the following statements is true?

Accepted Answer

A) Microeconomics is the study of the aggregate economy. 
B) Macroeconomics is the study of individual households and firms in a particular market. 
C) Macroeconomics is the study of the aggregate economy. 
D) Microeconomics is concerned with overall unemployment and inflation. 
A) Microeconomics is the study of the aggregate economy. 
B) Macroeconomics is the study of individual households and firms in a particular market. 
C) Macroeconomics is the study of the aggregate economy. 
D) Microeconomics is concerned with overall unemployment and inflation.

Question 2

In economic terms, equilibrium refers to a state of the economy

Accepted Answer

A) from which there is no tendency to deviate from; a state of rest. 
B) when it is at the upper or lower turning point of the business cycle. 
C) when there are both high unemployment and inflation. 
D) when markets fail to clear. 
A) from which there is no tendency to deviate from; a state of rest. 
B) when it is at the upper or lower turning point of the business cycle. 
C) when there are both high unemployment and inflation. 
D) when markets fail to clear.

Question 3

Which of the following would not be considered a financial intermediary?

Accepted Answer

A) Benson's Credit Union 
B) Palmyra State Bank 
C) Whitewater Savings and Loan 
D) a large stock brokerage firm 
A) Benson's Credit Union 
B) Palmyra State Bank 
C) Whitewater Savings and Loan 
D) a large stock brokerage firm

Question 4

Which of the following would be considered a financial intermediary?

Accepted Answer

A) Benson's Credit Union 
B) Palmyra State Bank 
C) Whitewater Savings and Loan 
D) All of the above are financial intermediaries 
A) Benson's Credit Union 
B) Palmyra State Bank 
C) Whitewater Savings and Loan 
D) All of the above are financial intermediaries

Question 5

What do financial regulators do?

Accepted Answer

A) promote competition and efficiency in the system 
B) preserve safety and soundness 
C) establish wage and price controls 
D) both a and b 
A) promote competition and efficiency in the system 
B) preserve safety and soundness 
C) establish wage and price controls 
D) both a and b

Question 6

Which of the following is a specialized secondary claim?

Accepted Answer

A) A checking account 
B) Life insurance 
C) A savings account 
D) Cash 
A) A checking account 
B) Life insurance 
C) A savings account 
D) Cash

Question 7

Microeconomics is most concerned with which of the following?

Accepted Answer

A) The Federal Reserve System 
B) The overall price level 
C) The individual decision making processes of business firms and households 
D) Business cycles and unemployment 
A) The Federal Reserve System 
B) The overall price level 
C) The individual decision making processes of business firms and households 
D) Business cycles and unemployment

Question 8

The best definition of finance is that it is concerned primarily with

Accepted Answer

A) game theoretic microeconomic behavior 
B) the rules of the game 
C) the study of the financial or monetary aspects of the production, spending, borrowing, and lending decisions of an economy. 
D) the way the "invisible hand" allocates resources in a command economy 
A) game theoretic microeconomic behavior 
B) the rules of the game 
C) the study of the financial or monetary aspects of the production, spending, borrowing, and lending decisions of an economy. 
D) the way the "invisible hand" allocates resources in a command economy

Question 9

The recession of the early 1990s caused many to be concerned due to

Accepted Answer

A) the depth of the contraction. 
B) the lengthy time frame over which it occurred. 
C) the lethargic or slow recovery that followed. 
D) the rapid inflation that accompanied it. 
A) the depth of the contraction. 
B) the lengthy time frame over which it occurred. 
C) the lethargic or slow recovery that followed. 
D) the rapid inflation that accompanied it.

Question 10

The Federal Reserve's monetary policy influences which of the following?

Accepted Answer

A) Interest rates 
B) The volume of funds available for lending 
C) The overall health and stability of the economy 
D) All of the above 
A) Interest rates 
B) The volume of funds available for lending 
C) The overall health and stability of the economy 
D) All of the above

Question 11

Which of the following is an example of investment?

Accepted Answer

A) The purchase of a new computer system by a business firm 
B) The acquisition of a newly constructed starter home by a young couple 
C) The purchase of a new forklift by a construction company 
D) All of the above are examples of investment 
A) The purchase of a new computer system by a business firm 
B) The acquisition of a newly constructed starter home by a young couple 
C) The purchase of a new forklift by a construction company 
D) All of the above are examples of investment

Question 12

When will saving equal the surplus funds a spending unit has available to lend?

Accepted Answer

A) When the spending unit purchases primary financial assets 
B) When the spending unit purchases either direct or indirect financial assets 
C) When the spending unit does not make any investment in capital, inventories, or newly-constructed houses 
D) When the spending unit purchases primary or secondary assets 
A) When the spending unit purchases primary financial assets 
B) When the spending unit purchases either direct or indirect financial assets 
C) When the spending unit does not make any investment in capital, inventories, or newly-constructed houses 
D) When the spending unit purchases primary or secondary assets

Question 13

Checkable deposits are

Accepted Answer

A) subject to withdrawal by writing a check 
B) issued only by commercial banks 
C) issued by all financial intermediaries 
D) not money. 
A) subject to withdrawal by writing a check 
B) issued only by commercial banks 
C) issued by all financial intermediaries 
D) not money.

Question 14

History has shown that financial systems are

Accepted Answer

A) largely unchanging. 
B) continuing changing and evolving. 
C) inherently stable. 
D) unaffected by financial innovation and regulatory changes. 
A) largely unchanging. 
B) continuing changing and evolving. 
C) inherently stable. 
D) unaffected by financial innovation and regulatory changes.

Question 15

The aim of regulatory policy in the financial system is to

Accepted Answer

A) generate government revenues. 
B) promote a smooth-running and efficient financial system. 
C) make it difficult for firms to enter the financial services market. 
D) raise banking costs and create an outflow in the circular flow model. 
A) generate government revenues. 
B) promote a smooth-running and efficient financial system. 
C) make it difficult for firms to enter the financial services market. 
D) raise banking costs and create an outflow in the circular flow model.

Question 16

If J.P. 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

Question 17

Deregulation

Accepted Answer

A) is the implementing or phasing in of new regulations. 
B) is the removing or phasing out of some existing regulations. 
C) is any regulation which pertains to accounting debits. 
D) was a trend in the financial system prior to the 1970s, but the trend of the 1970s and 1980s was toward greater regulation. 
A) is the implementing or phasing in of new regulations. 
B) is the removing or phasing out of some existing regulations. 
C) is any regulation which pertains to accounting debits. 
D) was a trend in the financial system prior to the 1970s, but the trend of the 1970s and 1980s was toward greater regulation.

Question 18

Which of the following best describes the order of business cycle phases?

Accepted Answer

A) Recession, trough, expansion, peak 
B) Recession, expansion, peak, trough 
C) Recession, peak, expansion, trough 
D) Recession, trough, contraction, peak 
A) Recession, trough, expansion, peak 
B) Recession, expansion, peak, trough 
C) Recession, peak, expansion, trough 
D) Recession, trough, contraction, peak

Question 19

If you spend less on your consumption or investment goods than your current income allows, then you are called a

Accepted Answer

A) loanshark 
B) investment expenditure 
C) net borrower 
D) net lender 
A) loanshark 
B) investment expenditure 
C) net borrower 
D) net lender

Question 20

An example of indirect finance would be

Accepted Answer

A) purchasing a corporate bond issued by PepsiCo. 
B) borrowing money from Norwest Bank to buy a used car. 
C) lending money to someone to start a publishing company. 
D) borrowing money from a friend to buy my '84 Mercury. 
A) purchasing a corporate bond issued by PepsiCo. 
B) borrowing money from Norwest Bank to buy a used car. 
C) lending money to someone to start a publishing company. 
D) borrowing money from a friend to buy my '84 Mercury.

Exam 1: Introduction and Overview

Economics is typically broken down into microeconomics and macroeconomics. Which of the following statements is true?

In economic terms, equilibrium refers to a state of the economy

Which of the following would not be considered a financial intermediary?

Which of the following would be considered a financial intermediary?

What do financial regulators do?

Which of the following is a specialized secondary claim?

Microeconomics is most concerned with which of the following?

The best definition of finance is that it is concerned primarily with

The recession of the early 1990s caused many to be concerned due to

The Federal Reserve's monetary policy influences which of the following?

Which of the following is an example of investment?

When will saving equal the surplus funds a spending unit has available to lend?

Checkable deposits are

History has shown that financial systems are

The aim of regulatory policy in the financial system is to

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

Deregulation

Which of the following best describes the order of business cycle phases?

If you spend less on your consumption or investment goods than your current income allows, then you are called a

An example of indirect finance would be

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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