Question 1

Which of the following fails to meet the economist's definition of a capital good?

Accepted Answer

A) A factory that produces shoes 
B) Cash on hand 
C) A brand new computer system used by a business 
D) Produced goods used to produce other goods 
A) A factory that produces shoes 
B) Cash on hand 
C) A brand new computer system used by a business 
D) Produced goods used to produce other goods

Question 2

Purchasing bonds for the expansion of a software firm would be considered

Accepted Answer

A) direct finance. 
B) indirect finance. 
C) bond refunding. 
D) bond discounting. 
A) direct finance. 
B) indirect finance. 
C) bond refunding. 
D) bond discounting.

Question 3

Financial intermediaries serve as go betweens to link net lenders and net borrowers. Here the linkage between saver and borrower is one of

Accepted Answer

A) direct finance 
B) indirect finance 
C) refinance 
D) compensatory finance 
A) direct finance 
B) indirect finance 
C) refinance 
D) compensatory finance

Question 4

Which of the following is/are not true of checkable deposits?

Accepted Answer

A) withdrawal by writing a check 
B) the FDIC does not insure checkable deposits 
C) are considered as money because they can be used as a means of payment 
D) both a and c 
A) withdrawal by writing a check 
B) the FDIC does not insure checkable deposits 
C) are considered as money because they can be used as a means of payment 
D) both a and c

Question 5

Transaction costs are best defined as

Accepted Answer

A) costs associated with checkable deposits. 
B) charges associated with making financial assets only. 
C) costs associated with borrowing and lending or making other exchanges. 
D) charges from failing to repay a financial claim. 
A) costs associated with checkable deposits. 
B) charges associated with making financial assets only. 
C) costs associated with borrowing and lending or making other exchanges. 
D) charges from failing to repay a financial claim.

Question 6

Which of the following is/are true of checkable deposits?

Accepted Answer

A) withdrawal by writing a check 
B) offered by all depository institutions 
C) are considered as money because they can be used as a means of payment 
D) all of the above are true of checkable deposits 
A) withdrawal by writing a check 
B) offered by all depository institutions 
C) are considered as money because they can be used as a means of payment 
D) all of the above are true of checkable deposits

Question 7

The spending and taxing decisions of the Congress and president that affect household and business decisions are called

Accepted Answer

A) monetary policy. 
B) deficit reduction policy. 
C) fiscal policy. 
D) None of the above 
A) monetary policy. 
B) deficit reduction policy. 
C) fiscal policy. 
D) None of the above

Question 8

The business cycle describes

Accepted Answer

A) long-run fluctuations in the level of economic activity. 
B) short-run fluctuations in the level of economic activity. 
C) low inflation. 
D) full employment. 
A) long-run fluctuations in the level of economic activity. 
B) short-run fluctuations in the level of economic activity. 
C) low inflation. 
D) full employment.

Question 9

The financial system

Accepted Answer

A) coordinates the flow of funds from lenders to borrowers. 
B) creates new liquidity for the economy. 
C)  both a and b. 
D) 
None of the above. 
A) coordinates the flow of funds from lenders to borrowers. 
B) creates new liquidity for the economy. 
C)  both a and b. 
D) 
None of the above.

Question 10

By increasing interest rates seven times within a 1year period beginning in early 1994, the Fed attempted to

Accepted Answer

A) slow the growth of the economy. 
B) increase inflation rates. 
C) decrease direct foreign investment. 
D) stimulate the U.S. Savings Bond market. 
A) slow the growth of the economy. 
B) increase inflation rates. 
C) decrease direct foreign investment. 
D) stimulate the U.S. Savings Bond market.

Question 11

Which of the following is not a universal characteristic of financial intermediaries?

Accepted Answer

A) Transferring funds from net borrowers to net lenders 
B) Issuing their own liabilities 
C) Investing in financial assets 
D) Issuing checkable deposits 
A) Transferring funds from net borrowers to net lenders 
B) Issuing their own liabilities 
C) Investing in financial assets 
D) Issuing checkable deposits

Question 12

The FDIC was created

Accepted Answer

A) during the Great Depression of the 1930s. 
B) during the Second World War. 
C) during the Korean War. 
D) during the 1970s oil crisis. 
A) during the Great Depression of the 1930s. 
B) during the Second World War. 
C) during the Korean War. 
D) during the 1970s oil crisis.

Question 13

One of the reasons that financial intermediaries exist is that

Accepted Answer

A) it is illegal for net lenders to lend directly to net borrowers 
B) the vaults at financial intermediaries are safer for your money than your mattress or piggy bank. 
C) there is no system for net lenders to lend directly to net borrowers 
D) financial intermediaries are better equipped to assess risk and to diversify portfolios. 
A) it is illegal for net lenders to lend directly to net borrowers 
B) the vaults at financial intermediaries are safer for your money than your mattress or piggy bank. 
C) there is no system for net lenders to lend directly to net borrowers 
D) financial intermediaries are better equipped to assess risk and to diversify portfolios.

Question 14

One factor complicating the analysis of the financial system and the economy is

Accepted Answer

A) the influence of politicians on both the economy and the financial system. 
B) the lack of regulation of the financial system. 
C) the continuous change and innovation in the financial system. 
D) the lack of change in the financial system compared to the constantly fluctuating economy. 
A) the influence of politicians on both the economy and the financial system. 
B) the lack of regulation of the financial system. 
C) the continuous change and innovation in the financial system. 
D) the lack of change in the financial system compared to the constantly fluctuating economy.

Question 15

If John receives $2000 monthly in net wages and spends $700 in rent, $500 on a car payment, $250 on entertainment, and $200 on groceries he is a(n)

Accepted Answer

A) net borrower. 
B) negative cash disbursement. 
C) net lender. 
D) accrued wage unit. 
A) net borrower. 
B) negative cash disbursement. 
C) net lender. 
D) accrued wage unit.

Question 16

Consumption is

Accepted Answer

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

Question 17

Of the following, which would be the most liquid financial asset?

Accepted Answer

A) One share of stock in Disney 
B) A ten-carat diamond 
C) $1000 cash 
D) house 
A) One share of stock in Disney 
B) A ten-carat diamond 
C) $1000 cash 
D) house

Question 18

Which of the following can the Federal Reserve not influence?

Accepted Answer

A) Congress in all fiscal policy actions 
B) the level of interest rates 
C) aggregate total demand in the economy 
D) both b and c 
A) Congress in all fiscal policy actions 
B) the level of interest rates 
C) aggregate total demand in the economy 
D) both b and c

Question 19

Which of the following would be an example of saving?

Accepted Answer

A) The purchase of a study guide for your class 
B) The purchase of a corporate bond 
C) Paying your rent 
D) Using coupons to buy diapers at a department store 
A) The purchase of a study guide for your class 
B) The purchase of a corporate bond 
C) Paying your rent 
D) Using coupons to buy diapers at a department store

Question 20

Monetary policy is defined as

Accepted Answer

A) the rules regarding borrowing and lending at banks. 
B) those policies which limit the interest rates banks may pay on deposits. 
C) the Federal Reserve's efforts to promote the overall health and stability of the economy. 
D) the policy regarding to whom net lenders should lend money. 
A) the rules regarding borrowing and lending at banks. 
B) those policies which limit the interest rates banks may pay on deposits. 
C) the Federal Reserve's efforts to promote the overall health and stability of the economy. 
D) the policy regarding to whom net lenders should lend money.

Exam 1: Introduction and Overview

Which of the following fails to meet the economist's definition of a capital good?

Purchasing bonds for the expansion of a software firm would be considered

Financial intermediaries serve as go betweens to link net lenders and net borrowers. Here the linkage between saver and borrower is one of

Which of the following is/are not true of checkable deposits?

Transaction costs are best defined as

Which of the following is/are true of checkable deposits?

The spending and taxing decisions of the Congress and president that affect household and business decisions are called

The business cycle describes

The financial system

By increasing interest rates seven times within a 1year period beginning in early 1994, the Fed attempted to

Which of the following is not a universal characteristic of financial intermediaries?

The FDIC was created

One of the reasons that financial intermediaries exist is that

One factor complicating the analysis of the financial system and the economy is

If John receives $2000 monthly in net wages and spends $700 in rent, $500 on a car payment, $250 on entertainment, and $200 on groceries he is a(n)

Consumption is

Of the following, which would be the most liquid financial asset?

Which of the following can the Federal Reserve not influence?

Which of the following would be an example of saving?

Monetary policy is defined as

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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