Question 1

Venture capital firms attempt to overcome the principal-agent problem by

Accepted Answer

A)  investing only in industries with high profit rates. 
B)  charging high interest rates on loans. 
C)  holding large equity stakes in the firms they invest in. 
D)  avoiding investing in common stock. 
A)  investing only in industries with high profit rates. 
B)  charging high interest rates on loans. 
C)  holding large equity stakes in the firms they invest in. 
D)  avoiding investing in common stock.

Question 2

The company that manufactures Screaming Chocolate Zonkers breakfast cereal finds that its sales collapse,it is forced into bankruptcy,and it defaults on its bonds,as a result of information on the filthy conditions in its factory,which had long been known to management,leaking out to the general public.This incident is best thought of as an example of

Accepted Answer

A)  symmetric information in the financial markets. 
B)  asymmetric information in the financial markets. 
C)  moral hazard in the financial markets. 
D)  the generally poor state of sanitation in the food-processing industry in the United States. 
A)  symmetric information in the financial markets. 
B)  asymmetric information in the financial markets. 
C)  moral hazard in the financial markets. 
D)  the generally poor state of sanitation in the food-processing industry in the United States.

Question 3

Compared to CDs and money market funds,crowdfunding

Accepted Answer

A)  provides higher expected returns with increased safety. 
B)  provides lower expected returns in exchange for increased safety. 
C)  is likely to result in lower returns due to higher volatility. 
D)  provides opportunities for higher returns but also significant losses. 
A)  provides higher expected returns with increased safety. 
B)  provides lower expected returns in exchange for increased safety. 
C)  is likely to result in lower returns due to higher volatility. 
D)  provides opportunities for higher returns but also significant losses.

Question 4

A part of the Jumpstart Our Business Startups (JOBS)Act is

Accepted Answer

A)  banks are required to provide special financing for start ups. 
B)  differences between qualified and unaccredited investors were removed. 
C)  the SEC is no longer allowed to regulate funding of business start ups. 
D)  Congress removed some of the restrictions on using crowdfunding to allow small investors to buy equity in start-ups. 
A)  banks are required to provide special financing for start ups. 
B)  differences between qualified and unaccredited investors were removed. 
C)  the SEC is no longer allowed to regulate funding of business start ups. 
D)  Congress removed some of the restrictions on using crowdfunding to allow small investors to buy equity in start-ups.

Question 5

From 2010-2015,the primary source of external funds for corporations was

Accepted Answer

A)  commercial paper. 
B)  loans. 
C)  bonds. 
D)  stocks. 
A)  commercial paper. 
B)  loans. 
C)  bonds. 
D)  stocks.

Question 6

The "lemons problem" is overcome in the used car market by

Accepted Answer

A)  strict government regulation of private deals between individual buyers and sellers of used cars. 
B)  most used cars selling for well below their true values. 
C)  "lemon insurance" policies being offered by insurance companies. 
D)  the existence of used car dealers who are concerned about maintaining their reputations. 
A)  strict government regulation of private deals between individual buyers and sellers of used cars. 
B)  most used cars selling for well below their true values. 
C)  "lemon insurance" policies being offered by insurance companies. 
D)  the existence of used car dealers who are concerned about maintaining their reputations.

Question 7

How does adverse selection affect the participation of small- and medium-sized firms in the stock market?

Accepted Answer

Many small- and medium-sized firms will

Question 8

Suppose one person buys a copy of Consumer Reports and gives away free copies to all who request one.This is an example of

Accepted Answer

A)  the free rider problem. 
B)  moral hazard. 
C)  adverse selection. 
D)  economies of scale. 
A)  the free rider problem. 
B)  moral hazard. 
C)  adverse selection. 
D)  economies of scale.

Question 9

If there were no adverse selection problems in the stock market

Accepted Answer

A)  some well-run firms would pay more to raise funds. 
B)  some poorly-run firms would pay less to raise funds. 
C)  the willingness of savers to invest in the market would be increased. 
D)  the volume of new stock issues would be lower. 
A)  some well-run firms would pay more to raise funds. 
B)  some poorly-run firms would pay less to raise funds. 
C)  the willingness of savers to invest in the market would be increased. 
D)  the volume of new stock issues would be lower.

Question 10

For the most part,countries with ________ of financial development have ________ of real GDP per capita.

Accepted Answer

A)  high levels; low levels 
B)  high levels; high levels 
C)  low levels; high levels 
D)  There is no discernable relationship between the level of financial development in a country and that country's level of real GDP per capita. 
A)  high levels; low levels 
B)  high levels; high levels 
C)  low levels; high levels 
D)  There is no discernable relationship between the level of financial development in a country and that country's level of real GDP per capita.

Question 11

The "lemons problem" exists in the market for goods because

Accepted Answer

A)  sellers tend to try to take advantage of buyers. 
B)  buyers tend to try to take advantage of sellers. 
C)  of the differences in the quality of the goods being exchanged. 
D)  of moral hazard. 
A)  sellers tend to try to take advantage of buyers. 
B)  buyers tend to try to take advantage of sellers. 
C)  of the differences in the quality of the goods being exchanged. 
D)  of moral hazard.

Question 12

Economies of scale are

Accepted Answer

A)  charges to savers and borrowers imposed by banks in exchange for reducing transactions costs. 
B)  the reduction in costs per unit that accompanies an increase in volume. 
C)  decreases in transactions costs that occur as information costs increase. 
D)  decreases in information costs that occur as transactions costs increase. 
A)  charges to savers and borrowers imposed by banks in exchange for reducing transactions costs. 
B)  the reduction in costs per unit that accompanies an increase in volume. 
C)  decreases in transactions costs that occur as information costs increase. 
D)  decreases in information costs that occur as transactions costs increase.

Question 13

How is the lemons problem in the used car market an example of asymmetric information?

Accepted Answer

The seller of a used car has m

Question 14

In the United States,the stake of top management in firms' ownership usually is

Accepted Answer

A)  less than 5%. 
B)  more than 25%. 
C)  more than 50%. 
D)  more than 75%. 
A)  less than 5%. 
B)  more than 25%. 
C)  more than 50%. 
D)  more than 75%.

Question 15

Generally,when there is asymmetric information

Accepted Answer

A)  a lender will only lend to the government. 
B)  a lender will only lend to well-known borrowers. 
C)  practical solutions are devised to allow lending to take place. 
D)  a lender will cease all lending activities. 
A)  a lender will only lend to the government. 
B)  a lender will only lend to well-known borrowers. 
C)  practical solutions are devised to allow lending to take place. 
D)  a lender will cease all lending activities.

Question 16

All of the following are factors that determine whether a country's economy can provide a high standard of living for its residents and whether that standard of living can increase over time EXCEPT

Accepted Answer

A)  the ability of the country's businesses to accumulate capital. 
B)  the ability of the country's businesses to adopt the latest technology. 
C)  the ability of the country's government to provide a legal framework that protects property rights and enforces contracts. 
D)  the ability of the country's government to print money in response to high levels of inflation. 
A)  the ability of the country's businesses to accumulate capital. 
B)  the ability of the country's businesses to adopt the latest technology. 
C)  the ability of the country's government to provide a legal framework that protects property rights and enforces contracts. 
D)  the ability of the country's government to print money in response to high levels of inflation.

Question 17

In effect,banks are able to charge

Accepted Answer

A)  depositors for banks' superior information about borrowers. 
B)  borrowers for banks' superior information about depositors. 
C)  the government for banks' superior information about borrowers and depositors. 
D)  interest rates that are in fact above those legally allowed. 
A)  depositors for banks' superior information about borrowers. 
B)  borrowers for banks' superior information about depositors. 
C)  the government for banks' superior information about borrowers and depositors. 
D)  interest rates that are in fact above those legally allowed.

Question 18

From 2010-2015,which of the following was the primary source of external financing for small to medium-size firms?

Accepted Answer

A)  mortgages 
B)  bank loans other than mortgages 
C)  trade credit 
D)  other loans 
A)  mortgages 
B)  bank loans other than mortgages 
C)  trade credit 
D)  other loans

Question 19

The problem of moral hazard

Accepted Answer

A)  is considerably more serious when an investor buys a firm's bonds than when the investor buys a firm's stock. 
B)  is considerably more serious when an investor buys a firm's stock than when the investor buys a firm's bonds. 
C)  is equally serious whether an investor buys a firm's bonds or a firm's stock. 
D)  is nonexistent for investors who buy corporate bonds or stock. 
A)  is considerably more serious when an investor buys a firm's bonds than when the investor buys a firm's stock. 
B)  is considerably more serious when an investor buys a firm's stock than when the investor buys a firm's bonds. 
C)  is equally serious whether an investor buys a firm's bonds or a firm's stock. 
D)  is nonexistent for investors who buy corporate bonds or stock.

Question 20

Which of the following agencies has established standardized accounting principles for reporting corporate earnings?

Accepted Answer

A)  The Securities and Exchange Commission 
B)  The Federal Trade Commission 
C)  The National Accounting Board 
D)  The Fair Reporting Commission 
A)  The Securities and Exchange Commission 
B)  The Federal Trade Commission 
C)  The National Accounting Board 
D)  The Fair Reporting Commission

Venture capital firms attempt to overcome the principal-agent problem by

Compared to CDs and money market funds,crowdfunding

A part of the Jumpstart Our Business Startups (JOBS)Act is

From 2010-2015,the primary source of external funds for corporations was

The "lemons problem" is overcome in the used car market by

How does adverse selection affect the participation of small- and medium-sized firms in the stock market?

Suppose one person buys a copy of Consumer Reports and gives away free copies to all who request one.This is an example of

If there were no adverse selection problems in the stock market

For the most part,countries with of financial development have of real GDP per capita.

The "lemons problem" exists in the market for goods because

Economies of scale are

How is the lemons problem in the used car market an example of asymmetric information?

In the United States,the stake of top management in firms' ownership usually is

Generally,when there is asymmetric information

All of the following are factors that determine whether a country's economy can provide a high standard of living for its residents and whether that standard of living can increase over time EXCEPT

In effect,banks are able to charge

From 2010-2015,which of the following was the primary source of external financing for small to medium-size firms?

The problem of moral hazard

Which of the following agencies has established standardized accounting principles for reporting corporate earnings?

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

The Economics of Banking

Beyond Commercial Banks: Shadow Banks and Nonbank Financial Institutions

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I- the Aggregate Demand and Aggregate Supply Model

Monetary Theory Ii: the Is-Mp Model

Filters

Exam 9: Transactions Costs, asymmetric Information, and the Structure of the Financial System

Venture capital firms attempt to overcome the principal-agent problem by

Compared to CDs and money market funds,crowdfunding

A part of the Jumpstart Our Business Startups (JOBS)Act is

From 2010-2015,the primary source of external funds for corporations was

The "lemons problem" is overcome in the used car market by

How does adverse selection affect the participation of small- and medium-sized firms in the stock market?

Suppose one person buys a copy of Consumer Reports and gives away free copies to all who request one.This is an example of

If there were no adverse selection problems in the stock market

For the most part,countries with ________ of financial development have ________ of real GDP per capita.

The "lemons problem" exists in the market for goods because

Economies of scale are

How is the lemons problem in the used car market an example of asymmetric information?

In the United States,the stake of top management in firms' ownership usually is

Generally,when there is asymmetric information

All of the following are factors that determine whether a country's economy can provide a high standard of living for its residents and whether that standard of living can increase over time EXCEPT

In effect,banks are able to charge

From 2010-2015,which of the following was the primary source of external financing for small to medium-size firms?

The problem of moral hazard

Which of the following agencies has established standardized accounting principles for reporting corporate earnings?

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

The Economics of Banking

Beyond Commercial Banks: Shadow Banks and Nonbank Financial Institutions

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I- the Aggregate Demand and Aggregate Supply Model

Monetary Theory Ii: the Is-Mp Model

Filters

For the most part,countries with of financial development have of real GDP per capita.