Question 1

In general, when the cost of credit declines,

Accepted Answer

A)  Unemployment rises 
B)  Total spending decreases 
C)  Production is cut back 
D)  More jobs are created 
E)  The economy's rate of growth slows down 
A)  Unemployment rises 
B)  Total spending decreases 
C)  Production is cut back 
D)  More jobs are created 
E)  The economy's rate of growth slows down

Question 2

Providing loanable funds to supplement current income in order to sustain current living standards represents what financial service area?

Accepted Answer

A)  Payments services 
B)  Thrift services 
C)  Agency services 
D)  Credit services 
E)  None of the above 
A)  Payments services 
B)  Thrift services 
C)  Agency services 
D)  Credit services 
E)  None of the above

Question 3

A NOW account is a type of savings account rather than a type of checking account.

Accepted Answer

A) True 
 B)False

Question 4

Current savings for a business firm is measured by:

Accepted Answer

A)  Total business sales receipts less business operating expenses (including business taxes) 
B)  Current budget receipts less current budgetary expenditures 
C)  Purchases of plant and equipment and inventory and residential construction 
D)  Construction of new public facilities 
E)  None of the above 
A)  Total business sales receipts less business operating expenses (including business taxes) 
B)  Current budget receipts less current budgetary expenditures 
C)  Purchases of plant and equipment and inventory and residential construction 
D)  Construction of new public facilities 
E)  None of the above

Question 5

The money market is designed for the making of short-term loans. It is the institution through which individuals and institutions with temporary surpluses of funds meet the needs of borrowers who have temporary funds shortages (deficits).

Accepted Answer

A) True 
 B)False

Question 6

Every year the volume of financial wealth is growing in the United States. In 2009 the total securities, deposits and other financial assets held by domestic nonfinancial businesses, households, the US government and foreign investors was:

Accepted Answer

A)  $55 trillion 
B)  $67 trillion 
C)  $11 trillion 
D)  $50 trillion 
E)  None of the above 
A)  $55 trillion 
B)  $67 trillion 
C)  $11 trillion 
D)  $50 trillion 
E)  None of the above

Question 7

The largest borrower in the money market is:

Accepted Answer

A)  Businesses 
B)  Government 
C)  Households 
D)  Commercial banks 
E)  None of the above 
A)  Businesses 
B)  Government 
C)  Households 
D)  Commercial banks 
E)  None of the above

Question 8

The term "financial system" refers to the collection of markets, individuals and institutions, laws, regulations and techniques through which securities are traded and interest rates determined.

Accepted Answer

A) True 
 B)False

Question 9

The financial asset which generally earns the lowest rate of return in the financial system is securities issued by the federal government which are presumed by investors to be free of credit risk.

Accepted Answer

A) True 
 B)False

Question 10

On annualized basis US corporations will earn approximately $1.1 trillion, of which ________ will be set aside for possible future business needs. Choose the answer for the blank.

Accepted Answer

A)  $500 billion 
B)  $200 billion 
C)  $700 billion 
D)  $50 billion 
E)  $150 billion 
A)  $500 billion 
B)  $200 billion 
C)  $700 billion 
D)  $50 billion 
E)  $150 billion

Question 11

Speculators in securities are continually on the lookout for small differences in prices or interest rates attached to different securities.

Accepted Answer

A) True 
 B)False

Question 12

According to the text speculators perform an important function in the financial markets. They:

Accepted Answer

A)  Create underpricing of certain securities, generating more attractive investment opportunities 
B)  Cause some securities to be overpriced which tends to drive out those securities 
C)  Level out the prices of securities 
D)  Help to prevent security fraud 
E)  None of the above 
A)  Create underpricing of certain securities, generating more attractive investment opportunities 
B)  Cause some securities to be overpriced which tends to drive out those securities 
C)  Level out the prices of securities 
D)  Help to prevent security fraud 
E)  None of the above

Question 13

The construction of office buildings, highways, schools and homes normally is financed by loans from the money market.

Accepted Answer

A) True 
 B)False

Question 14

When credit becomes more costly and less available, total spending for goods and services generally falls.

Accepted Answer

A) True 
 B)False

Question 15

For a household, according to US accounting procedures, which of the following is considered an investment?

Accepted Answer

A)  Jewelry 
B)  Home 
C)  Garage 
D)  Pickup truck 
E)  Boat 
A)  Jewelry 
B)  Home 
C)  Garage 
D)  Pickup truck 
E)  Boat

Question 16

The financial system determines the cost of credit and how much credit is available.

Accepted Answer

A) True 
 B)False

Question 17

The role of markets in a market-oriented economy like the United States is to:

Accepted Answer

A)  Allocate resources 
B)  Distribute income 
C)  Produce needed goods and services 
D)  All of the above 
E)  None of the above 
A)  Allocate resources 
B)  Distribute income 
C)  Produce needed goods and services 
D)  All of the above 
E)  None of the above

Exam 1: Understanding the Financial System and Its Impact on the Economy and Markets

In general, when the cost of credit declines,

Providing loanable funds to supplement current income in order to sustain current living standards represents what financial service area?

A NOW account is a type of savings account rather than a type of checking account.

Current savings for a business firm is measured by:

The money market is designed for the making of short-term loans. It is the institution through which individuals and institutions with temporary surpluses of funds meet the needs of borrowers who have temporary funds shortages (deficits).

Every year the volume of financial wealth is growing in the United States. In 2009 the total securities, deposits and other financial assets held by domestic nonfinancial businesses, households, the US government and foreign investors was:

The largest borrower in the money market is:

The term "financial system" refers to the collection of markets, individuals and institutions, laws, regulations and techniques through which securities are traded and interest rates determined.

The financial asset which generally earns the lowest rate of return in the financial system is securities issued by the federal government which are presumed by investors to be free of credit risk.

On annualized basis US corporations will earn approximately $1.1 trillion, of which ________ will be set aside for possible future business needs. Choose the answer for the blank.

Speculators in securities are continually on the lookout for small differences in prices or interest rates attached to different securities.

According to the text speculators perform an important function in the financial markets. They:

The construction of office buildings, highways, schools and homes normally is financed by loans from the money market.

When credit becomes more costly and less available, total spending for goods and services generally falls.

For a household, according to US accounting procedures, which of the following is considered an investment?

The financial system determines the cost of credit and how much credit is available.

The role of markets in a market-oriented economy like the United States is to:

Financial Systems, Monetary Units, and the Role of Money in the Economy

Financial Indices, Market Information, and Economic Data

The Financial Crisis and Its Impact on the Mortgage Market and Economy

Understanding Interest Rates, Savings, and the Wealth Effect

Financial Concepts and Interest Rates

Effects of Inflation and Yield Curves on Stock Prices and Investments

Understanding Risk and Market Factors in Financial Securities

Exploring Financial Markets and Hedging Strategies

Factors Affecting the Volume of CDs

Exploring the Reserve Accounting System, Money Markets, and Financial Instruments

Exploring Central Banks and Their Impact on the Economy and Financial System

Central Banking and Monetary Policy: Exploring Tools and Strategies

Banking and Financial Services: Regulations, Operations, and Trends

Comparative Analysis of Financial Institutions and Their Operations

Exploring Various Aspects of Pension Funds, Finance Companies, and Insurance Industry

The Impact of Deregulation and Regulation on Financial Institutions and Banking Industry in the United States

Treasury Auctions, Public Debt, and Government Borrowing: Exploring the Us Treasury System

Corporate Bond Pricing, Market Development, and Financing Strategies

The Truth About Regulation Fd and Stock Holdings: Debunking Common Myths in the Financial Market

Flexible Savings Account Options

Mortgage Market and Mortgage Instruments

International Financial Transactions and Balance of Payments

International Banking and Financial Regulations

Exploring the Complexities of Financial Services and Regulation

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