Question 1

Which of the following is a depository institution?

Accepted Answer

A) a life insurance company 
B) a mutual savings bank 
C) a pension fund 
D) a finance company 
A) a life insurance company 
B) a mutual savings bank 
C) a pension fund 
D) a finance company

Question 2

A liquid asset is

Accepted Answer

A) an asset that can easily and quickly be sold to raise cash. 
B) a share of an ocean resort. 
C) difficult to resell. 
D) always sold in an over-the-counter market. 
A) an asset that can easily and quickly be sold to raise cash. 
B) a share of an ocean resort. 
C) difficult to resell. 
D) always sold in an over-the-counter market.

Question 3

The primary assets of money market mutual funds are

Accepted Answer

A) stocks. 
B) bonds. 
C) money market instruments. 
D) deposits. 
A) stocks. 
B) bonds. 
C) money market instruments. 
D) deposits.

Question 4

________ work in the secondary markets matching buyers with sellers of securities.

Accepted Answer

A) Dealers 
B) Underwriters 
C) Brokers 
D) Claimants 
A) Dealers 
B) Underwriters 
C) Brokers 
D) Claimants

Question 5

A breakdown of financial markets can result in

Accepted Answer

A) financial stability. 
B) rapid economic growth. 
C) political instability. 
D) stable prices. 
A) financial stability. 
B) rapid economic growth. 
C) political instability. 
D) stable prices.

Question 6

The regulatory agency that sets reserve requirements for all banks is

Accepted Answer

A) the Federal Reserve System. 
B) the Federal Deposit Insurance Corporation. 
C) the Office of Thrift Supervision. 
D) the Securities and Exchange Commission. 
A) the Federal Reserve System. 
B) the Federal Deposit Insurance Corporation. 
C) the Office of Thrift Supervision. 
D) the Securities and Exchange Commission.

Question 7

Conflicts of interest are a type of ________ problem that can happen when an institution provides multiple services.

Accepted Answer

A) adverse selection 
B) free-riding 
C) discounting 
D) moral hazard 
A) adverse selection 
B) free-riding 
C) discounting 
D) moral hazard

Question 8

Secondary markets make financial instruments more

Accepted Answer

A) solid. 
B) vapid. 
C) liquid. 
D) risky. 
A) solid. 
B) vapid. 
C) liquid. 
D) risky.

Question 9

Financial institutions that accept deposits and make loans are called ________ institutions.

Accepted Answer

A) investment 
B) contractual savings 
C) depository 
D) underwriting 
A) investment 
B) contractual savings 
C) depository 
D) underwriting

Question 10

Financial markets improve economic welfare because

Accepted Answer

A) they channel funds from investors to savers. 
B) they allow consumers to time their purchase better. 
C) they weed out inefficient firms. 
D) they eliminate the need for indirect finance. 
A) they channel funds from investors to savers. 
B) they allow consumers to time their purchase better. 
C) they weed out inefficient firms. 
D) they eliminate the need for indirect finance.

Question 11

Money market mutual fund shares function like

Accepted Answer

A) checking accounts that pay interest. 
B) bonds. 
C) stocks. 
D) currency. 
A) checking accounts that pay interest. 
B) bonds. 
C) stocks. 
D) currency.

Question 12

________ are short-term loans in which Treasury bills serve as collateral.

Accepted Answer

A) Repurchase agreements 
B) Negotiable certificates of deposit 
C) Federal funds 
D) U.S.government agency securities 
A) Repurchase agreements 
B) Negotiable certificates of deposit 
C) Federal funds 
D) U.S.government agency securities

Question 13

The process of indirect finance using financial intermediaries is called

Accepted Answer

A) direct lending. 
B) financial intermediation. 
C) resource allocation. 
D) financial liquidation. 
A) direct lending. 
B) financial intermediation. 
C) resource allocation. 
D) financial liquidation.

Question 14

A corporation acquires new funds only when its securities are sold in the

Accepted Answer

A) primary market by an investment bank. 
B) primary market by a stock exchange broker. 
C) secondary market by a securities dealer. 
D) secondary market by a commercial bank. 
A) primary market by an investment bank. 
B) primary market by a stock exchange broker. 
C) secondary market by a securities dealer. 
D) secondary market by a commercial bank.

Question 15

A financial market in which only short-term debt instruments are traded is called the ________ market.

Accepted Answer

A) bond 
B) money 
C) capital 
D) stock 
A) bond 
B) money 
C) capital 
D) stock

Question 16

Forty or so dealers establish a "market" in these securities by standing ready to buy and sell them.

Accepted Answer

A) secondary stocks 
B) surplus stocks 
C) U.S.government bonds 
D) common stocks 
A) secondary stocks 
B) surplus stocks 
C) U.S.government bonds 
D) common stocks

Question 17

The agency that was created to protect depositors after the banking failures of 1930-1933 is the

Accepted Answer

A) Federal Reserve System. 
B) Federal Deposit Insurance Corporation. 
C) Treasury Department. 
D) Office of the Comptroller of the Currency. 
A) Federal Reserve System. 
B) Federal Deposit Insurance Corporation. 
C) Treasury Department. 
D) Office of the Comptroller of the Currency.

Question 18

Well-functioning financial markets

Accepted Answer

A) cause inflation. 
B) eliminate the need for indirect finance. 
C) cause financial crises. 
D) allow the economy to operate more efficiently. 
A) cause inflation. 
B) eliminate the need for indirect finance. 
C) cause financial crises. 
D) allow the economy to operate more efficiently.

Question 19

Which of the following can be described as involving direct finance?

Accepted Answer

A) A corporation issues new shares of stock. 
B) People buy shares in a mutual fund. 
C) A pension fund manager buys a short-term corporate security in the secondary market. 
D) An insurance company buys shares of common stock in the over-the-counter markets. 
A) A corporation issues new shares of stock. 
B) People buy shares in a mutual fund. 
C) A pension fund manager buys a short-term corporate security in the secondary market. 
D) An insurance company buys shares of common stock in the over-the-counter markets.

Question 20

An important feature of money market mutual fund shares is

Accepted Answer

A) deposit insurance. 
B) the ability to write checks against shareholdings. 
C) the ability to borrow against shareholdings. 
D) claims on shares of corporate stock. 
A) deposit insurance. 
B) the ability to write checks against shareholdings. 
C) the ability to borrow against shareholdings. 
D) claims on shares of corporate stock.

Exam 2: An Overview of the Financial System

Which of the following is a depository institution?

A liquid asset is

The primary assets of money market mutual funds are

________ work in the secondary markets matching buyers with sellers of securities.

A breakdown of financial markets can result in

The regulatory agency that sets reserve requirements for all banks is

Conflicts of interest are a type of ________ problem that can happen when an institution provides multiple services.

Secondary markets make financial instruments more

Financial institutions that accept deposits and make loans are called ________ institutions.

Financial markets improve economic welfare because

Money market mutual fund shares function like

________ are short-term loans in which Treasury bills serve as collateral.

The process of indirect finance using financial intermediaries is called

A corporation acquires new funds only when its securities are sold in the

A financial market in which only short-term debt instruments are traded is called the ________ market.

Forty or so dealers establish a "market" in these securities by standing ready to buy and sell them.

The agency that was created to protect depositors after the banking failures of 1930-1933 is the

Well-functioning financial markets

Which of the following can be described as involving direct finance?

An important feature of money market mutual fund shares is

Why Study Money, banking, and Financial Markets

What Is Money

The Meaning of Interest Rates

The Behavior of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Financial Crises

Central Banks and the Federal Reserve System

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory, inflation, and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

Web 1:financial Crises in Emerging Market Economies

Web 2:the Islm Model

Web 3:nonbank Finance

Web 4:financial Derivatives

Web 5:conflicts of Interest in the Financial Services Industry

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