Question 1

That most used cars are sold by intermediaries (i.e.,used car dealers)provides evidence that these intermediaries ________.

Accepted Answer

A)  have been afforded special government treatment, since used car dealers do not provide information that is valued by consumers of used cars 
B)  are able to prevent potential competitors from free-riding off the information that they provide 
C)  have failed to solve adverse selection problems in this market because "lemons" continue to be traded 
D)  have solved the moral hazard problem by providing valuable information to their customers 
A)  have been afforded special government treatment, since used car dealers do not provide information that is valued by consumers of used cars 
B)  are able to prevent potential competitors from free-riding off the information that they provide 
C)  have failed to solve adverse selection problems in this market because "lemons" continue to be traded 
D)  have solved the moral hazard problem by providing valuable information to their customers

Question 2

Net worth can perform a similar role to ________.

Accepted Answer

A)  diversification 
B)  collateral 
C)  intermediation 
D)  economies of scale 
A)  diversification 
B)  collateral 
C)  intermediation 
D)  economies of scale

Question 3

The problem created by asymmetric information before the transaction occurs is called ________,while the problem created after the transaction occurs is called ________.

Accepted Answer

A)  adverse selection; moral hazard 
B)  moral hazard; adverse selection 
C)  costly state verification; free-riding 
D)  free-riding; costly state verification 
A)  adverse selection; moral hazard 
B)  moral hazard; adverse selection 
C)  costly state verification; free-riding 
D)  free-riding; costly state verification

Question 4

A lesson of the Enron collapse is that government regulation ________.

Accepted Answer

A)  always fails 
B)  can reduce but not eliminate asymmetric information 
C)  increases the problem of asymmetric information 
D)  should be reduced 
A)  always fails 
B)  can reduce but not eliminate asymmetric information 
C)  increases the problem of asymmetric information 
D)  should be reduced

Question 5

Of the sources of external funds for nonfinancial businesses in Canada,loans from banks and other financial intermediaries account for ________ of the total.

Accepted Answer

A)  6 percent 
B)  40 percent 
C)  56 percent 
D)  over 70 percent 
A)  6 percent 
B)  40 percent 
C)  56 percent 
D)  over 70 percent

Question 6

Of the sources of external funds for nonfinancial businesses in Canada,corporate bonds and commercial paper account for approximately ________ of the total.

Accepted Answer

A)  5 percent 
B)  10 percent 
C)  15 percent 
D)  50 percent 
A)  5 percent 
B)  10 percent 
C)  15 percent 
D)  50 percent

Question 7

Explain the "lemons problem" as it applies to the used-car market.Why does this problem exist? How does this market resolve this problem?

Accepted Answer

The lemons problem exists because of asy

Question 8

The recent Enron and Tyco scandals are an example of ________.

Accepted Answer

A)  the free-rider problem 
B)  the adverse selection problem 
C)  the principal-agent problem 
D)  the "lemons problem" 
A)  the free-rider problem 
B)  the adverse selection problem 
C)  the principal-agent problem 
D)  the "lemons problem"

Question 9

Commercial and farm mortgages,in which property is pledged as collateral,account for ________.

Accepted Answer

A)  one-quarter of borrowing by nonfinancial businesses 
B)  one-half of borrowing by nonfinancial businesses 
C)  one-twentieth of borrowing by nonfinancial businesses 
D)  two-thirds of borrowing by nonfinancial businesses 
A)  one-quarter of borrowing by nonfinancial businesses 
B)  one-half of borrowing by nonfinancial businesses 
C)  one-twentieth of borrowing by nonfinancial businesses 
D)  two-thirds of borrowing by nonfinancial businesses

Question 10

The "lemons problem" exists because of ________.

Accepted Answer

A)  transactions costs 
B)  economies of scale 
C)  rational expectations 
D)  asymmetric information 
A)  transactions costs 
B)  economies of scale 
C)  rational expectations 
D)  asymmetric information

That most used cars are sold by intermediaries (i.e.,used car dealers)provides evidence that these intermediaries ________.

Net worth can perform a similar role to ________.

The problem created by asymmetric information before the transaction occurs is called ,while the problem created after the transaction occurs is called .

A lesson of the Enron collapse is that government regulation ________.

Of the sources of external funds for nonfinancial businesses in Canada,loans from banks and other financial intermediaries account for ________ of the total.

Of the sources of external funds for nonfinancial businesses in Canada,corporate bonds and commercial paper account for approximately ________ of the total.

Explain the "lemons problem" as it applies to the used-car market.Why does this problem exist? How does this market resolve this problem?

The recent Enron and Tyco scandals are an example of ________.

Commercial and farm mortgages,in which property is pledged as collateral,account for ________.

The "lemons problem" exists because of ________.

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

Understanding Interest Rates

The Behaviour of Interest Rates

The Risk and Term Structure of Interest Rates

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

Financial Crises

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Nonbank Finance

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

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

The ISLM Model

Filters

Exam 8: An Economic Analysis of Financial Structure

That most used cars are sold by intermediaries (i.e.,used car dealers)provides evidence that these intermediaries ________.

Net worth can perform a similar role to ________.

The problem created by asymmetric information before the transaction occurs is called ________,while the problem created after the transaction occurs is called ________.

A lesson of the Enron collapse is that government regulation ________.

Of the sources of external funds for nonfinancial businesses in Canada,loans from banks and other financial intermediaries account for ________ of the total.

Of the sources of external funds for nonfinancial businesses in Canada,corporate bonds and commercial paper account for approximately ________ of the total.

Explain the "lemons problem" as it applies to the used-car market.Why does this problem exist? How does this market resolve this problem?

The recent Enron and Tyco scandals are an example of ________.

Commercial and farm mortgages,in which property is pledged as collateral,account for ________.

The "lemons problem" exists because of ________.

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

Understanding Interest Rates

The Behaviour of Interest Rates

The Risk and Term Structure of Interest Rates

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

Financial Crises

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Nonbank Finance

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

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

The ISLM Model

Filters

The problem created by asymmetric information before the transaction occurs is called ,while the problem created after the transaction occurs is called .