Question 1

If you purchase a Treasury bond, the Treasury bond is

Accepted Answer

A) an asset to you as well as an asset to the U.S. government. 
B) an asset to you, but a liability to the U.S. government. 
C) a liability to you, but an asset to the U.S. government. 
D) a liability to you as well as a liability to the U.S. government. 
A) an asset to you as well as an asset to the U.S. government. 
B) an asset to you, but a liability to the U.S. government. 
C) a liability to you, but an asset to the U.S. government. 
D) a liability to you as well as a liability to the U.S. government. B

Question 2

A "primary market" is a market

Accepted Answer

A) for government securities. 
B) in which newly issued claims are sold to buyers by borrowers. 
C) in which newly issued claims are sold by savers to borrowers. 
D) for debt by large or "primary" corporations. 
A) for government securities. 
B) in which newly issued claims are sold to buyers by borrowers. 
C) in which newly issued claims are sold by savers to borrowers. 
D) for debt by large or "primary" corporations. B

Question 3

Briefly discuss three reasons why firms may borrow funds from a bank.

Accepted Answer

Many firms rely on bank loans to meet their short-term needs for credit, such as funds to pay for inventories or to meet their payrolls. Many firms rely on bank loans to bridge the gap between the time they must pay for inventories or meet their payrolls and when they receive revenues from the sales of goods and services. Some firms also rely on bank loans to meet their long-term credit
needs, such as funds they require to physically expand the firm.

Question 4

Alt-A borrowers were those who

Accepted Answer

A) used mortgages to purchase apartments. 
B) chose adjustable-rate mortgages instead of fixed-rate mortgages. 
C) borrowed using "interest-only" mortgages. 
D) did not provide documentation of their income when applying for a mortgage. 
A) used mortgages to purchase apartments. 
B) chose adjustable-rate mortgages instead of fixed-rate mortgages. 
C) borrowed using "interest-only" mortgages. 
D) did not provide documentation of their income when applying for a mortgage.

Question 5

Which of the following is NOT a financial asset?

Accepted Answer

A) a bond issued by Google 
B) Wells Fargo Bank 
C) a home mortgage loan 
D) a certificate of deposit 
A) a bond issued by Google 
B) Wells Fargo Bank 
C) a home mortgage loan 
D) a certificate of deposit

Question 6

The financial crisis of 2007-2009 worsened after the failure of which firm?

Accepted Answer

A) General Motors 
B) Lehman Brothers 
C) Bear Stearns 
D) American International Group (AIG) 
A) General Motors 
B) Lehman Brothers 
C) Bear Stearns 
D) American International Group (AIG)

Question 7

Which firm did the Treasury allow to fail during the financial crisis?

Accepted Answer

A) J)P. Morgan 
B) Bear Stearns 
C) Lehman Brothers 
D) American International Group (AIG) 
A) J)P. Morgan 
B) Bear Stearns 
C) Lehman Brothers 
D) American International Group (AIG)

Question 8

The Fed and Treasury took action to restore the flow of funds from savers to borrowers in order to encourage all of the following EXCEPT:

Accepted Answer

A) increase the return to savers 
B) enable households to purchase durable goods 
C) increase the likelihood of purchases of houses 
D) allow firms to finance purchases of structures and equipment 
A) increase the return to savers 
B) enable households to purchase durable goods 
C) increase the likelihood of purchases of houses 
D) allow firms to finance purchases of structures and equipment

Question 9

Briefly explain the process of securitizing mortgages.

Accepted Answer

The mortgage lender sells the loan to a

Question 10

The main role of financial intermediaries is to

Accepted Answer

A) provide funds to the federal government to cover the budget deficit. 
B) borrow funds from savers and lend them to borrowers. 
C) provide advice to consumers on how they should handle their finances. 
D) help ensure that there is enough money in circulation. 
A) provide funds to the federal government to cover the budget deficit. 
B) borrow funds from savers and lend them to borrowers. 
C) provide advice to consumers on how they should handle their finances. 
D) help ensure that there is enough money in circulation.

Question 11

All of the following are examples of risky mortgages that became more common in the 2000s EXCEPT

Accepted Answer

A) alt-A mortgages. 
B) adjustable-rate mortgages with low rates for a few years and then higher rates in later years. 
C) mortgages requiring down payments of at least 20%. 
D) subprime mortgages. 
A) alt-A mortgages. 
B) adjustable-rate mortgages with low rates for a few years and then higher rates in later years. 
C) mortgages requiring down payments of at least 20%. 
D) subprime mortgages.

Question 12

By providing and communicating information, the financial system

Accepted Answer

A) reduces the difference between the return on three-month U.S. Treasury bills and the return on thirty-year U.S. Treasury bonds. 
B) relieves individual savers from the necessity of searching out individual borrowers. 
C) eliminates the risk in investing in the stock market. 
D) guarantees investors a reasonable return on their money. 
A) reduces the difference between the return on three-month U.S. Treasury bills and the return on thirty-year U.S. Treasury bonds. 
B) relieves individual savers from the necessity of searching out individual borrowers. 
C) eliminates the risk in investing in the stock market. 
D) guarantees investors a reasonable return on their money.

Question 13

If you buy a bond issued by Intel, the bond is a(n):

Accepted Answer

A) liability to Intel and an asset to you. 
B) liability to you and an asset to Intel. 
C) liability to both you and Intel. 
D) asset to both you and Intel. 
A) liability to Intel and an asset to you. 
B) liability to you and an asset to Intel. 
C) liability to both you and Intel. 
D) asset to both you and Intel.

Question 14

Which of the following assets is the most liquid?

Accepted Answer

A) money market mutual fund 
B) computer 
C) washing machine 
D) U)S. Treasury bond 
A) money market mutual fund 
B) computer 
C) washing machine 
D) U)S. Treasury bond

Question 15

In the United States, the lender of last resort is

Accepted Answer

A) Fannie Mae. 
B) the Federal Reserve. 
C) the Federal Deposit Insurance Corporation. 
D) Securities and Exchange Commission. 
A) Fannie Mae. 
B) the Federal Reserve. 
C) the Federal Deposit Insurance Corporation. 
D) Securities and Exchange Commission.

Question 16

Fannie Mae and Freddie Mac both

Accepted Answer

A) sell bonds to investors and use the funds to purchase mortgages. 
B) help regulate the banking system. 
C) directly lend funds to people seeking mortgages. 
D) reduce access to funds for mortgages by purchasing existing mortgages. 
A) sell bonds to investors and use the funds to purchase mortgages. 
B) help regulate the banking system. 
C) directly lend funds to people seeking mortgages. 
D) reduce access to funds for mortgages by purchasing existing mortgages.

Question 17

A decline in bank lending has the most significant effect on

Accepted Answer

A) small businesses. 
B) large businesses. 
C) state governments. 
D) federal government. 
A) small businesses. 
B) large businesses. 
C) state governments. 
D) federal government.

Question 18

Briefly describe the process of microlending.

Accepted Answer

Microlending involves making small loans

Question 19

How did securitization and the bursting of the housing bubble contribute to the Financial Crisis of 2007-2009?

Accepted Answer

Many investment banks and other investor

Question 20

A bank lending depositors' money to a local business and a pension fund investing contributions in shares of a company are similar financial activities in that

Accepted Answer

A) both involve the use of financial markets. 
B) both involve funds being channeled from savers to borrowers through financial intermediaries. 
C) both involve a reduction in the overall level of liquidity in the financial system. 
D) both involve in an increase in the overall level of risk in the financial system. 
A) both involve the use of financial markets. 
B) both involve funds being channeled from savers to borrowers through financial intermediaries. 
C) both involve a reduction in the overall level of liquidity in the financial system. 
D) both involve in an increase in the overall level of risk in the financial system.

If you purchase a Treasury bond, the Treasury bond is

A "primary market" is a market

Briefly discuss three reasons why firms may borrow funds from a bank.

Alt-A borrowers were those who

Which of the following is NOT a financial asset?

The financial crisis of 2007-2009 worsened after the failure of which firm?

Which firm did the Treasury allow to fail during the financial crisis?

The Fed and Treasury took action to restore the flow of funds from savers to borrowers in order to encourage all of the following EXCEPT:

Briefly explain the process of securitizing mortgages.

The main role of financial intermediaries is to

All of the following are examples of risky mortgages that became more common in the 2000s EXCEPT

By providing and communicating information, the financial system

If you buy a bond issued by Intel, the bond is a(n):

Which of the following assets is the most liquid?

In the United States, the lender of last resort is

Fannie Mae and Freddie Mac both

A decline in bank lending has the most significant effect on

Briefly describe the process of microlending.

How did securitization and the bursting of the housing bubble contribute to the Financial Crisis of 2007-2009?

A bank lending depositors' money to a local business and a pension fund investing contributions in shares of a company are similar financial activities in that

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

Transactions Costs, Asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, Mutual Funds, Hedge Funds, and the Shadow Banking System

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 1: Introducing Money and the Financial System

If you purchase a Treasury bond, the Treasury bond is

A "primary market" is a market

Briefly discuss three reasons why firms may borrow funds from a bank.

Alt-A borrowers were those who

Which of the following is NOT a financial asset?

The financial crisis of 2007-2009 worsened after the failure of which firm?

Which firm did the Treasury allow to fail during the financial crisis?

The Fed and Treasury took action to restore the flow of funds from savers to borrowers in order to encourage all of the following EXCEPT:

Briefly explain the process of securitizing mortgages.

The main role of financial intermediaries is to

All of the following are examples of risky mortgages that became more common in the 2000s EXCEPT

By providing and communicating information, the financial system

If you buy a bond issued by Intel, the bond is a(n):

Which of the following assets is the most liquid?

In the United States, the lender of last resort is

Fannie Mae and Freddie Mac both

A decline in bank lending has the most significant effect on

Briefly describe the process of microlending.

How did securitization and the bursting of the housing bubble contribute to the Financial Crisis of 2007-2009?

A bank lending depositors' money to a local business and a pension fund investing contributions in shares of a company are similar financial activities in that

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

Transactions Costs, Asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, Mutual Funds, Hedge Funds, and the Shadow Banking System

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