TB_599810_Mishkin_TP.qxd:Layouto.1o . 01/02/25o . 9:45o.AMo . Pageo.1
TestBank
to accompany
Kathy Kelly o. Richard G. Stahl o. o.
University of Texas, Arlington
o. o. o. Louisiana State University
o. o.
Pearson Addison-Wesley
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Bostono . Sano.Franciscoo . Newo.York
Londono . Torontoo . Sydneyo . Tokyoo . Singaporeo . Madrido.
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recipients of this work are expected to abide by these o. o. o. o. o. o. o. o. o.
other instructors who rely on these materials.
o. o. o. o. o. o.
Acquisitions Editor: Noel Kamm Seibert Pr o. o. o. o. o.
oject Manager: Kerri McQueen Production
o. o. o. o. o.
Editor: Alison Eusden Manufacturing Buye
o. o. o. o.
r: Carol Melville
o. o.
Copyright© 2010, 2007, 2004, 2001 Pearson Education, Inc., 75 Arlington Street, Boston, MA 02116. P
o. o. o. o. o. o. o. o. o. o. o. o. o. o.
earson Addison- o.
Wesley. All rights reserved. Printed in the United States of America. This publication is protected by cop
o. o. o. o. o. o. o. o. o. o. o. o. o. o. o. o.
yright and permission should be obtained from the publisher prior to any prohibited reproduction, storag
o. o. o. o. o. o. o. o. o. o. o. o. o. o.
e in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopyi
o. o. o. o. o. o. o. o. o. o. o. o. o. o. o. o.
ng, recording, or likewise. For information regarding permission(s), write to: Rights and Permissions De
o. o. o. o. o. o. o. o. o. o. o. o. o.
partment.
This work is protected by United States copyright laws and is provided solely for the use of instructors
o. o. o. o. o. o. o. o. o. o. o. o. o. o. o. o. o.
o in teaching their courses and assessing student learning. Dissemination or sale of any part of this wo
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rk (including on the World Wide Web) will destroy the integrity of the work and is not permitted. The
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work
and materials from it should never be made available to students except by instructors using the accomp
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nying text in their classes. All recipients of this work are expected to abide by these restrictions and to
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honor the intended pedagogical purposes and the needs of other instructors who rely on these materials.
o. o. o. o. o. o. o. o. o. o. o. o. o. o. o.
Pearson Addison-Wesley™ is a trademark of Pearson Education, Inc.
o.
o.
o. o. o. o. o. o.
1o. 2o. 3o.4o. 5o. 6o. OPMo. 12o. 11o. 10o. 09
ISBN-13: 978-0-321-59981-0 o.
ISBN-10: 0-321-59981-0 o.
,Contents
.
o
Chapter 1
o. Why Study Money, Banking, and Financial Markets? ............................................... 1
o. o. o. o. o. o.
Chapter 2
o. An Overview of the Financial System ........................................................................ 20
o. o. o. o. o.
Chapter 3
o. What Is Money? ............................................................................................................. 43
o. o.
Chapter 4
o. Understanding Interest Rates ....................................................................................... 60
o. o.
Chapter 5
o. The Behavior of Interest Rates ..................................................................................... 78
o. o. o. o.
Chapter 6
o. The Risk and Term Structure of Interest Rates ........................................................ 111
o. o. o. o. o. o. o.
Chapter 7
o. The Stock Market, the Theory of Rational Expectations,
o. o. o. o. o. o. o.
and the Efficient Market Hypothesis ........................................................................ 133
o. o. o. o.
Chapter 8
o. An Economic Analysis of Financial Structure ......................................................... 150
o. o. o. o. o.
Chapter 9
o. Financial Crises and the Subprime Meltdown......................................................... 169
o. o. o. o. o.
Chapter 10
o. Banking and the Management of Financial Institutions ........................................ 181
o. o. o. o. o. o.
Chapter 11
o. Economic Analysis of Financial Regulation ............................................................. 208
o. o. o. o.
Chapter 12
o. Banking Industry: Structure and Competition ........................................................ 229
o. o. o. o.
Chapter 13
o. Central Banks and the Federal Reserve System ...................................................... 253
o. o. o. o. o. o.
Chapter 14
o. The Money Supply Process......................................................................................... 274
o. o. o.
Chapter 15
o. Tools for Monetary Policy ........................................................................................... 319
o. o. o.
Chapter 16
o. The Conduct of Monetary Policy: Strategy and Tactics ......................................... 343
o. o. o. o. o. o. o.
Chapter 17
o. The Foreign Exchange Market ................................................................................... 363
o. o. o.
Chapter 18
o. The International Financial System ........................................................................... 389
o. o. o.
Chapter 19
o. The Demand for Money .............................................................................................. 418
o. o. o.
Chapter 20
o. The ISLM Model .......................................................................................................... 440
o. o.
Chapter 21
o. Monetary and Fiscal Policy in the ISLM Model ...................................................... 466
o. o. o. o. o. o. o.
Chapter 22
o. Aggregate Demand and Supply Analysis ................................................................ 493
o. o. o. o.
Chapter 23
o. Transmission Mechanisms of Monetary Policy: The Evidence ............................. 511
o. o. o. o. o. o.
Chapter 24
o. Money and Inflation .................................................................................................... 529
o. o.
Chapter 25
o. Rational Expectations: Implications for Policy......................................................... 549
o. o. o. o.
, Chapter 1 o.
Why Study Money, Banking, and Financial Markets?
o. o. o. o. o. o.
1.1 Why Study Financial Markets?
o. o. o.
1) Financialo . marketso . promoteo . economico . efficiencyo . byo .
A) channelingo . fundso . fromo . investorso . too . savers.
B) creatingo. inflation.
C) channelingo . fundso . fromo . saverso . too . investors.
D) reducingo.investment.
Answer:o . C
o.
Queso.Status:o . Previouso.Edition
2) Financialo . marketso . promoteo . greatero . economico . efficiencyo . byo . channelingo . fundso . fromo . to
o.
.
A) investors;o . savers
B) borrowers;o . savers
C) savers;o . borrowers
D) savers;o.lenders
Answer:o . C
o.
Queso.Status:o . Previouso.Edition
3) Well-functioningo . financialo . marketso . promote
A) inflation.
B) deflation.
C) unemployment.
D) growth.
Answer:o . D
Queso.Status:o . Previouso.Edition
4) Ao . keyo . factoro . ino . producingo . higho . economico . growtho . iso .
A) eliminatingo . foreigno . trade.
B) well-functioningo . financialo . markets.
C) higho. interesto. rates.
D) stocko.marketo.volatility.
Answer:o . B
o.
Queso.Status:o . New
5) Marketso.ino.whicho.fundso.areo.transferredo.fromo.thoseo.whoo.haveo.excesso.fundso.availableo.too.thos
eo.whoo.haveo.ao.shortageo.ofo.availableo.fundso.areo.called
A) commodityo . markets.
B) fund-availableo . markets.
C) derivativeo . exchangeo . markets.
D) financialo . markets.
Answer:o . D
Queso.Status:o . Previouso.Edition
TestBank
to accompany
Kathy Kelly o. Richard G. Stahl o. o.
University of Texas, Arlington
o. o. o. Louisiana State University
o. o.
Pearson Addison-Wesley
o .
Bostono . Sano.Franciscoo . Newo.York
Londono . Torontoo . Sydneyo . Tokyoo . Singaporeo . Madrido.
Mexicoo.Cityo . Municho . Pariso . Capeo.Towno . Hongo.Kongo . Montre
al
,TB_599810_Mishkin_TP.qxd:Layouto.1o . 6/4/09o . 9:45o.AMo . Pageo.2
for the use of instructors in teaching their courses and assessing student
o. o. o. o. o. o. o. o. o. o. o.
learning. Dissemination or sale of any part of this work (including on the
o. o. o. o. o. o. o. o. o. o. o. o. o.
stud
ents except by instructors using the accompanying text in their classes. All
o. o. o. o. o. o. o. o. o. o. o. o.
recipients of this work are expected to abide by these o. o. o. o. o. o. o. o. o.
other instructors who rely on these materials.
o. o. o. o. o. o.
Acquisitions Editor: Noel Kamm Seibert Pr o. o. o. o. o.
oject Manager: Kerri McQueen Production
o. o. o. o. o.
Editor: Alison Eusden Manufacturing Buye
o. o. o. o.
r: Carol Melville
o. o.
Copyright© 2010, 2007, 2004, 2001 Pearson Education, Inc., 75 Arlington Street, Boston, MA 02116. P
o. o. o. o. o. o. o. o. o. o. o. o. o. o.
earson Addison- o.
Wesley. All rights reserved. Printed in the United States of America. This publication is protected by cop
o. o. o. o. o. o. o. o. o. o. o. o. o. o. o. o.
yright and permission should be obtained from the publisher prior to any prohibited reproduction, storag
o. o. o. o. o. o. o. o. o. o. o. o. o. o.
e in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopyi
o. o. o. o. o. o. o. o. o. o. o. o. o. o. o. o.
ng, recording, or likewise. For information regarding permission(s), write to: Rights and Permissions De
o. o. o. o. o. o. o. o. o. o. o. o. o.
partment.
This work is protected by United States copyright laws and is provided solely for the use of instructors
o. o. o. o. o. o. o. o. o. o. o. o. o. o. o. o. o.
o in teaching their courses and assessing student learning. Dissemination or sale of any part of this wo
. o. o. o. o. o. o. o. o. o. o. o. o. o. o. o. o.
rk (including on the World Wide Web) will destroy the integrity of the work and is not permitted. The
o. o. o. o. o. o. o. o. o. o. o. o. o. o. o. o. o. o. o.
work
and materials from it should never be made available to students except by instructors using the accomp
o. o. o. o. o. o. o. o. o. o. o. o. o. o. o. o.
a-
nying text in their classes. All recipients of this work are expected to abide by these restrictions and to
o. o. o. o. o. o. o. o. o. o. o. o. o. o. o. o. o. o. o. o.
honor the intended pedagogical purposes and the needs of other instructors who rely on these materials.
o. o. o. o. o. o. o. o. o. o. o. o. o. o. o.
Pearson Addison-Wesley™ is a trademark of Pearson Education, Inc.
o.
o.
o. o. o. o. o. o.
1o. 2o. 3o.4o. 5o. 6o. OPMo. 12o. 11o. 10o. 09
ISBN-13: 978-0-321-59981-0 o.
ISBN-10: 0-321-59981-0 o.
,Contents
.
o
Chapter 1
o. Why Study Money, Banking, and Financial Markets? ............................................... 1
o. o. o. o. o. o.
Chapter 2
o. An Overview of the Financial System ........................................................................ 20
o. o. o. o. o.
Chapter 3
o. What Is Money? ............................................................................................................. 43
o. o.
Chapter 4
o. Understanding Interest Rates ....................................................................................... 60
o. o.
Chapter 5
o. The Behavior of Interest Rates ..................................................................................... 78
o. o. o. o.
Chapter 6
o. The Risk and Term Structure of Interest Rates ........................................................ 111
o. o. o. o. o. o. o.
Chapter 7
o. The Stock Market, the Theory of Rational Expectations,
o. o. o. o. o. o. o.
and the Efficient Market Hypothesis ........................................................................ 133
o. o. o. o.
Chapter 8
o. An Economic Analysis of Financial Structure ......................................................... 150
o. o. o. o. o.
Chapter 9
o. Financial Crises and the Subprime Meltdown......................................................... 169
o. o. o. o. o.
Chapter 10
o. Banking and the Management of Financial Institutions ........................................ 181
o. o. o. o. o. o.
Chapter 11
o. Economic Analysis of Financial Regulation ............................................................. 208
o. o. o. o.
Chapter 12
o. Banking Industry: Structure and Competition ........................................................ 229
o. o. o. o.
Chapter 13
o. Central Banks and the Federal Reserve System ...................................................... 253
o. o. o. o. o. o.
Chapter 14
o. The Money Supply Process......................................................................................... 274
o. o. o.
Chapter 15
o. Tools for Monetary Policy ........................................................................................... 319
o. o. o.
Chapter 16
o. The Conduct of Monetary Policy: Strategy and Tactics ......................................... 343
o. o. o. o. o. o. o.
Chapter 17
o. The Foreign Exchange Market ................................................................................... 363
o. o. o.
Chapter 18
o. The International Financial System ........................................................................... 389
o. o. o.
Chapter 19
o. The Demand for Money .............................................................................................. 418
o. o. o.
Chapter 20
o. The ISLM Model .......................................................................................................... 440
o. o.
Chapter 21
o. Monetary and Fiscal Policy in the ISLM Model ...................................................... 466
o. o. o. o. o. o. o.
Chapter 22
o. Aggregate Demand and Supply Analysis ................................................................ 493
o. o. o. o.
Chapter 23
o. Transmission Mechanisms of Monetary Policy: The Evidence ............................. 511
o. o. o. o. o. o.
Chapter 24
o. Money and Inflation .................................................................................................... 529
o. o.
Chapter 25
o. Rational Expectations: Implications for Policy......................................................... 549
o. o. o. o.
, Chapter 1 o.
Why Study Money, Banking, and Financial Markets?
o. o. o. o. o. o.
1.1 Why Study Financial Markets?
o. o. o.
1) Financialo . marketso . promoteo . economico . efficiencyo . byo .
A) channelingo . fundso . fromo . investorso . too . savers.
B) creatingo. inflation.
C) channelingo . fundso . fromo . saverso . too . investors.
D) reducingo.investment.
Answer:o . C
o.
Queso.Status:o . Previouso.Edition
2) Financialo . marketso . promoteo . greatero . economico . efficiencyo . byo . channelingo . fundso . fromo . to
o.
.
A) investors;o . savers
B) borrowers;o . savers
C) savers;o . borrowers
D) savers;o.lenders
Answer:o . C
o.
Queso.Status:o . Previouso.Edition
3) Well-functioningo . financialo . marketso . promote
A) inflation.
B) deflation.
C) unemployment.
D) growth.
Answer:o . D
Queso.Status:o . Previouso.Edition
4) Ao . keyo . factoro . ino . producingo . higho . economico . growtho . iso .
A) eliminatingo . foreigno . trade.
B) well-functioningo . financialo . markets.
C) higho. interesto. rates.
D) stocko.marketo.volatility.
Answer:o . B
o.
Queso.Status:o . New
5) Marketso.ino.whicho.fundso.areo.transferredo.fromo.thoseo.whoo.haveo.excesso.fundso.availableo.too.thos
eo.whoo.haveo.ao.shortageo.ofo.availableo.fundso.areo.called
A) commodityo . markets.
B) fund-availableo . markets.
C) derivativeo . exchangeo . markets.
D) financialo . markets.
Answer:o . D
Queso.Status:o . Previouso.Edition
