COMM 220 questions with accurate answers
1) Depository institutions
2) Contractual savings institutions
3) Investment intermediaries Ans✓✓✓ Types of financial
intermediaries (3)
1) Diversification
2) Insurance
3) Obtaining more information Ans✓✓✓ 3 ways to reduce risk
1) Expected profitability of investment opportunities
2) Expected inflation
3) Government activities Ans✓✓✓ Factors causing shift in supply of
bonds (3)
1) The opportunity cost of the good
2) One's level of wealth
3) One's set of preferences Ans✓✓✓ The demand for a good is a
function of 3 factors:
1) To increase the information available to investors
2) To ensure the soundness of the financial system
3) To improve control of monetary policy Ans✓✓✓ The government
regulates financial markets for three main reasons:
,1) Wealth
2) Expected return
3) Risk
4) Liquidity Ans✓✓✓ Determinants of asset demand (4)
Absolute advantage Ans✓✓✓ Having higher labour productivity.
Actual return Ans✓✓✓ Return that an asset earns.
Actuarially fair Ans✓✓✓ Characterizing a situation in which an
insurance premium is equal to the expected payout.
Adverse selection Ans✓✓✓ Problem created by assymetric
information before the transaction occurs.
Agency theory Ans✓✓✓ The analysis of how assymetric problems
affect economic behaviour.
Anchoring Ans✓✓✓ Tendency to rely heavily on one prior (suggested)
piece of information when making a decision.
Arbitrage Ans✓✓✓ Practice of buying at a low price at one location
and selling at a higher price in another.
, Arc elasticity of demand Ans✓✓✓ Price elasticity calculated over a
range of prices.
Asset Ans✓✓✓ Something that provides a flow of money or services
to its owner.
Assymetric information Ans✓✓✓ One party often does not know
enough about another party to make accurate decisions.
Autarky Ans✓✓✓ The complete absence of trade.
Bonds Ans✓✓✓ Debt securities that promise to make payments
periodically for a specified period of time.
Brokers Ans✓✓✓ Agents of investors that match buyers with sellers of
securities.
Bubble Ans✓✓✓ An increase in the price of a good based not on the
fundamentals of demand or value, but instead on the belief that the price
will keep going up.
Budget constraint Ans✓✓✓ Line that reflects the combinations of
leisure and income possible for an individual.
1) Depository institutions
2) Contractual savings institutions
3) Investment intermediaries Ans✓✓✓ Types of financial
intermediaries (3)
1) Diversification
2) Insurance
3) Obtaining more information Ans✓✓✓ 3 ways to reduce risk
1) Expected profitability of investment opportunities
2) Expected inflation
3) Government activities Ans✓✓✓ Factors causing shift in supply of
bonds (3)
1) The opportunity cost of the good
2) One's level of wealth
3) One's set of preferences Ans✓✓✓ The demand for a good is a
function of 3 factors:
1) To increase the information available to investors
2) To ensure the soundness of the financial system
3) To improve control of monetary policy Ans✓✓✓ The government
regulates financial markets for three main reasons:
,1) Wealth
2) Expected return
3) Risk
4) Liquidity Ans✓✓✓ Determinants of asset demand (4)
Absolute advantage Ans✓✓✓ Having higher labour productivity.
Actual return Ans✓✓✓ Return that an asset earns.
Actuarially fair Ans✓✓✓ Characterizing a situation in which an
insurance premium is equal to the expected payout.
Adverse selection Ans✓✓✓ Problem created by assymetric
information before the transaction occurs.
Agency theory Ans✓✓✓ The analysis of how assymetric problems
affect economic behaviour.
Anchoring Ans✓✓✓ Tendency to rely heavily on one prior (suggested)
piece of information when making a decision.
Arbitrage Ans✓✓✓ Practice of buying at a low price at one location
and selling at a higher price in another.
, Arc elasticity of demand Ans✓✓✓ Price elasticity calculated over a
range of prices.
Asset Ans✓✓✓ Something that provides a flow of money or services
to its owner.
Assymetric information Ans✓✓✓ One party often does not know
enough about another party to make accurate decisions.
Autarky Ans✓✓✓ The complete absence of trade.
Bonds Ans✓✓✓ Debt securities that promise to make payments
periodically for a specified period of time.
Brokers Ans✓✓✓ Agents of investors that match buyers with sellers of
securities.
Bubble Ans✓✓✓ An increase in the price of a good based not on the
fundamentals of demand or value, but instead on the belief that the price
will keep going up.
Budget constraint Ans✓✓✓ Line that reflects the combinations of
leisure and income possible for an individual.
