Mishkin Test Bank 2023 Update

102752298 Mishkin Test Bank 2023 U

Chapter. 1
Why Study Money, Banking, and Financial Markets?


1.1 Why Study Financial Markets?

1) Financial markets promote economic efficiency by
A) channeling funds from investors to savers.
B) creating inflation.
C) channeling funds from savers to investors.
D) reducing investment.
Answer: C
Ques Status: Previous Edition

2) Financial markets promote greater economic efficiency by channeling funds from to
.
A) investors; savers
B) borrowers; savers
C) savers; borrowers
D) savers; lenders
Answer: C
Ques Status: Previous Edition

3) Well-functioning financial markets promote
A) inflation.
B) deflation.
C) unemployment.
D) growth.
Answer: D
Ques Status: Previous Edition

4) A key factor in producing high economic growth is
A) eliminating foreign trade.
B) well-functioning financial markets.
C) high interest rates.
D) stock market volatility.
Answer: B
Ques Status: New

5) Markets in which funds are transferred from those who have excess funds available to those

,2 Mishkin · The Economics of Money, Banking, and Financial Markets, 9th Edition



6) markets transfer funds from people who have an excess of available funds to people
who have a shortage.
A) Commodity
B) Fund- available
C) Financial
D) Derivative exchange
Answer: C
Ques Status: Previous Edition

7) Poorly performing financial markets can be the cause of
A) wealth.
B) poverty.
C) financial stability.
D) financial expansion.
Answer: B
Ques Status: Previous Edition

8) The bond markets are important because they are
A) easily the most widely followed financial markets in the United States.
B) the markets where foreign exchange rates are determined.
C) the markets where interest rates are determined.
D) the markets where all borrowers get their funds.
Answer: C
Ques Status: Previous Edition

9) The price paid for the rental of borrowed funds (usually expressed as a percentage of the rental
of $100 per year) is commonly referred to as the
A) inflation rate.
B) exchange rate.
C) interest rate.
D) aggregate price level.
Answer: C
Ques Status: Previous Edition

10) Compared to interest rates on long-term U.S. government bonds, interest rates on three -month
Treasury bills fluctuate and are on average.
A) more; lower
B) less; lower
C) more; higher
D) less; higher
Answer: A
Ques Status: Previous Edition

, Chapter 1 Why Study Money, Banking, and Financial M



11) The interest rate on Baa (medium quality) corporate bonds is , on average, than other
interest rates, and the spread between it and other rates became in the 1970s.
A) lower; smaller
B) lower; larger
C) higher; smaller
D) higher; larger
Answer: D
Ques Status: Previous Edition

12) Everything else held constant, a decline in interest rates will cause spending on housing to
A) fall.
B) remain unchanged.
C) either rise, fall, or remain the same.
D) rise.
Answer: D
Ques Status: Previous Edition

13) High interest rates might purchasing a house or car but at the same time high interest
rates might saving.
A) discourage; encourage
B) discourage; discourage
C) encourage; encourage
D) encourage; discourage
Answer: A
Ques Status: New

14) An increase in interest rates might saving because more can be earned in interest
income.
A) encourage
B) discourage
C) disallow
D) invalidate
Answer: A
Ques Status: Previous Edition

15) Everything else held constant, an increase in interest rates on student loans
A) increases the cost of a college education.
B) reduces the cost of a college education.
C) has no effect on educational costs.
D) increases costs for students with no loans.
Answer: A
Ques Status: Previous Edition

, 4 Mishkin · The Economics of Money, Banking, and Financial Markets, 9th Edition



16) High interest rates might cause a corporation to building a new plant that would
provide more jobs.
A) complete
B) consider
C) postpone
D) contemplate
Answer: C
Ques Status: Previous Edition

17) The stock market is important because it is
A) where interest rates are determined.
B) the most widely followed financial market in the United States.
C) where foreign exchange rates are determined.
D) the market where most borrowers get their funds.
Answer: B
Ques Status: Previous Edition

18) Stock prices are
A) relatively stable trending upward at a steady pace.
B) relatively stable trending downward at a moderate rate.
C) extremely volatile.
D) unstable trending downward at a moderate rate.
Answer: C
Ques Status: Revised

19) A rising stock market index due to higher share prices
A) increases people's wealth, but is unlikely to increase their willingness to spend.
B) increases people's wealth and as a result may increase their willingness to spend.
C) decreases the amount of funds that business firms can raise by selling newly- issued stock.
D) decreases people's wealth, but is unlikely to increase their willingness to spend.
Answer: B
Ques Status: Previous Edition

20) When stock prices fall
A) an individual's wealth is not affected nor is their willingness to spend.
B) a business firm will be more likely to sell stock to finance investment spending.
C) an individual's wealth may decrease but their willingness to spend is not affected.
D) an individual's wealth may decrease and their willingness to spend may decrease.
Answer: D
Ques Status: Previous Edition

21) Changes in stock prices
A) do not affect people's wealth and their willingness to spend.
B) affect firms' decisions to sell stock to finance investment spending.
C) occur in regular patterns.
D) are unimportant to decision makers.