MONEY, BANKING AND FINANCIAL MARKETS MIDTERM
STUDY QUESTIONS NEWEST FULL STUDY GUIDE
REVIEW; ACTUAL EXAM QUESTIONS BANK; COMPLETE
ACCURATE QUIZZES WITH VERIFIED ANSWERS
1) Financial markets promote greater economic efficiency by channeling funds from ________ to
________.
A) investors; savers
B) borrowers; savers
C) savers; borrowers
D) savers; lenders - ANS-C) Savers; borrowers
2) Which of the following instruments are traded in a capital market?
A) U.S. Government agency securities.
B) Negotiable bank CDs.
C) Repurchase agreements.
D) U.S. Treasury bills. - ANS-A) U.S. Government agency securities
3) Which of the following instruments are traded in a money market?
A) U.S. Government agency bonds.
B) Two year Certificate of Deposit.
C) Treasury Bonds.
D) U.S. Treasury bills. - ANS-D) U.S. Treasury bills
4) Which of the following instruments are traded in a debt market?
A) Municipal Bonds.
B) Treasury Bonds.
C) Repurchase agreements.
D) All of the above. - ANS-D) All of the above
5) Which of the following can be described as involving direct finance?
A) A corporation issues new shares of stock.
B) People buy shares in a mutual fund.
C) A pension fund manager buys a short-term corporate security in the secondary market.
, D) An insurance company buys shares of common stock in the over-the-counter markets. - ANS-A) A
corporation issues new shares of stock
6) Which of the following can be described as involving indirect finance?
A) A corporation takes out loans from a bank.
B) People buy shares in in the primary market.
C) A corporation issues shares in an IPO.
D) You are lending $1000 to your friend. - ANS-A) A corporation takes out loans from a bank
7) If bad credit risks are the ones who most actively seek loans and, therefore, receive them from
financial intermediaries, then financial intermediaries face the problem of
A) moral hazard.
B) adverse selection.
C) free-riding.
D) costly state verification. - ANS-B) adverse selection
8) If a borrower misuses funds then financial intermediaries face the problem of
A) moral hazard.
B) adverse selection.
C) free-riding.
D) costly state verification. - ANS-A) moral hazard
9) The concept of adverse selection helps to explain all of the following except
A) why firms are more likely to obtain funds from banks and other financial intermediaries, rather than
from the securities markets.
B) why indirect finance is more important than direct finance as a source of business finance.
C) why direct finance is more important than indirect finance as a source of business finance.
D) why the financial system is so heavily regulated. - ANS-C) why direct finance is more important than
indirect finance as a source of business finance
10) To an economist, ________ is anything that is generally accepted in payment for goods and services
or in the repayment of debt.
A) wealth
B) income
C) money
D) credit - ANS-C) money
11) Base Money is ...
A) another name for high powered money.
B) sum of cash held by banks and reserves of the banking system.
C) reserve money.
D) all of the above. - ANS-D) All of the above
12) M1 is defined as
A) Base Money + demand deposits
B) Cash held by public + demand deposits
C) Demand deposits + Savings deposits
D) Savings Deposits + time deposits - ANS-B) Cash held by public + demand deposits
STUDY QUESTIONS NEWEST FULL STUDY GUIDE
REVIEW; ACTUAL EXAM QUESTIONS BANK; COMPLETE
ACCURATE QUIZZES WITH VERIFIED ANSWERS
1) Financial markets promote greater economic efficiency by channeling funds from ________ to
________.
A) investors; savers
B) borrowers; savers
C) savers; borrowers
D) savers; lenders - ANS-C) Savers; borrowers
2) Which of the following instruments are traded in a capital market?
A) U.S. Government agency securities.
B) Negotiable bank CDs.
C) Repurchase agreements.
D) U.S. Treasury bills. - ANS-A) U.S. Government agency securities
3) Which of the following instruments are traded in a money market?
A) U.S. Government agency bonds.
B) Two year Certificate of Deposit.
C) Treasury Bonds.
D) U.S. Treasury bills. - ANS-D) U.S. Treasury bills
4) Which of the following instruments are traded in a debt market?
A) Municipal Bonds.
B) Treasury Bonds.
C) Repurchase agreements.
D) All of the above. - ANS-D) All of the above
5) Which of the following can be described as involving direct finance?
A) A corporation issues new shares of stock.
B) People buy shares in a mutual fund.
C) A pension fund manager buys a short-term corporate security in the secondary market.
, D) An insurance company buys shares of common stock in the over-the-counter markets. - ANS-A) A
corporation issues new shares of stock
6) Which of the following can be described as involving indirect finance?
A) A corporation takes out loans from a bank.
B) People buy shares in in the primary market.
C) A corporation issues shares in an IPO.
D) You are lending $1000 to your friend. - ANS-A) A corporation takes out loans from a bank
7) If bad credit risks are the ones who most actively seek loans and, therefore, receive them from
financial intermediaries, then financial intermediaries face the problem of
A) moral hazard.
B) adverse selection.
C) free-riding.
D) costly state verification. - ANS-B) adverse selection
8) If a borrower misuses funds then financial intermediaries face the problem of
A) moral hazard.
B) adverse selection.
C) free-riding.
D) costly state verification. - ANS-A) moral hazard
9) The concept of adverse selection helps to explain all of the following except
A) why firms are more likely to obtain funds from banks and other financial intermediaries, rather than
from the securities markets.
B) why indirect finance is more important than direct finance as a source of business finance.
C) why direct finance is more important than indirect finance as a source of business finance.
D) why the financial system is so heavily regulated. - ANS-C) why direct finance is more important than
indirect finance as a source of business finance
10) To an economist, ________ is anything that is generally accepted in payment for goods and services
or in the repayment of debt.
A) wealth
B) income
C) money
D) credit - ANS-C) money
11) Base Money is ...
A) another name for high powered money.
B) sum of cash held by banks and reserves of the banking system.
C) reserve money.
D) all of the above. - ANS-D) All of the above
12) M1 is defined as
A) Base Money + demand deposits
B) Cash held by public + demand deposits
C) Demand deposits + Savings deposits
D) Savings Deposits + time deposits - ANS-B) Cash held by public + demand deposits
