Test Bank for The Economics of Money, Banking & Financial Markets 9th Edition
Table of Contents
1. Why Study Money, Banking, and Financial Markets?
2. An Overview of the Financial System
3. What Is Money?
4. Understanding Interest Rates
5. The Behavior of Interest Rates
6. The Risk and Term Structure of Interest Rates
7. The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis
8. An Economic Analysis of Financial Structure
9. Financial Crises and the Subprime Debacle
10. Banking and the Management of Financial Institutions
11. Economic Analysis of Financial Regulation
12. Banking Industry: Structure and Competition
13. Structure of Central Banks and the Federal Reserve System
14. The Money Supply Process
15. Tools of Monetary Policy
16. What Should Central Banks Do? Monetary Policy Goals, Strategy, and Tactics
17. The Foreign Exchange Market
18. The International Financial System
19. The Demand for Money
20. The ISLM Model
21. Monetary and Fiscal Policy in the ISLM Model
22. Aggregate Demand and Supply Analysis
23. Transmission Mechanisms of Monetary Policy: The Evidence
24. Money and Inflation
25. Rational Expectations: Implications for Policy
,The Economics of Money, Banking, & Financial Markets 9th Edition Test Bank
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
who have a shortage of available funds are called
A) commodity markets.
B) fund-available markets.
C) derivative exchange markets.
D) financial markets.
Answer: D
Ques Status: Previous Edition
,The Economics of Money, Banking, & Financial Markets 9th Edition Test Bank
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
, The Economics of Money, Banking, & Financial Markets 9th Edition Test Bank
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
Table of Contents
1. Why Study Money, Banking, and Financial Markets?
2. An Overview of the Financial System
3. What Is Money?
4. Understanding Interest Rates
5. The Behavior of Interest Rates
6. The Risk and Term Structure of Interest Rates
7. The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis
8. An Economic Analysis of Financial Structure
9. Financial Crises and the Subprime Debacle
10. Banking and the Management of Financial Institutions
11. Economic Analysis of Financial Regulation
12. Banking Industry: Structure and Competition
13. Structure of Central Banks and the Federal Reserve System
14. The Money Supply Process
15. Tools of Monetary Policy
16. What Should Central Banks Do? Monetary Policy Goals, Strategy, and Tactics
17. The Foreign Exchange Market
18. The International Financial System
19. The Demand for Money
20. The ISLM Model
21. Monetary and Fiscal Policy in the ISLM Model
22. Aggregate Demand and Supply Analysis
23. Transmission Mechanisms of Monetary Policy: The Evidence
24. Money and Inflation
25. Rational Expectations: Implications for Policy
,The Economics of Money, Banking, & Financial Markets 9th Edition Test Bank
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
who have a shortage of available funds are called
A) commodity markets.
B) fund-available markets.
C) derivative exchange markets.
D) financial markets.
Answer: D
Ques Status: Previous Edition
,The Economics of Money, Banking, & Financial Markets 9th Edition Test Bank
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
, The Economics of Money, Banking, & Financial Markets 9th Edition Test Bank
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
