Test Bank For The Economics of Money, Banking and Financial Markets, Business School Edition 5th Edition By Frederic Mishki

The Economics of Money, Banking and
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Financial Markets, Business School Edition –
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5th Edition



TEST BANK
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Frederic S. Mishkin
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Comprehensive Test Bank for Instructors and
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Students
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© Frederic S. Mishkin

All rights reserved. Reproduction or distribution without permission is prohibited.
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©STUDYSTREAM

, Economics of Money, Banking, and Financial Markets, 5e (Mishkin)
Chapter 1 Why Study Money, Banking, and Financial Markets?
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1.1 Why Study Financial Markets?

1) Financial markets promote economic efficiency by
A) channeling funds from investors to savers.
B) creating inflation.
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C) channeling funds from savers to investors.
D) reducing investment.
Answer: C
Ques Status: Previous Edition
AACSB: Reflective Thinking
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2) Financial markets promote greater economic efficiency by channeling funds from ________
to ________.
A) investors; savers
B) borrowers; savers
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C) savers; borrowers
D) savers; lenders
Answer: C
Ques Status: Previous Edition
AACSB: Reflective Thinking
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3) Well-functioning financial markets promote
A) inflation.
B) deflation.
C) unemployment.
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D) growth.
Answer: D
Ques Status: Previous Edition
AACSB: Reflective Thinking
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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.
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Answer: B
Ques Status: Previous Edition
AACSB: Reflective Thinking
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, 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.
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B) fund-available markets.
C) derivative exchange markets.
D) financial markets.
Answer: D
Ques Status: Previous Edition
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AACSB: Application of Knowledge

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

7) Poorly performing financial markets can be the cause of
A) wealth.
B) poverty.
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C) financial stability.
D) financial expansion.
Answer: B
Ques Status: Previous Edition
AACSB: Reflective Thinking
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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.
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D) the markets where all borrowers get their funds.
Answer: C
Ques Status: Previous Edition
AACSB: Reflective Thinking
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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.
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D) aggregate price level.
Answer: C
Ques Status: Previous Edition
AACSB: Application of Knowledge
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, 10) Compared to interest rates on long-term U.S. government bonds, interest rates on three-
month Treasury bills fluctuate ________ and are ________ on average.
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A) more; lower
B) less; lower
C) more; higher
D) less; higher
Answer: A
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Ques Status: Previous Edition
AACSB: Reflective Thinking

11) The interest rate on Baa corporate bonds is ________, on average, than interest rates on
Treasuries, and the spread between these rates became ________ in the 1970s.
A) lower; smaller
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B) lower; larger
C) higher; smaller
D) higher; larger
Answer: D
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Ques Status: Previous Edition
AACSB: Reflective Thinking

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

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