Test Bank for The Economics of Money, Banking and Financial Markets, 13th Edition by Mishkin

TEST BANK FOR: ALL CHAPTERS
The Economics of Money, Banking and Financial Markets, 13e (Mishkin)
Chapter 1 Why Study Money, Banking, and Financial Markets?

1.1 Why Study Financial Markets? ANSWERS INCLUDED ✅

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.




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Answer: C
Question Status: Previous Edition




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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
C) savers; borrowers
D) savers; lenders IS
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Answer: C
Question Status: Previous Edition
AACSB: Reflective Thinking
N

3) Well-functioning financial markets promote
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A) inflation.
B) deflation.
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C) unemployment.
D) growth.
C




Answer: D
Question Status: Previous Edition
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AACSB: Reflective Thinking

4) A key factor in producing high economic growth is
A) eliminating foreign trade.
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B) well-functioning financial markets.
C) high interest rates.
D) stock market volatility.
Answer: B
Question 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.
B) fund-available markets.
C) derivative exchange markets.
D) financial markets.
Answer: D
Question Status: Previous Edition
AACSB: Application of Knowledge

6) markets transfer funds from people who have an excess of available funds to people




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who have a shortage.
A) Commodity




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B) Fund-available
C) Financial




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D) Derivative exchange
Answer: C
Question Status: Previous Edition
AACSB: Application of Knowledge

IS
7) Poorly performing financial markets can be the cause of
A) wealth.
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B) poverty.
C) financial stability.
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D) financial expansion.
Answer: B
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Question Status: Previous Edition
AACSB: Reflective Thinking
O



8) The bond markets are important because they are
C




A) easily the most widely followed financial markets in the United States.
B) the markets where foreign exchange rates are determined.
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C) the markets where interest rates are determined.
D) the markets where all borrowers get their funds.
Answer: C
Question Status: Previous Edition
M




AACSB: Reflective Thinking

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
Question 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.
A) more; lower
B) less; lower
C) more; higher
D) less; higher
Answer: A
Question Status: Previous Edition
AACSB: Reflective Thinking




R
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.




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A) lower; smaller
B) lower; larger




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C) higher; smaller
D) higher; larger
Answer: D
Question Status: Previous Edition
AACSB: Reflective Thinking
IS
12) Everything else held constant, a decline in interest rates will cause spending on housing to
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A) fall.
B) remain unchanged.
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C) either rise, fall, or remain the same.
D) rise.
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Answer: D
Question Status: Previous Edition
O



AACSB: Analytical Thinking
C




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

15) Everything else held constant, an increase in interest rates on student loans




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A) increases the cost of a college education.
B) reduces the cost of a college education.




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C) has no effect on educational costs.
D) increases costs for students with no loans.




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Answer: A
Question Status: Previous Edition
AACSB: Analytical Thinking

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


Question Status: Previous Edition
AACSB: Analytical Thinking
O



17) The stock market is
C




A) where interest rates are determined.
B) the most widely followed financial market in the United States.
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C) where foreign exchange rates are determined.
D) the market where most borrowers get their funds.
Answer: B
Question Status: Previous Edition
M




AACSB: Reflective Thinking

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
Question Status: Previous Edition
AACSB: Reflective Thinking


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