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

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?

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
Question Status: Previous Edition
AACSB: Reflective Thinking

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
Question Status: Previous Edition
AACSB: Reflective Thinking

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

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
Question Status: Previous Edition
AACSB: Reflective Thinking




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,5) Markets %ewin %ewwhich %ewfunds %eware %ewtransferred %ewfrom %ewthose %ewwho %ewhave %ewexcess %ewfunds
%ewavailable %ewto %ewthose %ewwho %ewhave %ewa %ewshortage %ewof %ewavailable %ewfunds %eware %ewcalled

A) commodity %ewmarkets.
B) fund-available %ewmarkets.
C) derivative %ewexchange %ewmarkets.
D) financial
%ewmarkets. %ewAnswer:

% ewD

Question %ewStatus: % e w Previous %ewEdition
%ewAACSB: % e w Application %ewof

%ewKnowledge




6) markets %ewtransfer %ewfunds %ewfrom %ewpeople %ewwho %ewhave %ewan %ewexcess %ewof %ewavailable
%ewfunds %ewto %ewpeople %ewwho %ewhave %ewa %ewshortage.

A) Commodity
B) Fund-available
C) Financial
D) Derivative
%ewexchange %ewAnswer:

% ewC

Question %ewStatus: % e w Previous %ewEdition
%ewAACSB: % e w Application %ewof

%ewKnowledge




7) Poorly %ewperforming %ewfinancial %ewmarkets %ewcan %ewbe %ewthe %ewcause %ewof
A) wealth.
B) poverty.
C) financial %ewstability.
D) financial
%ewexpansion.

Answer: % e w B
Question %ewStatus: % e w Previous %ewEdition
%ewAACSB: % e w Reflective %ewThinking




8) The %ewbond %ewmarkets %eware %ewimportant %ewbecause %ewthey %eware
A) easily %ewthe %ewmost %ewwidely %ewfollowed %ewfinancial %ewmarkets %ewin %ewthe %ewUnited %ewStates.
B) the %ewmarkets %ewwhere %ewforeign %ewexchange %ewrates %eware %ewdetermined.
C) the %ewmarkets %ewwhere %ewinterest %ewrates %eware %ewdetermined.
D) the %ewmarkets %ewwhere %ewall %ewborrowers %ewget
%ewtheir %ewfunds. %ewAnswer: % e w C

Question %ewStatus: % e w Previous %ewEdition
%ewAACSB: % e w Reflective %ewThinking




9) The %ewprice %ewpaid %ewfor %ewthe %ewrental %ewof %ewborrowed %ewfunds %ew(usually %ewexpressed %ewas
%ewa %ewpercentage %ewof %ewthe %ewrental %ewof %ew$100 %ewper %ewyear) %ewis %ewcommonly %ewreferred %ewto

%ewas %ewthe

A) inflation %ewrate.
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,B) exchange %ewrate.
C) interest %ewrate.
D) aggregate %ewprice
%ewlevel. %ewAnswer: % e w C

Question %ewStatus: % e w Previous %ewEdition
%ewAACSB: % e w Application %ewof

%ewKnowledge




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, 10) Compared %ewto %ewinterest %ewrates %ewon %ewlong-term %ewU.S. %ewgovernment %ewbonds, %ewinterest
%ewrates %ewon %ewthree- %ewmonth %ewTreasury %ewbills %ewfluctuate %ew and %eware %ew on %ewaverage.
A) more; %ewlower
B) less; %ewlower
C) more; %ewhigher
D) less;
%ewhigher

%ewAnswer:

% ewA

Question %ewStatus: % e w Previous %ewEdition
%ewAACSB: % e w Reflective %ewThinking




11) The %ewinterest %ewrate %ewon %ewBaa %ewcorporate %ewbonds %ewis %ew , %ewon %ewaverage, %ewthan
%ewinterest %ewrates %ewon %ewTreasuries, %ewand %ewthe %ewspread %ewbetween %ewthese %ewrates %ewbecame

%ew in %ewthe %ew1970s.
A) lower; %ewsmaller
B) lower; %ewlarger
C) higher; %ewsmaller
D) higher;
%ewlarger

%ewAnswer: % e w D

Question %ewStatus: % e w Previous %ewEdition
%ewAACSB: % e w Reflective %ewThinking




12) Everything %ewelse %ewheld %ewconstant, %ewa %ewdecline %ewin %ewinterest %ewrates %ewwill %ewcause %ewspending
%ewon %ewhousing %ewto

A) fall.
B) remain %ewunchanged.
C) either %ewrise, %ewfall, %ewor %ewremain %ewthe %ewsame.
D) rise.
%ewAnswer:

%ewD

Question %ewStatus: % e w Previous %ewEdition
%ewAACSB: % e w Analytical %ewThinking




13) High %ewinterest %ewrates %ewmight %ew purchasing %ewa %ewhouse %ewor %ewcar %ewbut %ewat %ewthe
%ewsame %ewtime %ewhigh %ewinterest %ewrates %ewmight %ew saving.
A) discourage; %ewencourage
B) discourage; %ewdiscourage
C) encourage; %ewencourage
D) encourage;
%ewdiscourage %ewAnswer:

% ewA

Question %ewStatus: % e w Previous %ewEdition
%ewAACSB: % e w Analytical %ewThinking




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%ewEducation, %ewInc.