ECO 4223 exam verified A+ 2024
What is the typical relationship between interest rates on 6-month Treasury bills, 10-
year Treasury notes, and Baa corporate bonds? - ANS They tend to move together
over time with the corporate bond having the highest rate of interest
Your answer is correct.
When interest rates decrease, how might businesses and consumers change their
economic behavior? - ANS There will be more consumption spending on interest-
sensitive items and more investment by businesses.
How does a fall in the value of the pound sterling affect British consumers?
A fall in the value of the pound will cause American businesses to be _________ - ANS
Foreign goods are now relatively more expensive; British consumers are hurt
worse off
When the dollar is worth less in relation to currencies of other countries, are you more
likely to buy American-made or foreign-made electronics?
You are more likely to purchase - ANS American-made products
Are US companies that manufacture semi-conductors happier when the dollar is strong
or when it is weak?
Semi-conductor manufacturers are happier when the dollar is - ANS weaker
What about an American company that is in the business of importing electronic
consumer goods into the United States?
Importers of electronic goods into the United States are happier when the dollar is -
ANS stronger
Which of the following is not an important financial intermediary in the economy? - ANS
the central bank
Economists group commercial banks, savings and loan associations, credit unions,
mutual funds, mutual savings banks, insurance companies, pension funds, and finance
companies together under the heading financial intermediaries. What function do
financial intermediaries perform? - ANS They provide a channel for linking those who
want to save with those who want to invest.
Banks, savings and loan associations, mutual savings banks, and credit unions: - ANS
have been adept at innovating in response to changes in the regulatory environment.
, What was the main cause of the recession that began in 2007? - ANS Defaults in
subprime residential mortgages.
Why do managers of financial institutions care so much about the activities of the
Federal Reserve System? - ANS Because the Federal Reserve affects interest rates,
inflation, and business cycles, all of which have an important impact on the profitability
of financial institutions.
The foreign exchange market is: - ANS where the currency of one country is converted
into the currency of another country
A strong U.S. dollar means that U.S. goods exported abroad will cost: - ANS more in
foreign countries and foreign goods imported will cost less in the United States.
In which of the following situations do financial markets allow consumers to better time
their purchases? - ANS Purchasing a car or furniture.
Paying the cost of repairing a flooded basement.
Paying for tuition
Primary market - ANS A financial market in which new issues of a security, such as a
bond or a stock, are sold to initial buyers by the corporation or government agency
borrowing the funds.
Capital market - ANS A market in which longer-term debt (generally those with original
maturity of one year or greater) and equity instruments are traded.
Money market - ANS A financial market in which only short-term debt instruments
(generally those with original maturity of less than one year) are traded.
Secondary market - ANS A financial market in which securities that have been
previously issued can be resold.
Debt market - ANS A market where bonds or mortgages, which are contractual
agreements by the borrower to pay the holder of the instrument fixed dollar amounts at
regular intervals until a specified date when a final payment is made, are traded.
What is the difference between a mortgage and a mortgage-backed
security? - ANS Mortgages are loans, whereas mortgage-backed securities are bond-
like debt instruments.
Government Security - ANS These long-term debt instruments are issued by the U.S.
Treasury to finance the deficits of the federal government.
Stocks - ANS These are equity claims on the net income and assets of a corporation.
What is the typical relationship between interest rates on 6-month Treasury bills, 10-
year Treasury notes, and Baa corporate bonds? - ANS They tend to move together
over time with the corporate bond having the highest rate of interest
Your answer is correct.
When interest rates decrease, how might businesses and consumers change their
economic behavior? - ANS There will be more consumption spending on interest-
sensitive items and more investment by businesses.
How does a fall in the value of the pound sterling affect British consumers?
A fall in the value of the pound will cause American businesses to be _________ - ANS
Foreign goods are now relatively more expensive; British consumers are hurt
worse off
When the dollar is worth less in relation to currencies of other countries, are you more
likely to buy American-made or foreign-made electronics?
You are more likely to purchase - ANS American-made products
Are US companies that manufacture semi-conductors happier when the dollar is strong
or when it is weak?
Semi-conductor manufacturers are happier when the dollar is - ANS weaker
What about an American company that is in the business of importing electronic
consumer goods into the United States?
Importers of electronic goods into the United States are happier when the dollar is -
ANS stronger
Which of the following is not an important financial intermediary in the economy? - ANS
the central bank
Economists group commercial banks, savings and loan associations, credit unions,
mutual funds, mutual savings banks, insurance companies, pension funds, and finance
companies together under the heading financial intermediaries. What function do
financial intermediaries perform? - ANS They provide a channel for linking those who
want to save with those who want to invest.
Banks, savings and loan associations, mutual savings banks, and credit unions: - ANS
have been adept at innovating in response to changes in the regulatory environment.
, What was the main cause of the recession that began in 2007? - ANS Defaults in
subprime residential mortgages.
Why do managers of financial institutions care so much about the activities of the
Federal Reserve System? - ANS Because the Federal Reserve affects interest rates,
inflation, and business cycles, all of which have an important impact on the profitability
of financial institutions.
The foreign exchange market is: - ANS where the currency of one country is converted
into the currency of another country
A strong U.S. dollar means that U.S. goods exported abroad will cost: - ANS more in
foreign countries and foreign goods imported will cost less in the United States.
In which of the following situations do financial markets allow consumers to better time
their purchases? - ANS Purchasing a car or furniture.
Paying the cost of repairing a flooded basement.
Paying for tuition
Primary market - ANS A financial market in which new issues of a security, such as a
bond or a stock, are sold to initial buyers by the corporation or government agency
borrowing the funds.
Capital market - ANS A market in which longer-term debt (generally those with original
maturity of one year or greater) and equity instruments are traded.
Money market - ANS A financial market in which only short-term debt instruments
(generally those with original maturity of less than one year) are traded.
Secondary market - ANS A financial market in which securities that have been
previously issued can be resold.
Debt market - ANS A market where bonds or mortgages, which are contractual
agreements by the borrower to pay the holder of the instrument fixed dollar amounts at
regular intervals until a specified date when a final payment is made, are traded.
What is the difference between a mortgage and a mortgage-backed
security? - ANS Mortgages are loans, whereas mortgage-backed securities are bond-
like debt instruments.
Government Security - ANS These long-term debt instruments are issued by the U.S.
Treasury to finance the deficits of the federal government.
Stocks - ANS These are equity claims on the net income and assets of a corporation.
