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1、1 Financial Markets and Institutions,6e(Mishkin/Eakins)Chapter 1 Why Study Financial Markets and Institutions?1.1 Multiple Choice 1)Financial markets and institutions A)involve the movement of huge quantities of money.B)affect the profits of businesses.C)affect the types of goods and services produc
2、ed in an economy.D)do all of the above.E)do only A and B of the above.Answer:D Question Status:Previous Edition 2)Financial market activities affect A)personal wealth.B)spending decisions by individuals and business firms.C)the economys location in the business cycle.D)all of the above.Answer:D Ques
3、tion Status:Previous Edition 3)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)funds markets.C)derivative exchange markets.D)financial markets.Answer:D Question Status:Previous Edition
4、4)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 5)The bond markets are important because
5、 A)they are easily the most widely followed financial markets in the United States.B)they are the markets where interest rates are determined.C)they are the markets where foreign exchange rates are determined.D)all of the above.Answer:B Question Status:Previous Edition 2 6)Interest rates are importa
6、nt to financial institutions since an interest rate increase _ the cost of acquiring funds and _ the income from assets.A)decreases;decreases B)increases;increases C)decreases;increases D)increases;decreases Answer:B Question Status:Previous Edition 7)Typically,increasing interest rates A)discourage
7、s individuals from saving.B)discourages corporate investments.C)encourages corporate expansion.D)encourages corporate borrowing.E)none of the above.Answer:B Question Status:Previous Edition 8)Compared to interest rates on long-term U.S.government bonds,interest rates on _ fluctuate more and are lowe
8、r on average.A)medium-quality corporate bonds B)low-quality corporate bonds C)high-quality corporate bonds D)three-month Treasury bills E)none of the above Answer:D Question Status:Previous Edition 9)Compared to interest rates on long-term U.S.government bonds,interest rates on three-month Treasury
9、bills fluctuate _ and are _ on average.A)more;lower B)less;lower C)more;higher D)less;higher Answer:A Question Status:Previous Edition 10)The stock market is important because A)it is where interest rates are determined.B)it is the most widely followed financial market in the United States.C)it is w
10、here foreign exchange rates are determined.D)all of the above.Answer:B Question Status:Previous Edition 3 11)Stock prices since the 1950s have been A)relatively stable,trending upward at a steady pace.B)relatively stable,trending downward at a moderate rate.C)extremely volatile.D)unstable,trending d
11、ownward at a moderate rate.Answer:C Question Status:Previous Edition 12)The largest one-day drop in the history of the American stock markets occurred in A)1929.B)1987.C)2000.D)2001.Answer:B Question Status:Previous Edition 13)A rising stock market index due to higher share prices A)increases people
12、s wealth and as a result may increase their willingness to spend.B)increases the amount of funds that business firms can raise by selling newly issued stock.C)decreases the amount of funds that business firms can raise by selling newly issued stock.D)both A and B of the above.Answer:D Question Statu
13、s:Previous Edition 14)A declining stock market index due to lower share prices A)reduces peoples wealth and as a result may reduce their willingness to spend.B)increases peoples wealth and as a result may increase their willingness to spend.C)decreases the amount of funds that business firms can rai
14、se by selling newly issued stock.D)both A and C of the above.E)both B and C of the above.Answer:D Question Status:Previous Edition 15)Changes in stock prices A)affect peoples wealth and their willingness to spend.B)affect firms decisions to sell stock to finance investment spending.C)are characteriz
15、ed by considerable fluctuations.D)all of the above.E)only A and B of the above.Answer:D Question Status:Previous Edition 4 16)(I)Debt markets are often referred to generically as the bond market.(II)A bond is a security that is a claim on the earnings and assets of a corporation.A)(I)is true,(II)fal
16、se.B)(I)is false,(II)true.C)Both are true.D)Both are false.Answer:A Question Status:Previous Edition 17)(I)A bond is a debt security that promises to make payments periodically for a specified period of time.(II)A stock is a security that is a claim on the earnings and assets of a corporation.A)(I)i
17、s true,(II)false.B)(I)is false,(II)true.C)Both are true.D)Both are false.Answer:C Question Status:Previous Edition 18)The price of one countrys currency in terms of anothers is called A)the exchange rate.B)the interest rate.C)the Dow Jones industrial average.D)none of the above.Answer:A Question Sta
18、tus:Previous Edition 19)A stronger dollar benefits _ and hurts _ A)American businesses;American consumers.B)American businesses;foreign businesses.C)American consumers;American businesses.D)foreign businesses;American consumers.Answer:C Question Status:Previous Edition 20)A weaker dollar benefits _
19、and hurts _ A)American businesses;American consumers.B)American businesses;foreign consumers.C)American consumers;American businesses.D)foreign businesses;American consumers.Answer:A Question Status:Previous Edition 21)From 1980 to early 1985 the dollar _ in value,thereby benefiting American _ A)app
20、reciated;businesses.B)appreciated;consumers.C)depreciated;businesses.D)depreciated;consumers.Answer:B Question Status:Previous Edition 5 22)Money is defined as A)anything that is generally accepted in payment for goods and services or in the repayment of debt.B)bills of exchange.C)a riskless reposit
21、ory of spending power.D)all of the above.E)only A and B of the above.Answer:A Question Status:Previous Edition 23)The organization responsible for the conduct of monetary policy in the United States is the A)Comptroller of the Currency.B)U.S.Treasury.C)Federal Reserve System.D)Bureau of Monetary Aff
22、airs.Answer:C Question Status:Previous Edition 24)The central bank of the United States is A)Citicorp.B)The Fed.C)Bank of America.D)The Treasury.E)none of the above.Answer:B Question Status:Previous Edition 25)Monetary policy is chiefly concerned with A)how much money businesses earn.B)the level of
23、interest rates and the nations money supply.C)how much money people pay in taxes.D)whether people have saved enough money for retirement.Answer:B Question Status:Previous Edition 26)Economists group commercial banks,savings and loan associations,credit unions,mutual funds,mutual savings banks,insura
24、nce companies,pension funds,and finance companies together under the heading financial intermediaries.Financial intermediaries A)act as middlemen,borrowing funds from those who have saved and lending these funds to others.B)produce nothing of value and are therefore a drain on societys resources.C)h
25、elp promote a more efficient and dynamic economy.D)do all of the above.E)do only A and C of the above.Answer:E Question Status:Previous Edition 6 27)Economists group commercial banks,savings and loan associations,credit unions,mutual funds,mutual savings banks,insurance companies,pension funds,and f
26、inance companies together under the heading financial intermediaries.Financial intermediaries A)act as middlemen,borrowing funds from those who have saved and lending these funds to others.B)play an important role in determining the quantity of money in the economy.C)help promote a more efficient an
27、d dynamic economy.D)do all of the above.E)do only A and C of the above.Answer:D Question Status:Previous Edition 28)Banks are important to the study of money and the economy because they A)provide a channel for linking those who want to save with those who want to invest.B)have been a source of rapi
28、d financial innovation that is expanding the alternatives available to those wanting to invest their money.C)are the only financial institution to play a role in determining the quantity of money in the economy.D)do all of the above.E)do only A and B of the above.Answer:E Question Status:Previous Ed
29、ition 29)Banks,savings and loan associations,mutual savings banks,and credit unions A)are no longer important players in financial intermediation.B)have been providing services only to small depositors since deregulation.C)have been adept at innovating in response to changes in the regulatory enviro
30、nment.D)all of the above.E)only A and C of the above.Answer:C Question Status:Previous Edition 30)(I)Banks are financial intermediaries that accept deposits and make loans.(II)The term banks includes firms such as commercial banks,savings and loan associations,mutual savings banks,credit unions,insu
31、rance companies,and pension funds.A)(I)is true,(II)false.B)(I)is false,(II)true.C)Both are true.D)Both are false.Answer:A Question Status:Previous Edition 31)_ was the stock markets worst one-day drop in history in the 1980s.A)Black Friday B)Black Monday C)Blackout Day D)none of the above Answer:B Q
32、uestion Status:New 7 32)The largest financial intermediaries are A)insurance companies.B)finance companies.C)banks.D)all of the above.Answer:C Question Status:New 33)In recent years A)interest rates have remained constant.B)success of financial institutions have reached levels unprecedented since th
33、e Great Depression.C)stock markets have crashed.D)all of the above.Answer:C Question Status:New 34)A security A)is a claim or price of property that is subject to ownership.B)promises that payments will be made periodically for a specified period of time.C)is the price paid for the usage of funds.D)
34、is a claim on the issuers future income.Answer:D Question Status:New 35)_ are considered a financial institutions.A)Banks B)Insurance companies C)Finance companies D)Investment banks Answer:D Question Status:New 36)Monetary policy affects A)interest rates.B)inflation.C)business cycles.D)all of the a
35、bove.Answer:D Question Status:New 1.2 True/False 1)Money is anything accepted by anyone as payment for services or goods.Answer:FALSE Question Status:Previous Edition 2)Interest rates are determined in the bond markets.Answer:TRUE Question Status:Previous Edition 8 3)A stock is a debt security that
36、promises to make periodic payments for a specific period of time.Answer:FALSE Question Status:Previous Edition 4)Monetary policy affects interest rates but has little effect on inflation or business cycles.Answer:FALSE Question Status:Previous Edition 5)The government organization responsible for th
37、e conduct of monetary policy in the United States is the U.S.Treasury.Answer:FALSE Question Status:Previous Edition 6)Interest rates can be accurately described as the rental price of money.Answer:TRUE Question Status:Previous Edition 7)Holding everything else constant,as the dollar weakens vacation
38、s abroad become less attractive.Answer:TRUE Question Status:Previous Edition 8)In recent years,financial markets have become more stable and less risky.Answer:FALSE Question Status:Previous Edition 9)Financial innovation has provided more options to both investors and borrowers.Answer:TRUE Question
39、Status:Previous Edition 10)A financial intermediary borrows funds from people who have saved.Answer:TRUE Question Status:Previous Edition 11)Holding everything else constant,as the dollar strengthens foreigners will buy more U.S.exports.Answer:FALSE Question Status:Previous Edition 12)In a bull mark
40、et stock prices are rising,on average.Answer:TRUE Question Status:Previous Edition 13)Financial institutions are among the largest employers in the country and frequently pay very high salaries.Answer:TRUE Question Status:New 14)Different interest rates have a tendency to move in unison.Answer:TRUE
41、Question Status:New 9 15)Financial markets are what makes financial institutions work.Answer:FALSE Question Status:New 1.3 Essay 1)Have interest rates been more or less volatile in recent years?Why?Question Status:Previous Edition 2)Why should consumers be concerned with movements in foreign exchang
42、e rates?Question Status:Previous Edition 3)How does the value of the dollar affect the competitiveness of American businesses?Question Status:Previous Edition 4)What is monetary policy and who is responsible for its implementation?Question Status:Previous Edition 5)What are financial intermediaries
43、and what do they do?Question Status:Previous Edition 6)What is money?Question Status:Previous Edition 7)How does a bond differ from a stock?Question Status:Previous Edition 8)Why is the stock market so important to individuals,firms,and the economy?Question Status:Previous Edition 9)What is the central bank and what does it do?Question Status:New