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FINA500-1900-SP11: 1st Assignment (CH.
1)
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UNVA-Online FINA500-1900-SP11 Quizzes 1st Assignment (CH.1) Review of attempt 2
1st Assignment (CH.1) Review of attempt 2

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If the price of a euro (the European currency) increases from $1.00 to $1.10, then, everything else held constant, Marks: 1
Choose one answer.
a. a European vacation becomes less expensive. b. foreign travel becomes impossible. c. the cost of a European vacation is not affected. d. a European vacation becomes more expensive.
Correct
Marks for this submission: 1/1.
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Marks: 1
Everything else held constant, an increase in interest rates on student loans Choose one answer. a. has no effect on educational costs. b. increases the cost of a college education. c. reduces the cost of a college education. d. increases costs for students with no loans. Correct
Financial institutions that accept deposits and make loans are called ________.
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FINA500-1900-SP11: 1st Assignment (CH.1)
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Marks: 1
Choose one answer.
a. exchanges b. banks c. finance companies d. over-the-counter markets
Correct
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Marks: 1
Financial intermediaries Choose one answer. a. hold very little of the average American's wealth. b. can hurt the performance of the economy. c. provide a channel for linking those who want to save with those who want to invest. d. produce nothing of value and are therefore a drain on society's resources. Correct
When tax revenues are greater than government expenditures, the government has a budget ________. Marks: 1
Choose one answer.
a. crisis b. revision c. surplus d. deficit
Correct
6
Marks: 1
Everything else constant, a stronger dollar will mean that Choose one answer. a. French cheese becomes more expensive. b. Japanese cars become more expensive. c. vacationing in England becomes more expensive. d. vacationing in England becomes less expensive.
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Correct
Between 1950 and 1980 in the U.S., interest rates trended upward. During this same time period, Marks: 1
Choose one answer.
a. the government budget deficit (expressed as a percentage of GNP) trended downward. b. the aggregate price level declined quite dramatically. c. the rate of money growth increased. d. the rate of money growth declined.
Correct
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Marks: 1
Financial markets promote economic efficiency by Choose one answer. a. channeling funds from savers to investors. b. creating inflation. c. channeling funds from investors to savers. d. reducing investment. Correct
The organization responsible for the conduct of monetary policy in the United States is the Marks: 1
Choose one answer.
a. Bureau of Monetary Affairs. b. U.S. Treasury. c. Comptroller of the Currency. d. Federal Reserve System.
Correct
________ theory relates changes in the quantity of money to changes in aggregate economic activity and the price level. Marks: 1
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Choose one answer.
a. Monetary b. Systemic c. Financial d. Fiscal
Correct
Financial markets promote greater economic efficiency by channeling funds from ________ to ________. Marks: 1
11
Choose one answer.
a. savers; lenders b. investors; savers c. savers; borrowers d. borrowers; savers
Correct
12
Marks: 1
A financial crisis is Choose one answer. a. not possible in the modern financial environment. b. a feature of developing economies only. c. a major disruption in the financial markets. d. typically followed by an economic boom. Correct
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Marks: 1
When stock prices fall Choose one answer. a. an individual's wealth may decrease but their willingness to spend is not affected. b. an individual's wealth is not affected nor is their willingness to spend. c. a business firm will be more likely to sell stock to finance investment spending.
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d. an individual's wealth may decrease and their willingness to spend may decrease. Correct
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Marks: 5
What crucial role do financial intermediaries perform in an economy? Answer: Financial intermediaries like banks or other financial institutions play a very crucial role in the well functioning of the financial markets and contribute towards improving the efficiency of the economy. The financial intermediaries perform three very important roles in the economy: 1. Afford Liquidity in the Financial Markets: Financial intermediaries channel funds between people, who have surplus funds, i.e. savers, and people who want to borrow. The financial intermediaries borrow money from savers and loans it to people, who have productive investment opportunities. Borrowers usually do not have liquid assets and tend to repay the loan over the life of investment; on the other hand, the lenders would like to hold on to assets that are low risk and relatively liquid. Financial intermediary plays the critical role of holding the long-term, highrisk claims of borrowers and finance this by issuing liabilities, called deposits, which are highly liquid and have low default risk. 2. Lower the Transaction Costs : Financial intermediaries help in lowering the transaction costs of money lending and borrowing. Transaction costs include the costs involved in searching for a borrower or lender, assessing the risk of default, and monitoring repayments and enforcing the contract. The financial intermediaries because of their expertise in transactions and access to several lenders and borrowers are better able to reduce the costs compared to an individual. The lower transaction costs allow small savers and borrowers to benefit from the existence of financial markets. 3. Reduce Risk from Asymmetric Information: Asymmetric information exists when one party to the transaction has more information than the other party. In case of financial transactions, usually the lender has limited information about the borrower and his/her ability to service the loan. The borrower will have more information about the potential returns and risks of the investment project for which funds are being borrowed. The financial intermediaries like banks, reduce the problems that arise from asymmetric information as they have the resources to verify the borrowers information and introduce restrictive covenants in the loan contracts.
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These important roles played by financial intermediaries assist in the growth and well being of the economy.
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Marks: 1
The stock market is important because it is Choose one answer. a. where foreign exchange rates are determined. b. the most widely followed financial market in the United States. c. the market where most borrowers get their funds. d. where interest rates are determined. Correct
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Marks: 1
A rising stock market index due to higher share prices Choose one answer. a. decreases the amount of funds that business firms can raise by selling newly-issued stock. b. increases people's wealth and as a result may increase their willingness to spend. c. decreases people's wealth, but is unlikely to increase their willingness to spend. d. increases people's wealth, but is unlikely to increase their willingness to spend. Correct
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Marks: 1
American companies can borrow funds Choose one answer. a. only from the U.S. government. b. in both U.S. and foreign financial markets. c. only in foreign financial markets. d. only in U.S. financial markets. Correct
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Banks, savings and loan associations, mutual savings banks, and credit unions Choose one answer. a. since deregulation now provide services only to small depositors. b. produce nothing of value and are therefore a drain on society's resources. c. have been adept at innovating in response to changes in the regulatory environment. d. are no longer important players in financial intermediation. Correct
The management of money and interest rates is called ________ policy and is conducted by a nation's ________ bank. Marks: 1
19
Choose one answer.
a. fiscal; superior b. monetary; superior c. monetary; central d. fiscal; central
Correct
20
Marks: 1
Poorly performing financial markets can be the cause of Choose one answer. a. wealth. b. financial stability. c. poverty. d. financial expansion. Correct
A budget ________ occurs when government expenditures exceed tax revenues for a particular time period. Marks: 1
21
Choose one answer.
a. deficit b. surplus
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c. surfeit d. surge Correct

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Marks: 1
Budgets deficits can be a concern because they might Choose one answer. a. lead to higher bond prices. b. ultimately lead to higher inflation. c. lead to a slower rate of money growth. d. lead to lower interest rates. Correct
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Marks: 1
Prior to all recessions since 1900, there has been a drop in Choose one answer. a. the money stock. b. interest rates. c. the growth rate of the money stock. d. inflation. Correct
24
Marks: 1
It is true that inflation is a Choose one answer. a. continually rising price level. b. continuous fall in prices. c. continuous increase in the money supply. d. decline in interest rates. Correct
25
On ________, October 19, 1987, the market experienced its worst one-day drop
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Marks: 1
in its entire history with the DIJA falling by more than 500 points. Choose one answer. a. "Freaky Friday" b. "Black Monday" c. "Terrible Tuesday" d. "Woeful Wednesday" Correct
________ markets transfer funds from people who have an excess of available funds to people who have a shortage. Marks: 1
26
Choose one answer.
a. Derivative exchange b. Financial c. Commodity d. Fund-available
Correct
27
Marks: 1
A key factor in producing high economic growth is Choose one answer. a. high interest rates. b. stock market volatility. c. well-functioning financial markets. d. eliminating foreign trade. Correct
The price of one country's currency in terms of another country's currency is called the Marks: 1
28
Choose one answer.
a. prime rate. b. interest rate. c. Dow Jones industrial average.
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d. exchange rate. Correct

Fear of a major recession causes stock prices to fall, everything else held constant, which in turn causes consumer spending to Marks: 1
29
Choose one answer.
a. increase. b. decrease.
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FINA500-1900-SP11: 1st Assignment (CH.

UNVA-Online FINA500-1900-SP11 Quizzes 1st Assignment (CH.1) Review of attempt 2

1st Assignment (CH.1) Review of attempt 2

Started on Completed on Time taken Marks Grade

Choose one answer.

FINA500-1900-SP11: 1st Assignment (CH.1)

Choose one answer.

a. exchanges b. banks c. finance companies d. over-the-counter markets

Choose one answer.

a. crisis b. revision c. surplus d. deficit

FINA500-1900-SP11: 1st Assignment (CH.1)

Choose one answer.

Choose one answer.

FINA500-1900-SP11: 1st Assignment (CH.1)

Choose one answer.

a. Monetary b. Systemic c. Financial d. Fiscal

Choose one answer.

a. savers; lenders b. investors; savers c. savers; borrowers d. borrowers; savers

FINA500-1900-SP11: 1st Assignment (CH.1)

FINA500-1900-SP11: 1st Assignment (CH.1)

FINA500-1900-SP11: 1st Assignment (CH.1)

Choose one answer.

a. fiscal; superior b. monetary; superior c. monetary; central d. fiscal; central

Choose one answer.

FINA500-1900-SP11: 1st Assignment (CH.1)

c. surfeit d. surge Correct

FINA500-1900-SP11: 1st Assignment (CH.1)

Choose one answer.

a. Derivative exchange b. Financial c. Commodity d. Fund-available

Choose one answer.

a. prime rate. b. interest rate. c. Dow Jones industrial average.

FINA500-1900-SP11: 1st Assignment (CH.1)

d. exchange rate. Correct

Choose one answer.

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