Question 1

Those who believe that market prices always incorporate all available information believe:

Accepted Answer

A)  in the efficient-market hypothesis.
B)  that randomly choosing a stock is as effective as technical or fundamental analysis.
C)  that current stock prices represent true value as correctly as is possible.
D)  All of these are true.E) B) and D)
F) A) and C)

Question 2

Making a loan is generally:

Accepted Answer

A)  less risky and less potentially rewarding than buying stock.
B)  less risky and more potentially rewarding than buying stock.
C)  more risky and less potentially rewarding than buying stock.
D)  more risky and more potentially rewarding than buying stock.E) A) and C)
F) None of the above

Question 3

An example of a derivative is:

Accepted Answer

A)  a futures contract.
B)  a stock.
C)  a bond.
D)  a fixed-income security.E) A) and B)
F) A) and C)

Question 4

If citizens expect to bear more of the burden for their own health care and retirement costs in the future,then we would expect their:

Accepted Answer

A)  demand for loanable funds further right than it would otherwise be.
B)  demand for loanable funds further left than it would otherwise be.
C)  supply of loanable funds further right than it would otherwise be.
D)  supply of loanable funds further left than it would otherwise be.E) A) and C)
F) B) and C)

Question 5

Which of the following is considered a major player in the financial system?

Accepted Answer

A)  Banks
B)  Savers
C)  Businesses
D)  All of these are important to the functioning of the financial system.E) B) and D)
F) All of the above

Question 6

A bank acts as _________________ between buyers and sellers.

Accepted Answer

A)  an intermediary
B)  a negotiator
C)  an agent
D)  an interpersonal communicantE) C) and D)
F) B) and D)

Question 7

Savers supply funds to those who want to borrow for their investment spending needs in the:

Accepted Answer

A)  market for loanable funds.
B)  market for savings.
C)  market for interest rates.
D)  stock market.E) All of the above
F) None of the above

Question 8

Intermediation is the process of:

Accepted Answer

A)  bringing together buyers and sellers in a market.
B)  negotiating terms of repayment when agreements between buyers and sellers are in default.
C)  government intervention in a financial market.
D)  None of these is true.E) A) and B)
F) C) and D)

Question 9

The transactions that take place in the financial markets:

Accepted Answer

A)  can be very complex.
B)  are very simple.
C)  are always to the buyer's advantage.
D)  are always to the seller's advantage.E) B) and D)
F) B) and C)

Question 10

In a closed economy,national savings will be:

Accepted Answer

A)  lower than private savings if the government runs a deficit.
B)  higher than private savings if the government runs a deficit.
C)  lower than private savings if the government runs a surplus.
D)  None of these is true.E) A) and B)
F) A) and C)

Question 11

Liquidity is:

Accepted Answer

A)  a measure of how easily a particular asset can be converted quickly to cash without much loss of value.
B)  the speed with which dollars are spent in the economy.
C)  the speed with which physical dollars change hands in the economy.
D)  the magnitude of change in the money supply as controlled by the Fed.E) All of the above
F) A) and D)

Question 12

Because banks have a very large pool of buyers and savers,it can:

Accepted Answer

A)  act as an intermediary between buyers and sellers.
B)  provide liquidity to individuals.
C)  diversify the risk of saving and borrowing for individuals.
D)  With access to such large pools of people,banks can provide all these things.E) A) and B)
F) A) and C)

Question 13

The two kinds of banks are ________ banks and ____________ banks.

Accepted Answer

A)  commercial;investment
B)  brokerage;investment
C)  private;commercial
D)  federal reserve;privateE) A) and D)
F) None of the above

Question 14

Which of the following goods is the most liquid?

Accepted Answer

A)  Painting by Degas
B)  Checking account
C)  Home-baked cookies
D)  Gold watchE) All of the above
F) B) and D)

Question 15

The principal of a loan is:

Accepted Answer

A)  the original amount of the loan.
B)  the set of rules and conditions borrowers agree to when taking out a loan.
C)  the set of rules and conditions savers agree to when agreeing to letting someone borrow their money.
D)  None of these is true.E) A) and B)
F) All of the above

Question 16

An example of a seller in a financial market would be:

Accepted Answer

A)  entrepreneurs starting new ventures.
B)  the government when it needs to finance public spending.
C)  individuals who have a savings account.
D)  All of these are sellers in financial markets.E) A) and C)
F) All of the above

Question 17

The demand for loanable funds comes from:

Accepted Answer

A)  investment.
B)  savings.
C)  the government printing money.
D)  None of these is true.E) All of the above
F) None of the above

Question 18

The financial system:

Accepted Answer

A)  brings together savers and borrowers in a set of interconnected markets where people trade a variety of financial products.
B)  connects the government to those truly in need of public services.
C)  is used to help individuals keep track of the general price level.
D)  gathers information about the economy in an effort to inform the public.E) B) and C)
F) None of the above

Question 19

A booming economy can make investors:

Accepted Answer

A)  eager to borrow money,and shift the demand curve for loanable funds to the right.
B)  eager to borrow money,and shift the supply curve for loanable funds to the right.
C)  wary of future downturns,and shift the demand curve for loanable funds to the left.
D)  wary of future downturns,and shift the supply curve for loanable funds to the left.E) B) and D)
F) B) and C)

Question 20

A net capital inflow occurs in open economies where:

Accepted Answer

A)  investment is higher than national savings.
B)  investment is lower than national savings.
C)  investment is equal to national savings.
D)  Any of these could be true.E) A) and B)
F) None of the above

Exam 30: The Basics of Finance

A booming economy can make investors:

Correct AnswerverifiedShow Answer

Those who believe that market prices always incorporate all available information believe:

Correct AnswerverifiedShow Answer

Liquidity is:

Correct AnswerverifiedShow Answer

Savers supply funds to those who want to borrow for their investment spending needs in the:

Correct AnswerverifiedShow Answer

Which of the following goods is the most liquid?

Correct AnswerverifiedShow Answer

Which of the following is considered a major player in the financial system?

Correct AnswerverifiedShow Answer

An example of a derivative is:

Correct AnswerverifiedShow Answer

The demand for loanable funds comes from:

Correct AnswerverifiedShow Answer

An example of a seller in a financial market would be:

Correct AnswerverifiedShow Answer

A net capital inflow occurs in open economies where:

Correct AnswerverifiedShow Answer

The financial system:

Correct AnswerverifiedShow Answer

The principal of a loan is:

Correct AnswerverifiedShow Answer

The transactions that take place in the financial markets:

Correct AnswerverifiedShow Answer

Making a loan is generally:

Correct AnswerverifiedShow Answer

Intermediation is the process of:

Correct AnswerverifiedShow Answer

If citizens expect to bear more of the burden for their own health care and retirement costs in the future,then we would expect their:

Correct AnswerverifiedShow Answer

A bank acts as _________________ between buyers and sellers.

Correct AnswerverifiedShow Answer

In a closed economy,national savings will be:

Correct AnswerverifiedShow Answer

Because banks have a very large pool of buyers and savers,it can:

Correct AnswerverifiedShow Answer

The two kinds of banks are ________ banks and ____________ banks.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The two kinds of banks are banks and ____ banks.

Correct Answer
verified