Exam Chapter 1 Essay

4684 Words Jul 8th, 2012 19 Pages
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
Ques Status: Previous Edition
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
Ques Status: Previous Edition
3) Well-functioning financial markets promote
A) inflation.
B) deflation.
C) unemployment.
D) growth.
Answer: D
Ques Status: Previous Edition
4) A key factor in producing high
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B) affect firmsʹ decisions to sell stock to finance investment spending.
C) occur in regular patterns.
D) are unimportant to decision makers.
Answer: B
Ques Status: Previous Edition
Chapter 1 Why Study Money, Banking, and Financial Markets? 5
22) An increase in stock prices ________ the size of peopleʹs wealth and may ________ their willingness to spend, everything else held constant.
A) increases; increase
B) increases; decrease
C) decreases; increase
D) decreases; decrease
Answer: A
Ques Status: Previous Edition
23) Low stock market prices might ________ consumers willingness to spend and might ________ businesses willingness to undertake investment projects.
A) increase; increase
B) increase; decrease
C) decrease; decrease
D) decrease; increase
Answer: C
Ques Status: New
24) Fear of a major recession causes stock prices to fall, everything else held constant, which in turn causes consumer spending to
A) increase.
B) remain unchanged.
C) decrease.
D) cannot be determined.
Answer: C
Ques Status: Previous Edition
25) A share of common stock is a claim on a corporationʹs
A) debt.
B) liabilities.
C) expenses.
D) earnings and assets.
Answer: D
Ques Status: Revised
26) On ________, October 19, 1987, the market experienced its worst one-day drop in its entire history with the DIJA falling by more than 500 points.
A) ʺTerrible Tuesdayʺ
B) ʺWoeful Wednesdayʺ
C) ʺFreaky Fridayʺ

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