Test Bank for Financial Markets and Institutions, 9th Edition

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1Financial Markets and Institutions, 9e(Mishkin)Chapter 1Why Study Financial Markets and Institutions?1.1Multiple Choice1) Financial markets and institutionsA) involve the movement of huge quantities of money.B) affect the profits of businesses.C) affect the types of goods and services produced in an economy.D) do all of the above.E) do only A and B of the above.Answer: DTopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition2) Financial market activities affectA) personal wealth.B) spending decisions by individuals and business firms.C) the economy's location in the business cycle.D) all of the above.Answer: DTopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition3) Markets in which funds are transferred from those who have excess funds available to thosewho have a shortage of available funds are calledA) commodity markets.B) funds markets.C) derivative exchange markets.D) financial markets.Answer: DTopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition4) The price paid for the rental of borrowed funds (usually expressed as a percentage of therental of $100 per year) is commonly referred to as theA) inflation rate.B) exchange rate.C) interest rate.D) aggregate price level.Answer: CTopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition

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25) The bond markets are important becauseA) 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: BTopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition6) Interest rates are important to financial institutions since an interest rate increase ________ thecost of acquiring funds and ________ the income from assets.A) decreases; decreasesB) increases; increasesC) decreases; increasesD) increases; decreasesAnswer: BTopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition7) Typically, increasing interest ratesA) discourages individuals from saving.B) discourages corporate investments.C) encourages corporate expansion.D) encourages corporate borrowing.E) none of the above.Answer: BTopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition8) Compared to interest rates on long-term U.S. government bonds, interest rates on ________fluctuate more and are lower on average.A) medium-quality corporate bondsB) low-quality corporate bondsC) high-quality corporate bondsD) three-month Treasury billsE) none of the aboveAnswer: DTopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition

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39) Compared to interest rates on long-term U.S. government bonds, interest rates on three-monthTreasury bills fluctuate ________ and are ________ on average.A) more; lowerB) less; lowerC) more; higherD) less; higherAnswer: ATopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition10) The stock market is important becauseA) it is where interest rates are determined.B) it is the most widely followed financial market in the United States.C) it is where foreign exchange rates are determined.D) all of the above.Answer: BTopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition11) Stock prices since the 1980s have beenA) relatively stable, trending upward at a steady pace.B) relatively stable, trending downward at a moderate rate.C) extremely volatile.D) unstable, trending downward at a moderate rate.Answer: CTopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition12) The largest one-day drop in the history of the American stock markets occurred inA) 1929.B) 1987.C) 2000.D) 2001.Answer: BTopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition13) A declining stock market index due to lower share pricesA) reduces people's wealth and as a result may reduce their willingness to spend.B) increases people's wealth and as a result may increase their willingness to spend.C) decreases the amount of funds that business firms can raise by selling newly issued stock.D) both A and C of the above.E) both B and C of the above.Answer: DTopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition

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414) Changes in stock pricesA) affect people's wealth and their willingness to spend.B) affect firms' decisions to sell stock to finance investment spending.C) are characterized by considerable fluctuations.D) all of the above.E) only A and B of the above.Answer: DTopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition15) (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) false.B) (I) is false, (II) true.C) Both are true.D) Both are false.Answer: ATopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition16) (I) A bond is a debt security that promises to make payments periodically for a specifiedperiod of time. (II) A stock is a security that is a claim on the earnings and assets of acorporation.A) (I) is true, (II) false.B) (I) is false, (II) true.C) Both are true.D) Both are false.Answer: CTopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition17) The price of one country's currency in terms of another's is calledA) the foreign exchange rate.B) the interest rate.C) the Dow Jones industrial average.D) none of the above.Answer: ATopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition

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518) A stronger dollar benefits ________ and hurts ________.A) American businesses; American consumersB) American businesses; foreign businessesC) American consumers; American businessesD) foreign businesses; American consumersAnswer: CTopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition19) A weaker dollar benefits ________ and hurts ________.A) American businesses; American consumersB) American businesses; foreign consumersC) American consumers; American businessesD) foreign businesses; American consumersAnswer: ATopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition20) From 1980 to early 1985 the dollar ________ in value, thereby benefiting American________.A) appreciated; businessesB) appreciated; consumersC) depreciated; businessesD) depreciated; consumersAnswer: BTopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition21) For most of 2010-2015, Three Month Treasury Bill rates were nearA) 0%.B) 3%.C) 5%.D) 6%.Answer: ATopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: New Question22) In general, from 2001 through 2013, the dollar ________ in value relative to major foreigncurrencies.A) appreciatedB) depreciatedC) remained about the sameAnswer: BTopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: New Question

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623) Between 1950 and 2016, Treasury Bill rates peaked nearA) 1961.B) 1972.C) 1981.D) 1995.Answer: CTopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: New Question24) Money is defined asA) anything that is generally accepted in payment for goods and services or in the repayment ofdebt.B) bills of exchange.C) a riskless repository of spending power.D) all of the above.E) only A and B of the above.Answer: ATopic: Chapter 1.2 Why Study Financial InstitutionsQuestion Status: Previous Edition25) During the Financial Crisis of 2007-2009, the Dow Jones Industrial Average fell to a lownearA) 5,200.B) 6,600.C) 8,900.D) 10,500.Answer: BTopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: New Question26) From "Black Monday" on October 19, 1987 until 2000, the stock market experienced one ofthe greatbull markets in its history, with the Dow climbing to a peak of overA) 5,000.B) 7,000.C) 9,000.D) 11,000.Answer: DTopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: New Question

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727) Between 1970 and 2016, the value of the U.S. dollar relative to other currencies peaked nearA) 1975.B) 1985.C) 1995.D) 2005.Answer: BTopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: New Question28) The organization responsible for the conduct of monetary policy in the United States is theA) Comptroller of the Currency.B) U.S. Treasury.C) Federal Reserve System.D) Bureau of Monetary Affairs.Answer: CTopic: Chapter 1.2 Why Study Financial InstitutionsQuestion Status: Previous Edition29) The central bank of the United States isA) Citicorp.B) The Fed.C) Bank of America.D) The Treasury.E) none of the above.Answer: BTopic: Chapter 1.2 Why Study Financial InstitutionsQuestion Status: Previous Edition30) Monetary policy is chiefly concerned withA) how much money businesses earn.B) the level of interest rates and the nation's money supply.C) how much money people pay in taxes.D) whether people have saved enough money for retirement.Answer: BTopic: Chapter 1.2 Why Study Financial InstitutionsQuestion Status: Previous Edition31) In the good old days, when you took cash out of the bank or wanted to check your accountbalance, you got to say hello to a friendly human. Nowadays, you are more likely to interact witha(n) ________ when withdrawing cash.A) automatic teller machine (ATM)B) federal reserve employeeC) robot bankerD) investment bankerAnswer: ATopic: Chapter 1.2 Why Study Financial InstitutionsQuestion Status: New Question

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832) Economists group commercial banks, savings and loan associations, credit unions, mutualfunds, mutual savings banks, insurance companies, pension funds, and finance companiestogether under the heading financial intermediaries. Financial intermediariesA) act as middlemen, borrowing funds from those who have saved and lending these funds toothers.B) produce nothing of value and are therefore a drain on society's resources.C) help promote a more efficient and dynamic economy.D) do all of the above.E) do only A and C of the above.Answer: ETopic: Chapter 1.2 Why Study Financial InstitutionsQuestion Status: Previous Edition33) Economists group commercial banks, savings and loan associations, credit unions, mutualfunds, mutual savings banks, insurance companies, pension funds, and finance companiestogether under the heading financial intermediaries. Financial intermediariesA) act as middlemen, borrowing funds from those who have saved and lending these funds toothers.B) play an important role in determining the quantity of money in the economy.C) help promote a more efficient and dynamic economy.D) do all of the above.E) do only A and C of the above.Answer: DTopic: Chapter 1.2 Why Study Financial InstitutionsQuestion Status: Previous Edition34) Banks are important to the study of money and the economy because theyA) provide a channel for linking those who want to save with those who want to invest.B) have been a source of financial innovation that is expanding the alternatives available to thosewanting to invest their money.C) are the only financial institution to play a role in determining the quantity of money in theeconomy.D) do all of the above.E) do only A and B of the above.Answer: ETopic: Chapter 1.2 Why Study Financial InstitutionsQuestion Status: Previous Edition

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935) Banks, savings and loan associations, mutual savings banks, and credit unionsA) 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 environment.D) all of the above.E) only A and C of the above.Answer: CTopic: Chapter 1.2 Why Study Financial InstitutionsQuestion Status: Previous Edition36) (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, insurance 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: ATopic: Chapter 1.2 Why Study Financial InstitutionsQuestion Status: Previous Edition37) ________ was the stock market's worst one-day drop in history in the 1980s.A) Black FridayB) Black MondayC) Blackout DayD) none of the aboveAnswer: BTopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition38) The largest financial intermediaries areA) insurance companies.B) finance companies.C) banks.D) all of the above.Answer: CTopic: Chapter 1.2 Why Study Financial InstitutionsQuestion Status: Previous Edition

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1039) In recent yearsA) interest rates have remained constant.B) the success of financial institutions has reached levels unprecedented since the GreatDepression.C) stock markets have crashed.D) all of the above.Answer: CTopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition40) A securityA) 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) is a claim on the issuers future income.Answer: DTopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition41) ________ are an example of a financial institution.A) BanksB) Insurance companiesC) Finance companiesD) All of the aboveAnswer: DTopic: Chapter 1.2 Why Study Financial InstitutionsQuestion Status: Previous Edition42) Monetary policy affectsA) interest rates.B) inflation.C) business cycles.D) all of the above.Answer: DTopic: Chapter 1.2 Why Study Financial InstitutionsQuestion Status: Previous Edition43) A rising stock market index due to higher share pricesA) increases people'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: DTopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition

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1144) From the peak of the high-tech bubble in 2000, the stock market ________ by over________ by late 2002.A) collapsed; 75%B) rose; 35%C) collapsed; 30%D) rose; 50%Answer: CTopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition45) The Dow fell below 7,000 in 2009, only to start a bull market run, reaching new highs near________ in 2016.A) 12,000B) 10,000C) 15,000D) 18,000Answer: DTopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Updated from Previous Edition1.2True/False1) Money is anything accepted by anyone as payment for services or goods.Answer: TRUETopic: Chapter 1.2 Why Study Financial InstitutionsQuestion Status: Previous Edition2) Interest rates are determined in the bond markets.Answer: TRUETopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition3) A stock is a debt security that promises to make periodic payments for a specific period oftime.Answer: FALSETopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition4) Monetary policy affects interest rates but has little effect on inflation or business cycles.Answer: FALSETopic: Chapter 1.2 Why Study Financial InstitutionsQuestion Status: Previous Edition

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125) The government organization responsible for the conduct of monetary policy in the UnitedStates is the U.S. Treasury.Answer: FALSETopic: Chapter 1.2 Why Study Financial InstitutionsQuestion Status: Previous Edition6) Interest rates can be accurately described as the rental price of money.Answer: TRUETopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition7) Holding everything else constant, as the dollar weakens vacations abroad become lessattractive.Answer: TRUETopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition8) In recent years, financial markets have become more stable and less risky.Answer: FALSETopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition9) Financial innovation has provided more options to both investors and borrowers.Answer: TRUETopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition10) A financial intermediary borrows funds from people who have saved.Answer: TRUETopic: Chapter 1.2 Why Study Financial InstitutionsQuestion Status: Previous Edition11) From 2001 to 2008, the dollar depreciated substantially.Answer: TRUETopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: New Question12) From 2007 to 2009, the U.S. economy was hit by the worst financial crisis since the GreatDepression.Answer: TRUETopic: Chapter 1.2 Why Study Financial InstitutionsQuestion Status: New Question

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1313) Holding everything else constant, as the dollar strengthens foreigners will buy more U.S.exports.Answer: FALSETopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition14) In a bull market stock prices are rising, on average.Answer: TRUETopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition15) In a bear market stock prices are rising, on average.Answer: FALSETopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: New Question16) Financial institutions are among the largest employers in the country and frequently pay veryhigh salaries.Answer: TRUETopic: Chapter 1.3 Applied Managerial PerspectiveQuestion Status: Previous Edition17) Different interest rates have a tendency to move in unison.Answer: TRUETopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition18) Financial markets are what makes financial institutions work.Answer: FALSETopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition19) In recent years, financial markets have become more risky. However, only a limited numberof tools (such as derivatives) are available to assist in managing this risk.Answer: FALSETopic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition20) Although the internet has changed many aspects of our lives, it hasn't proven very useful forcollecting and/or analyzing financial and economic data.Answer: FALSETopic: Chapter 1.4 How We Study Financial Markets and InstitutionsQuestion Status: Previous Edition

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141.3Essay1) Have interest rates been more or less volatile in recent years? Why?Topic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition2) Why should consumers be concerned with movements in foreign exchange rates?Topic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition3) How does the value of the dollar affect the competitiveness of American businesses?Topic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition4) What is monetary policy and who is responsible for its implementation?Topic: Chapter 1.2 Why Study Financial InstitutionsQuestion Status: Previous Edition5) What are financial intermediaries and what do they do?Topic: Chapter 1.2 Why Study Financial InstitutionsQuestion Status: Previous Edition6) What is money?Topic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition7) How does a bond differ from a stock?Topic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition8) Why is the stock market so important to individuals, firms, and the economy?Topic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition9) What is the central bank and what does it do?Topic: Chapter 1.2 Why Study Financial InstitutionsQuestion Status: Previous Edition10) If you are planning a vacation to Europe, do you prefer a strong dollar or weak dollar relativeto the euro? Why?Topic: Chapter 1.1 Why Study Financial MarketsQuestion Status: Previous Edition11) How has the stock market performed since 2000?Topic: Chapter 1.1 Why Study Financial MarketsQuestion Status: New Question

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1Financial Markets and Institutions, 9e(Mishkin)Chapter 2Overview of the Financial System2.1Multiple Choice1) Every financial market performs the following function:A) It determines the level of interest rates.B) It allows common stock to be traded.C) It allows loans to be made.D) It channels funds from lenders-savers to borrowers-spenders.Answer: DTopic: Chapter 2.1 Function of Financial MarketsQuestion Status: Previous Edition2) Securities are ________ for the person who buys them, but ________ for the individual/firmthat sells them.A) assets; liabilitiesB) liabilities; assetsC) income; liabilitiesD) liabilities; expensesAnswer: ATopic: Chapter 2.1 Function of Financial MarketsQuestion Status: Previous Edition3) Financial markets have the basic function ofA) bringing together people with funds to lend and people who want to borrow funds.B) assuring that the swings in the business cycle are less pronounced.C) assuring that governments need never resort to printing money.D) both A and B of the above.E) both B and C of the above.Answer: ATopic: Chapter 2.1 Function of Financial MarketsQuestion Status: Previous Edition4) Which of the following can be described as involving direct finance?A) A corporation's stock is traded in an over-the-counter market.B) People buy shares in a mutual fund.C) A pension fund manager buys commercial paper in the secondary market.D) An insurance company buys shares of common stock in the over-the-counter markets.E) None of the above.Answer: ETopic: Chapter 2.1 Function of Financial MarketsQuestion Status: Previous Edition

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