Question 1

Financial markets promote greater economic efficiency by channeling funds from ________ to ________.

Accepted Answer

Financial markets facilitate the flow of funds from savers to borrowers, allowing savers to earn a return on their savings while borrowers can access the capital they need for investments or expenses. This promotes greater economic efficiency by allocating resources to where they are most needed and productive. Choice A implies that investors and savers are separate groups, which is not necessarily the case. Choice B is incorrect because it suggests that savers are borrowing, which is the opposite of what financial markets facilitate. Choice D is also incorrect as it implies that savers are lending directly to borrowers, which is not how financial markets work.

Question 2

A rising stock market index due to higher share prices

Accepted Answer

When the stock market index rises, the value of people's investments increases and they feel wealthier. This can lead them to spend more as they have more confidence in their financial situation. Therefore, a rising stock market can increase people's willingness to spend.

Question 3

Everything else held constant,a decline in interest rates will cause spending on housing to

Accepted Answer

A decline in interest rates will cause the cost of borrowing to decrease, making mortgages and other housing loans more affordable. This will, in turn, cause an increase in demand for housing and result in a rise in housing spending.

Question 4

Markets in which funds are transferred from those who have excess funds available to those who have a shortage of available funds are called

Accepted Answer

Financial markets are where funds are transferred from those who have excess funds available to those who have a shortage of available funds through various financial instruments such as stocks, bonds, and currencies. Commodity markets and derivative exchange markets are not necessarily focused on fund transfers between parties. "Fund-available markets" is not a commonly used term in finance.

Question 5

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

Accepted Answer

The term used to describe the price paid for the rental of borrowed funds is the interest rate.

Question 6

Everything else held constant,an increase in interest rates on student loans

Accepted Answer

If interest rates on student loans increase, it becomes more expensive for students to borrow money to pay for their education. This ultimately leads to an increase in the cost of a college education.

Question 7

Stock prices are

Accepted Answer

Stock prices are known for their high volatility, with sudden and significant changes in value. This is due to various factors such as economic indicators, company news, and global events. Therefore, option C is the most appropriate choice.

Question 8

High interest rates might cause a corporation to ________ building a new plant that would provide more jobs.

Accepted Answer

High interest rates would increase the cost of borrowing money to build a new plant. As a result, the corporation may decide to postpone building the plant until interest rates decrease.

Question 9

High interest rates might ________ purchasing a house or car but at the same time high interest rates might ________ saving.

Accepted Answer

High interest rates make it more expensive to take out a loan for a house or car, which can discourage people from making those big purchases. However, high interest rates also mean that putting money into a savings account will earn a better return, which can encourage people to save more.

Question 10

The stock market is important because it is

Accepted Answer

The stock market is the most widely followed financial market in the United States and is closely watched by investors, analysts, and economists as an indicator of the state of the economy. While interest rates and foreign exchange rates can be affected by the stock market, they are not determined by it. The stock market is also not the primary market where most borrowers get their funds, as they typically obtain loans from banks or issue bonds.

Question 11

A key factor in producing high economic growth is

Accepted Answer

Well-functioning financial markets are essential for mobilizing savings and channeling them towards productive investments, thereby promoting economic growth. Eliminating foreign trade could lead to protectionism and reduced access to international markets and resources, hindering economic growth. High interest rates and stock market volatility can both have negative impacts on economic growth by making borrowing more expensive and reducing investor confidence, respectively.

Question 12

The interest rate on Baa (medium quality)corporate bonds is ________,on average,than other interest rates,and the spread between it and other rates became ________ in the 1970s.

Accepted Answer

Baa corporate bond rates are higher than other interest rates, and the spread between them became larger in the 1970s.

Question 13

Well-functioning financial markets promote

Accepted Answer

Well-functioning financial markets promote growth by efficiently allocating capital to productive investments, facilitating trade and commerce, and providing individuals and businesses with access to credit and investment opportunities.

Question 14

Compared to interest rates on long-term U.S.government bonds,interest rates on three-month Treasury bills fluctuate ________ and are ________ on average.

Accepted Answer

Three-month Treasury bills are short-term investments and are therefore more susceptible to fluctuations in the market. Long-term U.S. government bonds are less affected by short-term market movements and have a more stable interest rate. On average, three-month Treasury bills have a lower interest rate than long-term U.S. government bonds.

Question 15

________ markets transfer funds from people who have an excess of available funds to people who have a shortage.

Accepted Answer

Financial markets are designed to facilitate the transfer of funds between those who have an excess of available funds (surplus units) and those who have a shortage of available funds (deficit units). These markets include stocks, bonds, currencies, and other financial instruments. Commodity markets deal with the trade of physical goods (such as oil or gold) rather than financial instruments, while fund-available and derivative exchange are not commonly used terms in financial market terminology.

Question 16

When stock prices fall

Accepted Answer

When stock prices fall, an individual's wealth may decrease, as the value of their investment in the stock market decreases. This decrease in wealth may cause them to be less willing to spend, as they may feel less financially secure.

Question 17

An increase in interest rates might ________ saving because more can be earned in interest income.

Accepted Answer

When interest rates increase, the interest earned on savings and investments also increase. This provides an incentive or encouragement for people to save more money, as they can earn a higher return on their savings.

Question 18

The bond markets are important because they are

Accepted Answer

Bond markets are primarily where interest rates are determined. They are the markets where governments, corporations, and other entities raise funds through issuing bonds, which are debt securities that pay interest to investors. The supply and demand for these bonds directly impact interest rates. While the bond markets are an important component of the overall financial system, they are not the only place where borrowers can raise funds.

Question 19

Poorly performing financial markets can be the cause of

Accepted Answer

Poorly performing financial markets can lead to economic downturns, recession, and potentially widespread poverty. This can happen due to a decrease in investments, job loss, and reduced consumer spending.

Question 20

Financial markets promote economic efficiency by

Accepted Answer

Financial markets allow savers to invest their excess funds into various investment options, where they are utilized by investors to initiate new business ventures, expand existing firms, or undertake new projects that generate income for the economy. Hence, the financial markets facilitate the efficient allocation of funds from savers to potential investors.

Quiz 1: Why Study Money, banking, and Financial Markets

Financial markets promote greater economic efficiency by channeling funds from to .

A rising stock market index due to higher share prices

Everything else held constant,a decline in interest rates will cause spending on housing to

Markets in which funds are transferred from those who have excess funds available to those who have a shortage of available funds are called

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

Everything else held constant,an increase in interest rates on student loans

Stock prices are

High interest rates might cause a corporation to ________ building a new plant that would provide more jobs.

High interest rates might purchasing a house or car but at the same time high interest rates might saving.

The stock market is important because it is

A key factor in producing high economic growth is

The interest rate on Baa (medium quality) corporate bonds is ,on average,than other interest rates,and the spread between it and other rates became in the 1970s.

Well-functioning financial markets promote

Compared to interest rates on long-term U.S.government bonds,interest rates on three-month Treasury bills fluctuate and are on average.

________ markets transfer funds from people who have an excess of available funds to people who have a shortage.

When stock prices fall

An increase in interest rates might ________ saving because more can be earned in interest income.

The bond markets are important because they are

Poorly performing financial markets can be the cause of

Financial markets promote economic efficiency by

Quiz 1: Why Study Money, banking, and Financial Markets

Financial markets promote greater economic efficiency by channeling funds from ________ to ________.

A rising stock market index due to higher share prices

Everything else held constant,a decline in interest rates will cause spending on housing to

Markets in which funds are transferred from those who have excess funds available to those who have a shortage of available funds are called

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

Everything else held constant,an increase in interest rates on student loans

Stock prices are

High interest rates might cause a corporation to ________ building a new plant that would provide more jobs.

High interest rates might ________ purchasing a house or car but at the same time high interest rates might ________ saving.

The stock market is important because it is

A key factor in producing high economic growth is

The interest rate on Baa (medium quality) corporate bonds is ________,on average,than other interest rates,and the spread between it and other rates became ________ in the 1970s.

Well-functioning financial markets promote

Compared to interest rates on long-term U.S.government bonds,interest rates on three-month Treasury bills fluctuate ________ and are ________ on average.

________ markets transfer funds from people who have an excess of available funds to people who have a shortage.

When stock prices fall

An increase in interest rates might ________ saving because more can be earned in interest income.

The bond markets are important because they are

Poorly performing financial markets can be the cause of

Financial markets promote economic efficiency by

Financial markets promote greater economic efficiency by channeling funds from to .

High interest rates might purchasing a house or car but at the same time high interest rates might saving.

The interest rate on Baa (medium quality) corporate bonds is ,on average,than other interest rates,and the spread between it and other rates became in the 1970s.

Compared to interest rates on long-term U.S.government bonds,interest rates on three-month Treasury bills fluctuate and are on average.