Question 1

One purpose of regulation of financial markets is to

Accepted Answer

One purpose of regulation of financial markets is to promote the provision of information to shareholders, depositors, and the public. This helps ensure transparency and accountability in financial institutions and protects consumers from fraud and deception. Regulation also helps maintain the stability and integrity of the financial system by preventing excessive risk-taking and ensuring fair competition. Limiting profits or guaranteeing maximum rates of interest would not necessarily achieve these goals, while increasing competition could lead to a race to the bottom in terms of quality and safety.

Question 2

Direct finance involves the sale to ________ of marketable securities such as stocks and bonds.

Accepted Answer

Direct finance involves the sale of marketable securities such as stocks and bonds directly to households.

Question 3

Which of the following statements concerning external sources of financing for nonfinancial businesses in the United States are TRUE?

Accepted Answer

Stocks are a relatively unimportant source of finance for nonfinancial businesses in the United States. Marketable securities and bonds are the primary ways that they finance their activities. Selling bonds directly to households is not a major source of funding.

Question 4

Collateralized debt is also know as

Accepted Answer

Collateralized debt is secured by collateral, meaning if the borrower defaults on the loan, the lender can seize the collateral to recover the debt. Therefore, option B, secured debt, is the correct answer. Unsecured debt (option A) does not involve collateral, while unrestricted debt (option C) and promissory debt (option D) are not terms commonly used to describe collateralized debt.

Question 5

Of the sources of external funds for nonfinancial businesses in the United States,stocks account for approximately ________ of the total.

Accepted Answer

According to data from the Federal Reserve, as of December 2019, stocks accounted for approximately 11% of the total external funds raised by nonfinancial businesses in the United States. Other sources of external funds for businesses include bonds, bank loans, and commercial paper.

Question 6

American businesses get their external funds primarily from

Accepted Answer

The answer of American businesses get their external funds primarily...

Question 7

Regulation of the financial system

Accepted Answer

The regulation of the financial system is primarily focused on ensuring the stability of the financial system. This includes measures to prevent systemic risks, maintain investor confidence, and promote fair and orderly markets. Protecting the jobs and wealth of employees and owners of financial institutions may be secondary goals, but the primary goal is to ensure the smooth functioning of the financial system as a whole. Additionally, financial regulation is not limited to the United States and occurs in many other countries as well.

Question 8

As a source of funds for nonfinancial businesses,stocks are relatively more important in

Accepted Answer

The answer of As a source of funds for nonfinancial...

Question 9

Which of the following statements concerning external sources of financing for nonfinancial businesses in the United States are TRUE?

Accepted Answer

According to data from the Federal Reserve, stocks and bonds combined supplied less than half of the external funds for nonfinancial businesses in the US. Other sources include bank loans, commercial paper, and trade credit.

(Note: A is false, as bonds are actually a more important source of finance than stocks. C is false, as financial intermediaries such as banks and insurance companies are a significant source of external funds for businesses. D is false, as data from the Federal Reserve shows that only about 15% of new issues of stock were sold to households in the period from 1970-2017.)

Question 10

With regard to external sources of financing for nonfinancial businesses in the United States,which of the following are accurate statements?

Accepted Answer

According to the text, marketable securities account for a larger share of external business financing in the United States than in Germany and Japan.

Answer: B
 The text states that since 1970, most of the newly issued corporate bonds and commercial paper have been sold directly to American households.

Answer: C
 The text indicates that direct finance accounts for more than 50 percent of the external financing of American businesses.

Answer: None for option D
 The text does not support the statement that smaller businesses almost always raise funds by issuing marketable securities.

Question 11

Nonfinancial businesses in Germany,Japan,and Canada raise most of their funds

Accepted Answer

Nonfinancial businesses in Germany, Japan, and Canada mostly raise funds from bank loans. These businesses have a strong banking system that provides them with ample credit at lower interest rates. Non-banking loans, issuing stock, and issuing bonds are not as popular in these countries for nonfinancial businesses to raise funds.

Question 12

Credit card debt is

Accepted Answer

Credit card debt is unsecured debt because there is no collateral taken out to secure the debt. It is based on an individual's creditworthiness and ability to repay the debt.

Question 13

If you default on your auto loan,your car will be repossessed because it has been pledged as ________ for the loan.

Accepted Answer

Collateral refers to the property or asset that has been pledged as security for a loan. In the case of an auto loan, the car serves as collateral. If the borrower defaults on the loan, the lender has the right to repossess the car in order to recover their funds. A, C, and D are not correct choices as they do not accurately describe the concept of collateral.

Question 14

Of the sources of external funds for nonfinancial businesses in the United States,loans from banks and other financial intermediaries account for approximately ________ of the total.

Accepted Answer

According to data from the Federal Reserve, loans from banks and other financial intermediaries account for approximately 56% of the total external funds for nonfinancial businesses in the United States. This makes it the largest source of external funding for nonfinancial businesses. Other sources include issuing bonds, selling equity, and borrowing from nonbank financial institutions.

Question 15

Of the sources of external funds for nonfinancial businesses in the United States,corporate bonds and commercial paper account for approximately ________ of the total.

Accepted Answer

According to the Federal Reserve's Flow of Funds data, as of the first quarter of 2021, corporate bonds and commercial paper accounted for approximately 32% of the total external funds for nonfinancial businesses in the United States. Therefore, option C is the correct answer.

Question 16

Of the four sources of external funding for nonfinancial businesses,the least often used in the U.S. is

Accepted Answer

Stock issuance is the least often used source of external funding for nonfinancial businesses in the U.S. This is because issuing new stock dilutes the ownership of existing shareholders and can be a more expensive and complex process compared to obtaining loans or issuing bonds.

Question 17

Property that is pledged to the lender in the event that a borrower cannot make his or her debt payment is called

Accepted Answer

Collateral refers to the property or asset pledged to a lender as security for a loan. If the borrower fails to make their debt payment, the lender can seize the collateral to recoup some or all of their losses. Points refer to a fee paid upfront by the borrower to the lender, usually to lower the interest rate on a loan. Interest refers to the cost of borrowing money, usually expressed as a percentage of the total loan amount. Good faith money is a deposit made by a buyer to show their commitment to purchasing a property.

Question 18

The predominant form of household debt is

Accepted Answer

Collateralized debt, such as mortgages, is the predominant form of household debt, as it is typically secured by an asset like a home.

Question 19

Commercial and farm mortgages,in which property is pledged as collateral,account for

Accepted Answer

Commercial and farm mortgages account for one-quarter of borrowing by nonfinancial businesses. This reflects the significant but not dominant role that real estate collateral plays in the borrowing landscape for these entities.

Question 20

Of the following sources of external finance for American nonfinancial businesses,the least important is

Accepted Answer

Stocks are generally considered the least important source of external finance for American nonfinancial businesses compared to loans from banks, bonds and commercial paper, and loans from other financial intermediaries. This is because businesses often rely more on debt financing through loans and bonds for their external financing needs.

Quiz 8: An Economic Analysis of Financial Structure

One purpose of regulation of financial markets is to

Direct finance involves the sale to ________ of marketable securities such as stocks and bonds.

Which of the following statements concerning external sources of financing for nonfinancial businesses in the United States are TRUE?

Collateralized debt is also know as

Of the sources of external funds for nonfinancial businesses in the United States,stocks account for approximately ________ of the total.

American businesses get their external funds primarily from

Regulation of the financial system

As a source of funds for nonfinancial businesses,stocks are relatively more important in

Which of the following statements concerning external sources of financing for nonfinancial businesses in the United States are TRUE?

With regard to external sources of financing for nonfinancial businesses in the United States,which of the following are accurate statements?

Nonfinancial businesses in Germany,Japan,and Canada raise most of their funds

Credit card debt is

If you default on your auto loan,your car will be repossessed because it has been pledged as ________ for the loan.

Of the sources of external funds for nonfinancial businesses in the United States,loans from banks and other financial intermediaries account for approximately ________ of the total.

Of the sources of external funds for nonfinancial businesses in the United States,corporate bonds and commercial paper account for approximately ________ of the total.

Of the four sources of external funding for nonfinancial businesses,the least often used in the U.S. is

Property that is pledged to the lender in the event that a borrower cannot make his or her debt payment is called

The predominant form of household debt is

Commercial and farm mortgages,in which property is pledged as collateral,account for

Of the following sources of external finance for American nonfinancial businesses,the least important is