Question 1

A bond is a(n) :

Accepted Answer

A)  regular payment made to owners of a firm.
B)  claim to partial ownership of a firm.
C)  agreement issued by a financial intermediary linking savers and investors.
D)  legal promise to repay a debt.E) A) and B)
F) All of the above

Question 2

Fred purchases a bond,newly issued by the Big Time Corporation,for $10,000.The bond pays $400 to its holder at the end of the first,second,and third years and pays $10,400 upon its maturity at the end of four years.The principal amount of this bond is ___,the coupon rate is ____,and the term of this bond is _____.

Accepted Answer

A)  $400;40%;four years
B)  $10,000;4%;four years
C)  $10,000;$400;4%
D)  $10,400;4%;four yearsE) All of the above
F) B) and D)

Question 3

In Macroland there is $10,000,000 in currency.The public holds half of the currency and banks hold the rest as reserves.If banks' desired reserve/deposit ratio is 10%,deposits in Macroland equal ______ and the money supply equals _______.

Accepted Answer

A)  $50,000,000;$60,000,000
B)  $55,000,000;$55,000,000
C)  $50,000,000;$55,000,000
D)  $100,000,000;$100,000,000E) A) and B)
F) B) and C)

Question 4

When the coupon rate on newly-issued bonds increases from 5% to 6%,the prices of existing bonds:

Accepted Answer

A)  increase.
B)  decrease.
C)  remain unchanged.
D)  increase only if the coupon rate is less than 6%.E) None of the above
F) All of the above

Question 5

The speed at which money circulates is called:

Accepted Answer

A)  the multiplier.
B)  acceleration.
C)  velocity.
D)  the pace of money.E) None of the above
F) A) and D)

Question 6

Money serves as a basic yardstick for measuring economic value (a unit of account) ,allowing:

Accepted Answer

A)  people to hold their wealth in a liquid form.
B)  governments to restrict the issuance of private monies.
C)  easy comparison of the relative prices of goods and services.
D)  goods and services to be exchanged with a double coincidence of wants.E) All of the above
F) None of the above

Question 7

Two reasons savers keep deposits at banks are to:

Accepted Answer

A)  secure mortgages and to purchase stocks.
B)  earn a return on their savings and to facilitate making payments.
C)  lower interest rates and to increase the money supply.
D)  equalize loan supply and demand and to earn interest.E) C) and D)
F) A) and D)

Question 8

When the Fed sells government securities,the banks':

Accepted Answer

A)  reserves will increase and lending will expand,causing an increase in the money supply.
B)  reserves will decrease and lending will contract,causing a decrease in the money supply.
C)  reserve requirements will increase and lending will contract,causing a decrease in the money supply.
D)  reserves/deposit ratio will increase and lending will expand,causing an increase in the money supply.E) None of the above
F) A) and B)

Question 9

Stockholders receive returns on their financial investment in the form of ______ and _____.

Accepted Answer

A)  interest payments;dividends
B)  capital gains;dividends
C)  coupon payments;capital gains
D)  capital gains;interest paymentsE) A) and B)
F) All of the above

Question 10

Suppose you have $200 with which you can buy shares of stock from two companies: ABC Hot Chocolate Company and XYZ Lemonade.Each company's stock currently sells for $100 per share.If the temperature next year is lower than average,the stock price for ABC will increase by $20,and the stock price for XYZ will not change.If the temperature next year is higher than average,the stock price for XYZ will increase by $20,and the stock price for ABC will not change.There is a 50% chance that it will be colder than average next year,and a 25% chance that it will be warmer than average.If you purchase two shares of ABC stock and no shares of XYZ stock,there is a ______ chance that your gain will be $40.Otherwise,your gain will be ______.

Accepted Answer

A)  50%;$0
B)  25%;$20
C)  75%;$30
D)  50%;$20E) B) and C)
F) A) and B)

Question 11

Firms that extend credit to borrowers using funds from savers are called:

Accepted Answer

A)  bond dealers.
B)  stock brokers.
C)  central banks.
D)  financial intermediaries.E) None of the above
F) B) and C)

Question 12

When the interest rate on newly issued bonds increases,the price of existing bonds:

Accepted Answer

A)  increases.
B)  decreases.
C)  increases only if the coupon rate is below the new rate.
D)  may either increase or decrease.E) A) and D)
F) All of the above

Question 13

Suppose you have $200 with which you can buy shares of stock from two companies: ABC Hot Chocolate Company and XYZ Lemonade.Each company's stock currently sells for $100 per share.If the temperature next year is lower than average,the stock price for ABC will increase by $20,and the stock price for XYZ will not change.If the temperature next year is higher than average,the stock price for XYZ will increase by $20,and the stock price for ABC will not change.There is a 50% chance that it will be colder than average next year,and a 25% chance that it will be warmer than average.If you purchase one share of ABC stock and one shares of XYZ stock,there is a ______ chance that your gain will be $20.Otherwise,your gain will be ______.

Accepted Answer

A)  50%;$0
B)  25%;$30
C)  75%;$0
D)  50%;$40E) B) and C)
F) All of the above

Question 14

In an open-market sale the Federal Reserve ______ government bonds and the supply of bank reserves ____.

Accepted Answer

A)  buys;increases
B)  buys;decreases
C)  sells;increases
D)  sells;decreasesE) B) and C)
F) A) and B)

Question 15

A rapidly growing supply of money will lead to:

Accepted Answer

A)  rising real GDP.
B)  rising velocity.
C)  unemployment.
D)  inflation.E) All of the above
F) A) and B)

Question 16

Two countries,Alpha and Beta,have the same levels of nominal and real GDP.Each dollar in Alpha is used more frequently than each dollar in Beta.Therefore,it must be the case that ______ in Alpha than in Beta.

Accepted Answer

A)  the rate of inflation is greater
B)  the money stock is smaller
C)  the price level is greater
D)  the velocity is lowerE) A) and D)
F) B) and C)

Question 17

The money supply will increase by a multiple of the increase in bank reserves created by the central bank unless:

Accepted Answer

A)  there is fractional reserve banking.
B)  there is 100 percent reserve banking.
C)  the public holds no currency.
D)  banks' desired reserve/deposit ratio is 0.20.E) None of the above
F) B) and D)

Question 18

The main disadvantage of using money as a store of value is that:

Accepted Answer

A)  other assets provide greater anonymity than cash.
B)  barter is a more efficient way to conduct transactions than using money.
C)  unlike other assets,money serves as a medium of exchange.
D)  other assets pay relatively higher rates of interest than money.E) A) and B)
F) All of the above

Question 19

You expect a share of EconNews.Com to sell for $65 a year from now.If you are willing to pay $65.74 for one share of the stock today,and you require a return of 8%,what dividend payment must you expect to receive from the stock?

Accepted Answer

A)  $4.46
B)  $5.20
C)  $6.00
D)  $9.25E) C) and D)
F) A) and B)

Question 20

Decentralized market-based financial systems improve the allocation of saving by:

Accepted Answer

A)  insuring capital gains exceed dividend payments.
B)  eliminating the need for commercial banks or other financial intermediaries.
C)  matching net capital inflows to net capital outflows.
D)  providing information and risk-sharing services.E) None of the above
F) A) and D)

Exam 20: Money, Prices, and the Financial System

Stockholders receive returns on their financial investment in the form of __ and _.

Correct Answer
verified

In an open-market sale the Federal Reserve __ government bonds and the supply of bank reserves .

Correct Answer
verified

Correct Answer
verified

The main disadvantage of using money as a store of value is that:

Correct Answer
verified

Correct Answer
verified

When the Fed sells government securities,the banks':

Correct Answer
verified

When the interest rate on newly issued bonds increases,the price of existing bonds:

Correct Answer
verified

Two countries,Alpha and Beta,have the same levels of nominal and real GDP.Each dollar in Alpha is used more frequently than each dollar in Beta.Therefore,it must be the case that ______ in Alpha than in Beta.

Correct Answer
verified

Firms that extend credit to borrowers using funds from savers are called:

Correct Answer
verified

A bond is a(n) :

Correct Answer
verified

Decentralized market-based financial systems improve the allocation of saving by:

Correct Answer
verified

You expect a share of EconNews.Com to sell for $65 a year from now.If you are willing to pay $65.74 for one share of the stock today,and you require a return of 8%,what dividend payment must you expect to receive from the stock?

Correct Answer
verified

The money supply will increase by a multiple of the increase in bank reserves created by the central bank unless:

Correct Answer
verified

A rapidly growing supply of money will lead to:

Correct Answer
verified

Correct Answer
verified

When the coupon rate on newly-issued bonds increases from 5% to 6%,the prices of existing bonds:

Correct Answer
verified

Money serves as a basic yardstick for measuring economic value (a unit of account) ,allowing:

Correct Answer
verified

In Macroland there is $10,000,000 in currency.The public holds half of the currency and banks hold the rest as reserves.If banks' desired reserve/deposit ratio is 10%,deposits in Macroland equal and the money supply equals _.

Correct Answer
verified

Two reasons savers keep deposits at banks are to:

Correct Answer
verified

The speed at which money circulates is called:

Correct Answer
verified

Exam 20: Money, Prices, and the Financial System

Stockholders receive returns on their financial investment in the form of ______ and _____.

Correct AnswerverifiedShow Answer

In an open-market sale the Federal Reserve ______ government bonds and the supply of bank reserves ____.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The main disadvantage of using money as a store of value is that:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When the Fed sells government securities,the banks':

Correct AnswerverifiedShow Answer

When the interest rate on newly issued bonds increases,the price of existing bonds:

Correct AnswerverifiedShow Answer

Two countries,Alpha and Beta,have the same levels of nominal and real GDP.Each dollar in Alpha is used more frequently than each dollar in Beta.Therefore,it must be the case that ______ in Alpha than in Beta.

Correct AnswerverifiedShow Answer

Firms that extend credit to borrowers using funds from savers are called:

Correct AnswerverifiedShow Answer

A bond is a(n) :

Correct AnswerverifiedShow Answer

Decentralized market-based financial systems improve the allocation of saving by:

Correct AnswerverifiedShow Answer

You expect a share of EconNews.Com to sell for $65 a year from now.If you are willing to pay $65.74 for one share of the stock today,and you require a return of 8%,what dividend payment must you expect to receive from the stock?

Correct AnswerverifiedShow Answer

The money supply will increase by a multiple of the increase in bank reserves created by the central bank unless:

Correct AnswerverifiedShow Answer

A rapidly growing supply of money will lead to:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When the coupon rate on newly-issued bonds increases from 5% to 6%,the prices of existing bonds:

Correct AnswerverifiedShow Answer

Money serves as a basic yardstick for measuring economic value (a unit of account) ,allowing:

Correct AnswerverifiedShow Answer

In Macroland there is $10,000,000 in currency.The public holds half of the currency and banks hold the rest as reserves.If banks' desired reserve/deposit ratio is 10%,deposits in Macroland equal ______ and the money supply equals _______.

Correct AnswerverifiedShow Answer

Two reasons savers keep deposits at banks are to:

Correct AnswerverifiedShow Answer

The speed at which money circulates is called:

Correct AnswerverifiedShow Answer

Stockholders receive returns on their financial investment in the form of __ and _.

Correct Answer
verified

In an open-market sale the Federal Reserve __ government bonds and the supply of bank reserves .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

In Macroland there is $10,000,000 in currency.The public holds half of the currency and banks hold the rest as reserves.If banks' desired reserve/deposit ratio is 10%,deposits in Macroland equal and the money supply equals _.

Correct Answer
verified

Correct Answer
verified

Correct Answer
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