FALSE 39. OTC markets are not very important any more.
TRUE 40. When a_ stock is listed on an exchange, members may trade it on the’ floor of’’ the’ exchange.
MCQS
B 1) An SSU’s
a_ . income an’d expenditures for_ the’ period are equal.
b. income for_ the’ period exceeds expenditures.
c. expenditures for_ the’ period exceed receipts.
d. spending is entirely financed by credit cards
C 2. Which_ of’’ the’ following is an example of’’ indirect financing?
a_ . an SSU purchasing a_ financial claim from’ a_ DSU
b. an SSU purchasing a_ financial claim from’ a_ dealer
c. an SSU purchasing a_ financial claim from’ a_ commercial bank
d. an SSU purchasing a_ financial claim from’ an underwriter
[d] 3. Which_ of’’ the’ following does not take deposits?
a_ . commercial banks.
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b. savings an’d loan associations.
c. credit unions.
d. finance companies.
C 4. When the’ financial system has achieved a_ high degree of’’ efficiency,
a_ . Borrowers are able to finance at the’ highest possible cost.
b. Surplus spending units are able to receive the’ lowest return on their savings.
c. Transaction an’d intermediation costs are low.
d. Lenders will have a_ limited choice of’’ financial investments.
C 5. An efficient financial system
a_ . eliminates search an’d transactions costs
b. is a_ mere theoretical possibility
c. promotes economic growth an’d social progress
d. depends on high volumes of’’ “direct” transactions
(a_ ) 6. Pension funds tend to invest in
a_ . higher-yielding long-term securities
b. money market securities exclusively
c. government securities exclusively
d. none of’’ the’ above
[d] 7. Financial institutions facilitate the’ flow of’’ investment funds
a_ . from’ savers to borrowers
b. from’ SSUs to DSUs
c. from’ the’ household sector to the’ business sector
d. any of’’ the’ above
[d] 8. Which_ sector has been most consistently in a_ surplus budget position?
a_ . Business
b. Government
c. Foreign
d. Household
[d] 9. Which_ of’’ the’ following are “economic units”?
a_ . households
b. businesses
c. governments
d. all of’’ the’ above
B 10. Which_ of’’ the’ following best describes the’ "two faces of’’ debt" concept?
a_ . DSUs are sometimes SSUs.
b. Every financial asset is someone else’s liability.
c. Intermediaries may own both direct an’d indirect financial assets.
d. The’ government is unable to control its federal spending.
(a_ ) 11) A_ dealer offers to buy shares of’’ IBM at 125 an’d sell to investors at 127. The’ “bid” is
a_ ) 125 b. 127 c. 2 d. none of’’ the’ preceding
[d] 12. Most financial intermediaries:
a_ . issue direct claims an’d purchase direct financial assets.
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b. issue indirect claims an’d purchase indirect financial assets.
c. purchase large amounts of’’ real, tangible assets.
d. purchase direct financial claims an’d issue indirect securities.
(a_ ) 13. Profitability of’’ financial intermediaries derives from’ all of’’ the’ following except
a_ ) government regulation of’’ interest rates
b. economies of’’ scale
c. ability to manage credit risk
d. control of’’ transactions costs
C 14. Denomination intermediation is best exemplified by
a_ . issuing insured deposits an’d making risky business loans.
b. bringing together investors of’’ different religions
c. issuing five 3,000 CDs an’d making one 15,000 loan.
d. promising liquidity to SSUs while investing the’ funds long-term
(a_ ) 15. All but one of’’ the’ following is comparative advantage of’’ financial intermediaries:
a_ . ability to finance businesses an’d governments.
b. ability to achieve economies of’’ scale.
c. ability to reduce transaction costs.
d. ability to find confidential information.
(a_ ) 16. Which_ of’’ the’ following would tend to hold corporate bonds in significant amounts?
a_ . life insurance company
b. credit union
c. mutual savings bank
d. commercial bank
[d] 17. All but one of’’ the’ following is a_ standard characteristic of’’ financial claims:
a_ . They are recognized on two balance sheets.
b. They are intangible assets.
c. They are IOU's traded for_ funds.
d. They represent ownership of’’ real assets.
(a_ ) 18. Money market mutual funds are a_ strong competitor for_
a_ . depository institutions.
b. contractual savings institutions.
c. finance companies.
d. the’ real estate market.
[d] 19. All of’’ the’ following are terms for_ or examples of’’ financial claims except
a_ . bonds.
b. money.
c. loans.
d. commodities.
C 20. Direct finance is best exemplified by
a_ . the’ purchase of’’ mutual fund shares.
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