Economic Question

EXERCISE 1

ECO551

1) Financial markets promote economic efficiency by
A) channeling funds from investors to savers.
B) creating inflation.
C) channeling funds from savers to investors.
D) reducing investment.

2) Financial markets promote greater economic efficiency by channeling funds from ________ to ________.
A) investors; savers
B) borrowers; savers
C) savers; borrowers
D) savers; lenders

3) Well-functioning financial markets promote
A) inflation.
B) deflation.
C) unemployment.
D) growth.

4) A key factor in producing high economic growth is
A) eliminating foreign trade.
B) well-functioning financial markets.
C) high interest rates.
D) stock market volatility.

5) Poorly performing financial markets can be the cause of
A) wealth.
B) poverty.
C) financial stability.
D) financial expansion.

6) The bond markets are important because they are
A) easily the most widely followed financial markets in the United States.
B) the markets where foreign exchange rates are determined.
C) the markets where interest rates are determined.
D) the markets where all borrowers get their funds.

7) ________ is used to make purchases while ________ is the total collection of pieces of property that serve to store value.
A) Money; income
B) Wealth; income
C) Income; money
D) Money; wealth

8) The difference between money and income is that
A) money is a flow and income is a stock.
B) money is a stock and income is a flow.
C) there is no differencemoney and income are both stocks.
D) there is no differencemoney and income are both flows.

9) Of money's three functions, the one that distinguishes money from other assets is its function as a
A) store of value.
B) unit of account.
C) standard of deferred payment.
D) medium of exchange.

10) Compared to an economy that uses a medium of exchange, in a barter economy
A) transaction costs are higher.
B) transaction costs are lower.
C) liquidity costs are higher.
D) liquidity costs are lower.

11) Increasing transactions costs of selling an asset make the asset
A) more valuable.
B) more liquid.
C) less liquid.
D) more moneylike.

12) Which of the following statements about financial markets and securities is true?
A) A bond is a long-term security that promises to make periodic payments called dividends to the firm's residual claimants.
B) A debt instrument is intermediate term if its maturity is less than one year.
C) A debt instrument is intermediate term if its maturity is ten years or longer.
D) The maturity of a debt instrument is the number of years (term) to that instrument's expiration date.

13) Long-term debt has a maturity that is ________.
A) between one and ten years.
B) less than a year.
C) between five and ten years.
D) ten years or longer.

14) A liquid asset is
A) an asset that can easily and quickly be sold to raise cash.
B) a share of an ocean resort.
C) difficult to resell.
D) always sold in an over-the-counter market.

15) A financial market in which only short-term debt instruments are traded is called the ________ market.
A) bond
B) money
C) capital
D) stock