Test Bank For Money Banking and the Financial System 3rd Edition By Hubbard

ISBN-10: 0134524063, ISBN-13: 978-0134524061

Chapter 1   Introducing Money and the Financial System

 

1.1   Key Components of the Financial System

 

1) The financial system is primarily a means by which

1. A) funds are transferred from savers to borrowers.
2. B) money is put into circulation.
3. C) the government puts into operation its plans for the economy.
4. D) business firms distribute their goods.

Answer:  A

Diff: 1     Page Ref: 4

Topic:  financial system

Objective:  Identify the key components of the financial system

*:  Recurring

AACSB:  Reflective Thinking

 

2) Which of the following is NOT a financial asset?

1. A) a bond issued by Google
2. B) Wells Fargo Bank
3. C) a home mortgage loan
4. D) a certificate of deposit

Answer:  B

Diff: 1     Page Ref: 2

Topic:  financial assets

Objective:  Identify the key components of the financial system

*:  Recurring

AACSB:  Reflective Thinking

 

3) If you buy a bond issued by Intel, the bond is a(n)

1. A) liability to Intel and an asset to you.
2. B) liability to you and an asset to Intel.
3. C) liability to both you and Intel.
4. D) asset to both you and Intel.

Answer:  A

Diff: 2     Page Ref: 4

Topic:  financial assets

Objective:  Identify the key components of the financial system

*:  Recurring

AACSB:  Reflective Thinking

 

 

4) Which of the following forms the largest share of household holdings of financial assets?

1. A) corporate stocks
2. B) bonds
3. C) pension fund reserves
4. D) equity in unincorporated businesses

Answer:  C

Diff: 1     Page Ref: 9-10

Topic:  financial assets

Special Feature:  Making the Connection: What Do People Do with Their Savings?

Objective:  Identify the key components of the financial system

AACSB:  Reflective Thinking

5) From 1978 to 2016, the percentage of wealth held by households decreased for all of the following categories of assets EXCEPT

1. A) corporate stocks.
2. B) bonds.
3. C) deposits.
4. D) equity in unincorporated businesses.

Answer:  A

Diff: 1     Page Ref: 9-10

Topic:  financial assets

Special Feature:  Making the Connection: What Do People Do with Their Savings?

Objective:  Identify the key components of the financial system

AACSB:  Reflective Thinking

 

6) Which of the following is NOT a key financial service provided by the financial system?

1. A) risk sharing
2. B) profitability
3. C) liquidity
4. D) information

Answer:  B

Diff: 1     Page Ref: 13

Topic:  financial system

Objective:  Identify the key components of the financial system

*:  Recurring

AACSB:  Reflective Thinking

 

 

7) Economists define risk as

1. A) the difference between the interest rate borrowers pay and the interest rate lenders receive.
2. B) the chance that the value of financial assets will change from what you expect.
3. C) the ease with which an asset can be exchanged for other assets or for goods and services.
4. D) the difference between the return on common stock and the return on corporate bonds.

Answer:  B

Diff: 1     Page Ref: 13

Topic:  financial system

Objective:  Identify the key components of the financial system

*:  Recurring

AACSB:  Reflective Thinking

 

8) Economists define liquidity as

1. A) the difference between the return on the asset and the return on a long-term U.S. Treasury bond.
2. B) the fraction the asset makes up of an investor’s portfolio.
3. C) the ease with which an asset can be exchanged for money.
4. D) the difference between the total demand for an asset and the total supply of the asset.

Answer:  C

Diff: 1     Page Ref: 13

Topic:  financial system

Objective:  Identify the key components of the financial system

*:  Recurring

AACSB:  Reflective Thinking

9) Which of the following assets is the most liquid?

1. A) money market mutual fund
2. B) computer
3. C) washing machine
4. D) U.S. Treasury bond

Answer:  A

Diff: 2     Page Ref: 13-14

Topic:  financial system

Objective:  Identify the key components of the financial system

*:  Recurring

AACSB:  Reflective Thinking

 

 

10) By providing and communicating information, the financial system

1. A) reduces the difference between the return on three-month U.S. Treasury bills and the return on thirty-year U.S. Treasury bonds.
2. B) relieves individual savers from the necessity of searching out individual borrowers.
3. C) eliminates the risk in investing in the stock market.
4. D) guarantees investors a reasonable return on their money.

Answer:  B

Diff: 2     Page Ref: 14

Topic:  financial system

Objective:  Identify the key components of the financial system

*:  Recurring

AACSB:  Reflective Thinking

 

11) Financial securities that represent partial ownership of a corporation are known as

1. A) bonds.
2. B) stocks.
3. C) coupons.
4. D) dividends.

Answer:  B

Diff: 1     Page Ref: 3

Topic:  financial assets

Objective:  Identify the key components of the financial system

*:  Recurring

AACSB:  Reflective Thinking

 

12) Securitization is the process of

1. A) issuing stocks to finance capital spending.
2. B) issuing bonds to finance purchases of equipment and structures.
3. C) reducing risk by decreasing corporate debt loads.
4. D) converting loans into securities.

Answer:  D

Diff: 1     Page Ref: 4

Topic:  financial assets

Objective:  Identify the key components of the financial system

*:  Recurring

AACSB:  Reflective Thinking

 

13) If a bank grants you a mortgage, the mortgage is

1. A) an asset to you as well as an asset to the bank.
2. B) an asset to you, but a liability to the bank.
3. C) a liability to you, but an asset to the bank.
4. D) a liability to you as well as a liability to the bank.

Answer:  C

Diff: 2     Page Ref: 4

Topic:  financial assets

Objective:  Identify the key components of the financial system

*:  Recurring

AACSB:  Reflective Thinking

 

14) Financial markets

1. A) channel funds indirectly between borrowers and lenders.
2. B) channel funds directly from lenders to borrowers.
3. C) act as go-betweens by holding a portfolio of assets and issuing claims based on that portfolio to savers.
4. D) generally provide lenders with lower returns than do financial intermediaries.

Answer:  B

Diff: 2     Page Ref: 4

Topic:  financial institutions

Objective:  Identify the key components of the financial system

*:  Recurring

AACSB:  Reflective Thinking

 

15) If you purchase a Treasury bond, the Treasury bond is

1. A) an asset to you as well as an asset to the U.S. government.
2. B) an asset to you, but a liability to the U.S. government.
3. C) a liability to you, but an asset to the U.S. government.
4. D) a liability to you as well as a liability to the U.S. government.

Answer:  B

Diff: 2     Page Ref: 4

Topic:  financial assets

Objective:  Identify the key components of the financial system

*:  Recurring

AACSB:  Reflective Thinking