1) The price paid for the rental of borrowed funds (usually expressed as a percentage
of
the rental of $100 per year) is commonly referred to as the
A) inflation rate.
B) exchange rate.
C) interest rate.
D) aggregate price level.
Answer: C
2) Financial markets and institutions
A) involve the movement of huge quantities of money.
B) affect the profits of businesses.
C) affect the types of goods and services produced in an economy.
D) do all of the above.
E) do only (A) and (B) of the above.
Answer: D
3) Which of the following can be described as involving direct finance?
A) A corporation使
s stock is traded in an
over-the-counter market.
B) People buy shares in a mutual fund.
C) A pension fund manager buys commercial paper in the secondary market.
D)
An
insurance
company
buys
shares
of
common
stock
in
the
over-the-counter
markets.
E) None of the above.
Answer: E
4) The purpose of diversification is to
A) reduce the volatility of a portfolio使
s return.
B) raise the volatility of a portfolio使
s return.
C) reduce the average return on a portfolio.
D) raise the average return on a portfolio.
Answer: A
5) When the interest rate on a bond is _________ the equilibrium interest rate, there is
excess_________ in the bond market and the interest rate will _________.
A) below; demand; rise
B) below; demand; fall
C) below; supply; rise
D) above; supply; fall
Answer: C
6)
In
a
recession
when
income
and
wealth
are
falling,
the
demand
for
bonds
_________ and the
demand curve shifts to the _________.
A) falls; right