Money & Banking Final from practice test and actual exams

Money & Banking Final from practice test and actual exams A rising stock market index due to higher share prices a. decreases people's wealth, but is unlikely to increase their willingness to spend b. increases people's wealth and as a result may increase their willingness to spend c. decreases the amount of funds that business firms can raise by selling newlyissued stock d. increases people's wealth, but is unlikely to increase their willingness to spend - CORRECT ANSWER b. increases people's wealth and as a result may increase their willingness to spend Money is defined as a. a risk-free repository of spending power b. bills of exchange c. anything that is generally accepted in payment for goods and services or in the repayment of debt d. the unrecognized liability of governments - CORRECT ANSWER c. anything that is generally accepted in payment for goods and services or in the repayment of debt Evidence from business cycle fluctuations in the United States indicates that a. recessions have been preceded by declines in share prices on the stock exchange b. recessions have been preceded by dollar depreciation c. recessions have been preceded by a decline in the growth rate of money d. a negative relationship between money growth and general economic activity exists - CORRECT ANSWER c. recessions have been preceded by a decline in the growth rate of money Every financial market has the following characteristic: a. it allows loans to be made b. it channels funds from lenders-savers to borrowers-spenders c. it allows common stock to be traded d. it determines the level of interest rates - CORRECT ANSWER b. it channels funds from lenders-savers to borrowers-spenders Financial markets improve economic welfare because a. they allow consumers to time their purchase better b. they weed out inefficient firms c. they channel funds from investors to savers d. eliminate the need for indirect finance - CORRECT ANSWER a. they allow consumers to time their purchase better An important function of secondary markets is to a. make it easier for governments to raise taxes b. create a market for newly constructed houses c. make it easier to sell financial instruments to raise funds d. raise funds for corporations through the sale of securities - CORRECT ANSWER c. make it easier to sell financial instruments to raise funds Which of the following statements about the characteristics of debt and equity are true? a. debt is a claim on the issuer's assets, but equity is a claim on the issuer's income b. they can both be long-term financial instruments c. they can both be short-term financial instruments d. both (a) and (b) of the above e. both (a) and (c) of the ab