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 newly-issued 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