QUIZ 1

1. What are 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

2. 2. Financial market activities affect

• A. personal wealth

• B. spending decisions by individuals and business firms

• C. the economy’s location in the business cycle

• D. all of the above

3. 3. Markets in which funds are transferred from those who have excess funds available to

those who have a shortage of available funds are called

• A. commodity markets

• B. funds markets

• C. derivative exchange markets

• D. financial markets

4. 4. 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

5. The bond markets are important because

• A. they are easily the most widely followed financial markets in the United States

• B. they are the markets where interest rates are determined.

  
  

• C. they are the markets where foreign exchange rates are determined

• D. all of the above.

  
  

6. 6. Interest rates are important to financial institutions since an interest rate increase

_________ the cost of acquiring funds and _________ the income from assets

• A. decreases; decreases

• B. increases; increases

• C. decreases; increases

• D. increases; decreases