________ markets transfer funds from people who have an excess of available funds to people who have a shortage.

6) ________ markets transfer funds from people who have an excess of available funds to people
who have a shortage.
A) Commodity
B) Fund-available
C) Financial
D) Derivative exchange
Answer: C
Ques Status: Previous Edition
7) Poorly performing financial markets can be the cause of
A) wealth.
B) poverty.
C) financial stability.
D) financial expansion.
Answer: B
Ques Status: Previous Edition
8) The bond markets are important because they are
A) easily the most widely followed financial markets in the United States.
B) the markets where foreign exchange rates are determined.
C) the markets where interest rates are determined.
D) the markets where all borrowers get their funds.
Answer: C
Ques Status: Previous Edition
9) 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
Ques Status: Previous Edition
10) Compared to interest rates on long-term U.S. government bonds, interest rates on three-month
Treasury bills fluctuate ________ and are ________ on average.
A) more; lower
B) less; lower
C) more; higher
D) less; higher
Answer: A
Ques Status: Previous Edition
11) The interest rate on Baa (medium quality) corporate bonds is ________, on average, than other
interest rates, and the spread between it and other rates became ________ in the 1970s.
A) lower; smaller
B) lower; larger
C) higher; smaller
D) higher; larger
Answer: D
Ques Status: Previous Edition
12) Everything else held constant, a decline in interest rates will cause spending on housing to
A) fall.
B) remain unchanged.
C) either rise, fall, or remain the same.
D) rise.
Answer: D
Ques Status: Previous Edition
13) High interest rates might ________ purchasing a house or car but at the same time high interest
rates might ________ saving.
A) discourage; encourage
B) discourage; discourage
C) encourage; encourage
D) encourage; discourage
Answer: A
Ques Status: New
14) An increase in interest rates might ________ saving because more can be earned in interest
income.
A) encourage
B) discourage
C) disallow
D) invalidate
Answer: A
Ques Status: Previous Edition
15) Everything else held constant, an increase in interest rates on student loans
A) increases the cost of a college education.
B) reduces the cost of a college education.
C) has no effect on educational costs.
D) increases costs for students with no loans.
Answer: A
Ques Status: Previous Edition
16) High interest rates might cause a corporation to ________ building a new plant that would
provide more jobs.
A) complete
B) consider
C) postpone
D) contemplate
Answer: C
Ques Status: Previous Edition
17) The stock market is important because it is
A) where interest rates are determined.
B) the most widely followed financial market in the United States.
C) where foreign exchange rates are determined.
D) the market where most borrowers get their funds.
Answer: B
Ques Status: Previous Edition
18) Stock prices are
A) relatively stable trending upward at a steady pace.
B) relatively stable trending downward at a moderate rate.
C) extremely volatile.
D) unstable trending downward at a moderate rate.
Answer: C
Ques Status: Revised
19) A rising stock market index due to higher share prices
A) increases peopleʹs wealth, but is unlikely to increase their willingness to spend.
B) increases peopleʹs 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) decreases peopleʹs wealth, but is unlikely to increase their willingness to spend.
Answer: B
Ques Status: Previous Edition
20) When stock prices fall
A) an individualʹs wealth is not affected nor is their willingness to spend.
B) a business firm will be more likely to sell stock to finance investment spending.
C) an individualʹs wealth may decrease but their willingness to spend is not affected.
D) an individualʹs wealth may decrease and their willingness to spend may decrease.
Answer: D
Ques Status: Previous Edition
21) Changes in stock prices
A) do not affect peopleʹs wealth and their willingness to spend.
B) affect firmsʹ decisions to sell stock to finance investment spending.
C) occur in regular patterns.
D) are unimportant to decision makers.
Answer: B
Ques Status: Previous Edition

22) An increase in stock prices ________ the size of peopleʹs wealth and may ________ their

willingness to spend, everything else held constant.

A) increases; increase

B) increases; decrease

C) decreases; increase

D) decreases; decrease

Answer: A

Ques Status: Previous Edition

23) Low stock market prices might ________ consumers willingness to spend and might ________

businesses willingness to undertake investment projects.

A) increase; increase

B) increase; decrease

C) decrease; decrease

D) decrease; increase

Answer: C

Ques Status: New

24) Fear of a major recession causes stock prices to fall, everything else held constant, which in turn

causes consumer spending to

A) increase.

B) remain unchanged.

C) decrease.

D) cannot be determined.

Answer: C

Ques Status: Previous Edition

25) A share of common stock is a claim on a corporationʹs

A) debt.

B) liabilities.

C) expenses.

D) earnings and assets.

Answer: D

Ques Status: Revised

26) On ________, October 19, 1987, the market experienced its worst one-day drop in its entire

history with the DIJA falling by more than 500 points.

A) ʺTerrible Tuesdayʺ

B) ʺWoeful Wednesdayʺ

C) ʺFreaky Fridayʺ

D) ʺBlack Mondayʺ

Answer: D

Ques Status: Previous Edition