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ECON302 Final Exam - Money, Banking, And Financial Markets
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MCQs on the importance of money, banking, and financial markets of a developed economy.

ECON302 Final Exam - Money, Banking, And Financial Markets
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25 Questions

1. Complete the following statement.The problem of adverse selection in financial markets, which financial intermediaries have evolved to minimize, refers to the difficulty in:
2. Why are bonds issued by municipalities to finance large projects attractive to investors?
3. The U.S. government is running a big budget deficit and plans to finance the deficit by borrowing.If everything else remaining constant, then what will happen to the supply of bonds and the interest rate?
4. A deposits funds with B for safekeeping. B lends the funds to C and charges C interest.Which of the following is true?
5. A new ten-year bond will be bought and sold in what market?
6. The asymmetric information problem that occurs after a financial transaction is called which of the following?
7. Why is one hundred dollars today not the same as one hundred dollars a year from now?
8. Under what condition will real interest rate in the economy be negative?
9. What is a secondary market?
10. Erica borrows $1,000.00 from Jorge.Jorge demands repayment in a year in the amount of $1,100.00.What is the yield to maturity?
11. Fill in the blanks.Financial markets foster economic growth by facilitating the transfer of funds from ______ to ______.
12. Money functions as which of the following?
13. To achieve the mandate of full employment, the Federal Reserve Bank could do which of the following?
14. Fill in the blanks.In a world where there is only direct financing, small savers would be subject to ______, because their portfolios would not be sufficiently ______.
15. Fill in the blanks.Financial intermediaries are the major means of moving funds from savers to borrowers, because they are able to provide financial services at ______ by taking advantage of ______.
16. Without financial intermediaries, why would small savers not benefit from financial markets?
17. Moral hazard occurs when a borrower does which of the following?
18. Complete the following statement.Adverse selection occurs when:
19. Why would a modern economy not operate efficiently without money?
20. If money is a unit of account, then which of the following is true?
21. What is the Federal Funds rate?
22. Complete the following statement.The federal funds market is the market where:
23. Complete the following statement.Money market instruments have maturities of:
24. Treasury bills are issued by which of the following?
25. James, John, and Kojo buy houses with funds from First All Bank.First All Bank puts all three loan agreements together, divides them into one hundred pieces of financial instruments, and sells them to several investors.The one hundred financial instruments can be accurately described as which of the following?

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