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Money, Banking, and Financial Markets Practice Test: The Basics
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Money, Banking, and Financial Markets Practice Test: The Basics
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25 Questions

1. Markets in which funds are transferred from those who have excess funds available to those who have a shortage of available funds are called
2. A budget ________ occurs when government expenditures exceed tax revenues for a particular time period.
3. Which of the following items are not counted in U.S. GDP?
4. A share of common stock is a claim on a corporationʹs
5. Financial markets promote greater economic efficiency by channeling funds from ________ to________.
6. Nominal GDP is output measured in ________ prices while real GDP is output measured in ________ prices.
7. ________ policy involves decisions about government spending and taxation.
8. If an economy has aggregate output of $20 trillion, then aggregate income is
9. The bond markets are important because they are
10. Changes in stock prices
11. Well-functioning financial markets promote
12. Complete Milton Friedmanʹs famous statement, ʺInflation is always and everywhere a ________ phenomenon.ʺ
13. American companies can borrow funds
14. If the price of a euro (the European currency) increases from $1.00 to $1.10, then, everything else held constant,
15. When tax revenues are greater than government expenditures, the government has a budget________.
16. The price of one countryʹs currency in terms of another countryʹs currency is called the
17. Everything else held constant, a decline in interest rates will cause spending on housing to
18. The Dow reached a peak of over 11,000 before the collapse of the ________ bubble in 2000.
19. Which of the following is not a financial institution?
20. The decline in stock prices from 2000 through 2002
21. Financial institutions that accept deposits and make loans are called ________.
22. When in 1985 a British pound cost approximately $1.30, a Shetland sweater that cost 100 British pounds would have cost $130. With a weaker dollar, the same Shetland sweater would have cost
23. Fear of a major recession causes stock prices to fall, everything else held constant, which in turn causes consumer spending to
24. Banks are important to the study of money and the economy because they
25. Poorly performing financial markets can be the cause of

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