Economics of Money, Banking, and Financial Markets, 8e (Mishkin) Chapter 1 1.2 Why Study Banking and Financial Institutions?
1) Channeling funds from individuals with surplus funds to those desiring funds when the saver does not
purchase the borrower's security is known as A) barter. B) redistribution. C) financial intermediation. D) taxation. Answer: C
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2) Banks are important to the study of money and the economy because they
A) channel funds from investors to savers. B) have been a source of rapid financial innovation. C) are the only important financial institution in the U.S. economy. D) create inflation. Answer: B
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3) Economists group commercial banks, savings and loan associations, credit unions, mutual funds, mutual savings banks, insurance companies, pension funds, and finance companies together under the heading financial intermediaries. Financial intermediaries A) provide a channel for linking those who want to save with those who want to invest. B) produce nothing of value and are therefore a drain on society's resources. C) can hurt the performance of the economy. D) hold very little of the average American's wealth. Answer: A
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4) Banks, savings and loan associations, mutual savings banks, and credit unions
A) are no longer important players in financial intermediation. B) since deregulation now provide services only to small depositors. C) have been adept at innovating in response to changes in the regulatory environment. D) produce nothing of value and are therefore a drain on society's resources. Answer: C
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5) Banks and other financial institutions engage in financial intermediation, which
A) can hurt the performance of the economy. B) can benefit economic performance. C) has no effect on economic performance. D) involves borrowing from investors and lending to savers. Answer: B
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Economics of Money, Banking, and Financial Markets, 8e (Mishkin) Chapter 1
6) Financial institutions that accept deposits and make loans are called ________.
A) exchanges B) banks C) over-the-counter markets D) finance companies Answer: B
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7) The financial intermediaries that the average person interacts with most frequently are ________.
A) exchanges B) over-the-counter markets C) finance companies D) banks Answer: D
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8) Which of the following is not a financial institution?
A) a life insurance company B) a pension fund C) a credit union D) a business college Answer: D
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9) The delivery of financial services electronically is called ________.
A) e-business B) e-commerce C) e-finance D) e-possible Answer: C
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Economics of Money, Banking, and Financial Markets, 8e (Mishkin) Chapter 1 1.3 Why Study Money and Monetary Policy?
1) Money is defined as
A) bills of exchange. B) anything that is generally accepted in payment for goods and services or in the repayment of debt. C) a risk-free repository of spending power. D) the unrecognized liability of governments. Answer: B
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2) Evidence from the United States and other foreign countries indicates that
A) there is a strong positive association between inflation and growth rate of money over long periods of time. B) there is little support for the assertion that \phenomenon.\C) countries with low monetary growth rates tend to experience higher rates of inflation, all else being constant. D) money growth is clearly unrelated to inflation. Answer: A
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3) The upward and downward movement of aggregate output produced in the economy is referred to as the ________. A) roller coaster B) see saw C) business cycle D) shock wave Answer: C
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4) Sustained downward movements in the business cycle are referred to as
A) inflation. B) recessions. C) economic recoveries. D) expansions. Answer: B
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5) Prior to all recessions since 1900, there has been a drop in
A) inflation. B) the money stock. C) the growth rate of the money stock. D) interest rates. Answer: C
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Economics of Money, Banking, and Financial Markets, 8e (Mishkin) Chapter 1
6) Evidence from business cycle fluctuations in the United States indicates that
A) a negative relationship between money growth and general economic activity exists. B) recessions have been preceded by declines in share prices on the stock exchange. C) recessions have been preceded by dollar depreciation. D) recessions have been preceded by a decline in the growth rate of money. Answer: D
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7) A sharp increase in the growth of the money supply is likely followed by A) a recession. B) a depression. C) an increase in the inflation rate. D) no change in the economy. Answer: C
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8) It is true that inflation is a
A) continuous increase in the money supply. B) continuous fall in prices. C) decline in interest rates. D) continually rising price level. Answer: D
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9) ________ theory relates changes in the quantity of money to changes in aggregate economic activity and the price level. A) Monetary B) Fiscal C) Financial D) Systemic Answer: A
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10) The management of money and interest rates is called ________ policy and is conducted by a nation's
________ bank. A) monetary; superior B) fiscal; superior C) fiscal; central D) monetary; central Answer: D
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11) The organization responsible for the conduct of monetary policy in the United States is the
A) Comptroller of the Currency. B) U.S. Treasury. C) Federal Reserve System. D) Bureau of Monetary Affairs. Answer: C
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