Professional Documents
Culture Documents
1. When real income ________, the demand curve for money shifts to the ________ and the interest rate
________, everything else held constant.
A) falls; right; rises
B) rises; right; rises
C) falls; left; rises
D) rises; left; rises
2. Which of the following statements best explains how the use of money in an economy increases
economic efficiency?
A) Money increases economic efficiency because it is costless to produce.
B) Money increases economic efficiency because it discourages specialization.
C) Money increases economic efficiency because it decreases transactions costs.
D) Money cannot have an effect on economic efficiency.
3. High interest rates might __________ the purchase of a house or a car but at the same time high
interest rates might also ____________ saving.
A. encourage; discourage
B. discourage; encourage
C. encourage; encourage
D. discourage; discourage
6. Debt instruments (e.g., bonds) are _________ for the issuer and _____________ for the purchaser.
A. put options; call options
B. primary assets; secondary assets
C. assets; liabilities
D. liabilities; assets
9) The formula used the Bank of Canada in calculating the money supply is ________.
A) M = A1X1 + A2X2 + ... + AnXn
B) M =
C) M = X1 + X2 + +Xn
D) M =
10. A type of financial player that has a major role in ensuring the sale of corporate bonds in PRIMARY
markets is
A. a specialized trader on a stock exchange
B. a commercial banker
C. an investment banker
D. a Securities and Exchange Commissioner
16) A financial crisis occurs when an increase in asymmetric information from a disruption in the
financial system ________.
A) causes severe adverse selection and moral hazard problems that make financial markets incapable of
channelling funds efficiently
B) allows for a more efficient use of funds
C) increases economic activity
D) reduces uncertainty in the economy and increases market efficiency
17) When financial intermediaries deleverage, firms cannot fund investment opportunities resulting in
________.
A) a contraction of economic activity
B) an economic boom
C) an increased opportunity for growth
D) a call for government regulation
19) Of the following sources of external finance for Canadian nonfinancial businesses, the least
important is ________.
A) loans from banks
B) stocks
C) bonds and commercial paper
D) loans from other financial intermediaries
20) General Electric announces that it is going to cut its dividends by $0.02 per share in the future. This,
everything else remaining the same, will cause its current stock price to ________.
A) increase
B) decrease
C) remain the same
D) fluctuate
23) The bond markets are important because they are ________.
A) easily the most widely followed financial markets in Canada
B) the markets where foreign exchange rates are determined
C) where corporations and governments borrow to finance their activities
D) the markets where all borrowers get their funds
24) 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
25) In the country of Moneyland the law allows you to repay mortgage in rocks. Thus, ________.
A) Moneyland is a poor country
B) rocks in this country are considered as money
C) money is scarce
D) Moneyland is a developing country
Solutions (Good luck)
1. B 11. A 21. B
2. C 12. A 22. D
3. B 13. B 23. C
4. C 14. A 24. A
5. A 15. C 25. B
6. D 16. A
7. D 17. A
8. C 18. A
9. C 19. B
10. C 20. B