Full Test Bank Ch17 The Financial System And Investing 459 - Contemporary Business 19e | Practice Test Bank by Louis E. Boone. DOCX document preview.
Package Title: Chapter 17, Testbank
Course Title: Boone, Contemporary Business, 19th Edition
Chapter Number: 17
Question type: Multiple Choice
1) The ______ is sometimes referred to as the Big Board, the most famous and one of the oldest stock markets in the world, having been founded in 1792.
a) NASDAQ
b) credit unions
c) Federal Open Market
d) New York Stock Exchange
Difficulty: Easy
Learning Objective 1: 17-04: Understand the stock markets.
Section Reference 1: Understanding Stock Markets
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
2) In the United States, most households are _____ because they conserve more funds than they use.
a) net spenders
b) limit order
c) primary markets
d) net savers
Difficulty: Easy
Learning Objective 1: 17-01: Understand the financial system.
Section Reference 1: Understanding the Financial System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
3) When bond rates start to decline, issuers usually use the _____ to redeem the bond before its maturity at a specified price.
a) financial system
b) call provision
c) securities
d) limit order
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
4) _____ are backed only by the financial reputation of the issuing corporation.
a) Bonds
b) Call provisions
c) Securities
d) Debentures
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
5) By selling ____, a firm obtains long-term debt capital.
a) bonds
b) Securities
c) limit orders
d) debentures
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
6) ______ represent obligations on the part of issuers to provide purchasers with expected or stated returns on the funds invested or loaned.
a) Bonds
b) Call provisions
c) Securities
d) Debentures
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
7) The process by which money flows from savers to users is called the _____.
a) financial system
b) call provision
c) limit order
d) primary market
Difficulty: Easy
Learning Objective 1: 17-01: Understand the financial system.
Section Reference 1: Understanding the Financial System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
8) _____ is a global electronic marketplace where securities are bought and sold.
a) NASDAQ
b) Federal Open Market
c) New York Stock Exchange
d) Primary market
Difficulty: Easy
Learning Objective 1: 17-04: Understand the stock markets.
Section Reference 1: Understanding Stock Markets
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
9) ______ are cooperative financial institutions that are owned by their depositors, all of whom are members.
a) Commercial banks
b) Credit unions
c) Internet-only banks
d) Primary market
Difficulty: Easy
Learning Objective 1: 17-05: Describe financial institutions and the growth of financial technology (FinTech).
Section Reference 1: Financial Institutions
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
10) The financial market where corporations and governments issue securities and sell them initially to the general public is called the ______.
a) NASDAQ
b) Federal Open Market
c) New York Stock Exchange
d) Primary market
Difficulty: Easy
Learning Objective 1: 17-03: Discuss financial markets.
Section Reference 1: Financial Markets
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
11) In a(n) ______, a price ceiling is set when buying or a price floor is set when selling.
a) Financial system
b) Call provision
c) Limit order
d) Debenture
Difficulty: Easy
Learning Objective 1: 17-04: Understand the stock markets.
Section Reference 1: Understanding Stock Markets
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
12) Ally Bank is an example of _____.
a) commercial banks
b) credit unions
c) financial system
d) Internet-only banks
Difficulty: Easy
Learning Objective 1: 17-05: Describe financial institutions and the growth of financial technology (FinTech).
Section Reference 1: Financial Institutions
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
13) _____ are the largest and probably most important financial institutions in the United States and in most other countries as well.
a) Commercial banks
b) Credit unions
c) Internet-only banks
d) Debentures
Difficulty: Easy
Learning Objective 1: 17-05: Describe financial institutions and the growth of financial technology (FinTech).
Section Reference 1: Financial Institutions
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
14) The _____ sets most policies concerning monetary policy and interest rates.
a) NASDAQ
b) financial system
c) Federal Open Market Committee (FOMC)
d) New York Stock Exchange
Difficulty: Easy
Learning Objective 1: 17-06: Explain the role of the Federal Reserve System.
Section Reference 1: The Role of the Federal Reserve System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
15) The use of material nonpublic information about a company to make an investment profit is known as _____.
a) financial system
b) call provision
c) insider trading
d) limit order
Difficulty: Easy
Learning Objective 1: 17-07: Describe the regulation of the financial system.
Section Reference 1: Regulation of the Financial System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
16) Which of the following is a net saver in the U.S. financial system?
a) Households
b) Business
c) The government
d) Financial institutions
Difficulty: Easy
Learning Objective 1: 17-01: Understand the financial system.
Section Reference 1: Understanding the Financial System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
17) The process by which money flows from savers to users is called the _____.
a) net worth
b) gross worth
c) financial system
d) debt factor
Difficulty: Easy
Learning Objective 1: 17-01: Understand the financial system.
Section Reference 1: Understanding the Financial System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
18) One of the most important variables that determine how much a person saves is _____.
a) what country he or she is from
b) the person’s gender
c) the person’s race
d) the person’s age
Difficulty: Easy
Learning Objective 1: 17-01: Understand the financial system.
Section Reference 1: Understanding the Financial System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
19) The difference between the value of what you own and what you currently owe is called _____.
a) net worth
b) gross worth
c) net value
d) debt factor
Difficulty: Easy
Learning Objective 1: 17-01: Understand the financial system.
Section Reference 1: Understanding the Financial System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
20) Funds can be transferred between savers and users in two ways: _____.
a) individually and collectively
b) in person and electronically
c) directly and indirectly
d) free and with user charges
Difficulty: Easy
Learning Objective 1: 17-01: Understand the financial system.
Section Reference 1: Understanding the Financial System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
21) The Roxy Bank of Englewood pools customer deposits and uses the funds to make loans to businesses and households. These businesses and households, now known as the borrowers, pay the bank interest, and the bank, in turn, pays depositors interest for the use of their money. Which of the following would best describe the process used by the bank?
a) Foreign exchange
b) Direct transfer
c) Indirect transfer
d) Barter system
Difficulty: Medium
Learning Objective 1: 17-01: Understand the financial system.
Section Reference 1: Understanding the Financial System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
22) If an individual owns 10% of the assets in a particular company, he or she becomes a(n) _____.
a) auditor
b) lender
c) borrower
d) shareholder
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
23) _______, also called financial instruments, represent obligations on the part of the issuers—businesses and governments—to provide the purchasers with expected or stated returns on the funds invested or loaned.
a) FDIC
b) Exchanges
c) The Fed
d) Securities
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
24) Which of these are units of ownership held by shareholders in corporations?
a) Money market instruments
b) Stock
c) Bonds
d) Cash
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
25) All of the following are types of securities EXCEPT _____.
a) money market instruments
b) stock
c) bonds
d) cash
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
26) _____ are short-term debt securities issued by governments, financial institutions, and corporations.
a) Stock
b) Bonds
c) Checks
d) Money market instruments
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
27) Amanda buys a money market instrument. It will mature within, at most, _____.
a) 10 years
b) 2 years
c) 1 year
d) 6 months
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
28) Which of these are short-term securities is issued by the U.S. Treasury and backed by the full faith and credit of the U.S. government?
a) Treasury bills
b) CDs
c) Commercial paper
d) Bonds
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
29) Treasury bills have a minimum denomination of _____.
a) $100,000
b) $10,000
c) $1,000
d) $100
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
30) Which of the following is a form of short-term financing sold by corporations, such as Raytheon, that mature from 1 to 270 days from the date of issue?
a) Bonds
b) CDs
c) Treasury bills
d) Commercial paper
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
31) A ______ is a time deposit at a financial institution, such as a commercial bank, savings bank, or credit union.
a) commercial paper
b) treasury bill
c) certificate of deposit
d) bond
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
32) Which of these are creditors (an entity to whom a debt is owed) of a corporation or government body?
a) Commercial paper holders
b) Bondholders
c) Treasury bills holders
d) Certificate of deposit holders
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
33) The U.S. Department of Treasury sells what type of bonds?
a) Corporate bonds
b) Government bonds
c) Certificate of deposits bonds
d) Municipal bonds
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
34) Two types of municipal bonds exist. What are they?
a) Government bonds and mortgage pass-through security bonds
b) Corporate bonds and general obligation bonds
c) Revenue bonds and government bonds
d) Revenue bonds and general obligation bonds
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
35) A ______ bond is a bond issue whose proceeds will be used to pay for a project that will produce income.
a) government bond
b) corporate bond
c) revenue bond
d) general obligation bonds
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
36) A ______ bond is a bond whose proceeds are to be used to pay for a project that will not produce any income.
a) government bond
b) corporate bond
c) revenue bond
d) general obligation bonds
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
37) Corporate bonds are a diverse group and often vary based on the _____ that backs it.
a) market
b) value
c) collateral
d) company
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
38) Veronica just bought a bond from United Pet Group. This bond is only backed by the financial reputation of the company. What type of bond did Veronica buy?
a) Debenture
b) Secured bond
c) Certificate of deposit
d) Commercial paper
Difficulty: Medium
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
39) Which securities are backed by a pool of mortgage loans purchased from lenders, such as savings banks?
a) Mortgage pass-through
b) Mortgage bond
c) Commercial paper
d) Corporate bond
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
40) Bonds with ratings _____ and above are classified as investment grade bonds.
a) A
b) BBB
c) BB+
d) AA
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
41) Two factors determine the price of a bond: _____ and _____.
a) risk; interest rate
b) market; risk
c) interest rate; call provision
d) price of other bonds; the company selling the bond
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
42) For which type of bonds, interest is exempt from state income taxes?
a) Corporate bonds
b) U.S. Treasury bonds
c) Junk bonds
d) Financial institution bonds
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
43) Bonds with ratings of BBB and above are classified as _____.
a) speculative bonds
b) investment-grade bonds
c) junk bonds
d) convertible bonds
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
44) Other things being equal, as interest rate rises, the price of a bond _____.
a) stays the same
b) will also rise
c) cannot be determined
d) decreases
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
45) What provision allows the issuer to redeem the bond before its maturity at a specified price?
a) Bond provision
b) Convertible provision
c) Call provision
d) Redeem provision
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
46) The basic form of corporate ownership is embodied in _____.
a) preferred stock
b) standard stock
c) convertible securities
d) common stock
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
47) Which of the following is a depository financial institution?
a) Life insurance companies
b) Credit unions
c) Pension funds
d) Mutual funds
Difficulty: Easy
Learning Objective 1: 17-05: Describe financial institutions and the growth of financial technology (FinTech).
Section Reference 1: Financial Institutions
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
48) Which form of stock owner would receive dividend payments first?
a) Convertible securities
b) Common stock
c) Preferred stock
d) Standard stock
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
49) What feature gives the bondholder or preferred stockholder the right to exchange the bond or preferred stock for a fixed number of shares of common stock?
a) Bond rating
b) Convertible securities
c) Pass-through securities
d) Standard stock
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
50) When a company needs capital to purchase inventory, expand a plant, make major investments, acquire another firm, or pursue other business goals, it may sell a bond or stock issue to the investing public. This is done in the ______ market.
a) primary
b) secondary
c) government
d) labor
Difficulty: Easy
Learning Objective 1: 17-03: Discuss financial markets.
Section Reference 1: Financial Markets
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
51) Which of these is a collection of financial markets in which previously issued securities are traded among investors?
a) The primary market
b) The secondary market
c) The government market
d) The super market
Difficulty: Easy
Learning Objective 1: 17-03: Discuss financial markets.
Section Reference 1: Financial Markets
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
52) Which are the two largest stock markets in the world?
a) New York Stock Exchange; SP 500
b) Tokyo Stock Exchange; New York Stock Exchange
c) Tokyo Stock Exchange; London Stock Exchange
d) New York Stock Exchange; NASDAQ stock market
Difficulty: Easy
Learning Objective 1: 17-04: Understand the stock markets.
Section Reference 1: Understanding Stock Markets
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
53) Which U.S. stock market focuses on the stocks of smaller companies?
a) NYSE
b) NASDAQ
c) IEX
d) AMEX
Difficulty: Easy
Learning Objective 1: 17-04: Understand the stock markets.
Section Reference 1: Understanding Stock Markets
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
54) The _____ involves the direct trading of exchange-listed stocks off the floor of the exchange (in the case of NYSE-listed stocks) or outside the network (in the case of NASDAQ-listed stocks).
a) American Stock Exchange
b) fourth market
c) secondary market
d) primary market
Difficulty: Easy
Learning Objective 1: 17-04: Understand the stock markets.
Section Reference 1: Understanding Stock Markets
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
55) Which of these connect major brokerages and individual traders virtually using the Internet, so that trades can be made directly without going through an intermediary?
a) Open market operations
b) Electronic communications networks
c) Nondepository financial institutions
d) Traditional brick-and-mortar online transactions
Difficulty: Easy
Learning Objective 1: 17-04: Understand the stock markets.
Section Reference 1: Understanding Stock Markets
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
56) The ______ order instructs the broker to obtain the best possible price—the highest price when selling and the lowest price when buying.
a) fast
b) stock
c) market
d) limit
Difficulty: Easy
Learning Objective 1: 17-04: Understand the stock markets.
Section Reference 1: Understanding Stock Markets
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
57) Which of the following statements is incorrect?
a) The number of commercial banks is declining each year.
b) Commercial banks are the most important financial institution.
c) Commercial banks are prohibited from selling securities or insurance.
d) Banks offer the widest range of services of any financial institution.
Difficulty: Easy
Learning Objective 1: 17-05: Describe financial institutions and the growth of financial technology (FinTech).
Section Reference 1: Financial Institutions
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
58) A ______ is a nondepository financial institution that has the ability to provide higher returns, albeit with greater risk.
a) yearling
b) blue chip
c) hedge fund
d) mutual fund
Difficulty: Easy
Learning Objective 1: 17-05: Describe financial institutions and the growth of financial technology (FinTech).
Section Reference 1: Financial Institutions
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
59) Francisco made a purchase at his local Walmart. Instead of writing a check, Francisco used a card issued by his bank. He entered his PIN and the purchase was automatically deducted from his checking account. Francisco used his __________ card.
a) credit
b) debit
c) mortgage
d) point-of-sale
Difficulty: Medium
Learning Objective 1: 17-05: Describe financial institutions and the growth of financial technology (FinTech).
Section Reference 1: Financial Institutions
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
60) Deposit insurance shifts most of the financial risk of bank failures from the depositors to _____.
a) the bank's creditors
b) the bank's stockholders
c) the borrowers
d) the federal agency
Difficulty: Easy
Learning Objective 1: 17-05: Describe financial institutions and the growth of financial technology (FinTech).
Section Reference 1: Financial Institutions
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
61) A _____ is organized as a not-for-profit cooperative.
a) Commercial bank
b) Credit union
c) Life insurance company
d) Savings bank
Difficulty: Easy
Learning Objective 1: 17-05: Describe financial institutions and the growth of financial technology (FinTech).
Section Reference 1: Financial Institutions
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
62) A(n) _____ helps underwrite equity and debt (bond) offerings and helps devise and implement financial strategies.
a) investment banker
b) public accountant
c) auditor
d) management accountant
Difficulty: Easy
Learning Objective 1: 17-05: Describe financial institutions and the growth of financial technology (FinTech).
Section Reference 1: Financial Institutions
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
63) Savings banks were originally established to make __________ loans.
a) home mortgage
b) business
c) agricultural
d) automobile
Difficulty: Easy
Learning Objective 1: 17-05: Describe financial institutions and the growth of financial technology (FinTech).
Section Reference 1: Financial Institutions
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
64) A(n) _______ is a nondepository financial institution.
a) Insurance company
b) Savings bank
c) Commercial bank
d) Credit union
Difficulty: Easy
Learning Objective 1: 17-05: Describe financial institutions and the growth of financial technology (FinTech).
Section Reference 1: Financial Institutions
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
65) The process used by an insurance company to determine whom to insure and how much to charge is called _____.
a) a premium
b) underwriting
c) an insuring agreement
d) indemnity
Difficulty: Easy
Learning Objective 1: 17-05: Describe financial institutions and the growth of financial technology (FinTech).
Section Reference 1: Financial Institutions
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
66) _________ invest the greatest percentage of its assets in common stocks and real estate.
a) Commercial banks
b) Pension funds
c) Credit unions
d) Property and liability insurance companies
Difficulty: Easy
Learning Objective 1: 17-05: Describe financial institutions and the growth of financial technology (FinTech).
Section Reference 1: Financial Institutions
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
67) What type of financial institution raises money from investors by selling shares?
a) Credit unions
b) Property and liability insurance companies
c) Mutual funds
d) Pension funds
Difficulty: Easy
Learning Objective 1: 17-05: Describe financial institutions and the growth of financial technology (FinTech).
Section Reference 1: Financial Institutions
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
68) There are __________ Federal Reserve districts.
a) 5
b) 8
c) 12
d) 15
Difficulty: Easy
Learning Objective 1: 17-06: Explain the role of the Federal Reserve System.
Section Reference 1: The Role of the Federal Reserve System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
69) Which of the following statements concerning the Fed is incorrect?
a) The Fed is the nation's central bank.
b) The Fed acts as the banker's bank.
c) Credit unions and savings banks must belong to the Fed.
d) Virtually, all large commercial banks are Fed members.
Difficulty: Easy
Learning Objective 1: 17-06: Explain the role of the Federal Reserve System.
Section Reference 1: The Role of the Federal Reserve System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
70) All of the following are included in M1 EXCEPT _____.
a) money market mutual funds
b) total value of coins
c) checking accounts
d) currency in circulation
Difficulty: Easy
Learning Objective 1: 17-06: Explain the role of the Federal Reserve System.
Section Reference 1: The Role of the Federal Reserve System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
71) M2 includes __________ M1.
a) all of
b) none of
c) some of
d) half of
Difficulty: Easy
Learning Objective 1: 17-06: Explain the role of the Federal Reserve System.
Section Reference 1: The Role of the Federal Reserve System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
72) Which of the following is not one of the four major policy tools the Fed has for controlling the growth in the supply of money and credit?
a) Reserve requirements
b) Check clearing
c) The discount rate
d) Open market operations
Difficulty: Easy
Learning Objective 1: 17-06: Explain the role of the Federal Reserve System.
Section Reference 1: The Role of the Federal Reserve System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
73) The rate the Fed charges member banks for short-term loans is called the _____.
a) discount rate
b) margin rate
c) federal funds rate
d) reserve requirement
Difficulty: Easy
Learning Objective 1: 17-06: Explain the role of the Federal Reserve System.
Section Reference 1: The Role of the Federal Reserve System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
74) Which of the following interest rates does the Federal Reserve actually set?
a) Federal funds rate
b) Discount rate
c) Government bond rate
d) Commercial paper rate
Difficulty: Easy
Learning Objective 1: 17-06: Explain the role of the Federal Reserve System.
Section Reference 1: The Role of the Federal Reserve System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
75) If the Fed reduced reserve requirements, _____.
a) banks would have less money to lend businesses and consumers
b) economic growth would decline
c) inflation would decline
d) banks would have more money to lend out
Difficulty: Medium
Learning Objective 1: 17-06: Explain the role of the Federal Reserve System.
Section Reference 1: The Role of the Federal Reserve System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
76) Which of the following actions would have the effect of increasing the supply of money and credit and lowering interest rates?
a) The Fed buys government securities.
b) The Fed raises the margin requirement.
c) The Fed raises the reserve requirement.
d) The Fed raises the discount rate.
Difficulty: Easy
Learning Objective 1: 17-06: Explain the role of the Federal Reserve System.
Section Reference 1: The Role of the Federal Reserve System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
77) When the Fed sells government securities, banks have __________ money to lend and economic growth _____.
a) less; will slow
b) less; will accelerate
c) more; will slow
d) more; will accelerate
Difficulty: Easy
Learning Objective 1: 17-06: Explain the role of the Federal Reserve System.
Section Reference 1: The Role of the Federal Reserve System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
78) Which of the following policy tools does the Fed use most frequently?
a) Open market operations
b) Reserve requirement
c) Margin requirements
d) The discount rate
Difficulty: Easy
Learning Objective 1: 17-06: Explain the role of the Federal Reserve System.
Section Reference 1: The Role of the Federal Reserve System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
79) The chairman of the Federal Reserve Board can accelerate economic activity by lowering interest rates. What primary method does the Federal Reserve use to accomplish this?
a) Selling margin requirements
b) Increasing the discount rate
c) Increasing reserve requirements
d) Buying Treasury securities
Difficulty: Easy
Learning Objective 1: 17-06: Explain the role of the Federal Reserve System.
Section Reference 1: The Role of the Federal Reserve System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
80) ______ regulate(s) both state and federally chartered commercial banks.
a) The Federal Reserve
b) Federal comptroller
c) State banking agencies
d) The FDIC
Difficulty: Easy
Learning Objective 1: 17-07: Describe the regulation of the financial system.
Section Reference 1: Regulation of the Financial System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
81) The Securities and Exchange Commission requires virtually all new public issues of corporate securities to be registered. As part of the registration process for a new security issue, the issuer must prepare a(n) _____.
a) essay
b) prospectus
c) application
d) financial report
Difficulty: Easy
Learning Objective 1: 17-07: Describe the regulation of the financial system.
Section Reference 1: Regulation of the Financial System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
82) Which of the following is defined as the use of material nonpublic information about a company to make investment profits?
a) Underwriting
b) Insider trading
c) Thrift supervision
d) Self-regulation
Difficulty: Easy
Learning Objective 1: 17-07: Describe the regulation of the financial system.
Section Reference 1: Regulation of the Financial System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
83) The ___ establishes and updates rules to ensure that member brokers perform their basic functions honestly and fairly.
a) NASD
b) NASDAQ
c) NYSE
d) FDIC
Difficulty: Easy
Learning Objective 1: 17-07: Describe the regulation of the financial system.
Section Reference 1: Regulation of the Financial System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
84) All market participants must keep detailed records of every aspect of every trade. What is this called?
a) Paper trail
b) Audit trail
c) Trade record
d) Prospectus
Difficulty: Easy
Learning Objective 1: 17-07: Describe the regulation of the financial system.
Section Reference 1: Regulation of the Financial System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
85) Which of the following U.S. institutions is among the world’s 20 largest banks?
a) Citizens Financial Group
b) HSBC North America Holdings
c) JPMorgan Chase
d) Ally Financial
Difficulty: Easy
Learning Objective 1: 17-08: Discuss the global perspective of the financial system
Section Reference 1: The Financial System: A Global Perspective
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
86) A local government in Montana issued bonds to the general public to build a community park in the locality. The primary objective of the proposed community park is to enhance the green cover in the locality. Which of the following best describes the bonds issued in this scenario?
a) General obligation bond
b) Secured bond
c) Revenue bond
d) Pass-through bond
Difficulty: Medium
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
87) A local government agency of Minnesota issued municipal securities for the purpose of building a community hospital. Austin Hunter Corp, a financial services company, decides to purchase these securities from the government and resell them to the investing public. Which of the following describes the process undertaken by Austin Hunter Corp.?
a) Tombstone
b) Underwriting
c) Limit order
d) Check clearing
Difficulty: Medium
Learning Objective 1: 17-03: Discuss financial markets.
Section Reference 1: Financial Markets
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
88) Operating under severe recessionary conditions, the Federal Reserve System decides to reduce its reserve requirements from the current level of 9% to 7.5%. Which of the following is likely to happen following the Fed’s move?
a) The rate of unemployment will double.
b) The rate of growth in the economy will fall drastically.
c) It increases the availability of credit with the commercial banks.
d) Businesses will find it difficult to borrow at cheaper rates of interest.
Difficulty: Medium
Learning Objective 1: 17-06: Explain the role of the Federal Reserve System.
Section Reference 1: The Role of the Federal Reserve System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
89) Federico works at Martinez Inc., a multinational technology giant. As a senior accountant at the company, Federico had exclusive access to some of the sensitive financial information of Martinez. It was later found that Federico had sold some of the sensitive information to a rival company for an undisclosed amount. Which of the following describes Federico’s activity?
a) Underwriting
b) Insider trading
c) Limit order
d) Check clearing
Difficulty: Medium
Learning Objective 1: 17-07: Describe the regulation of the financial system.
Section Reference 1: Regulation of the Financial System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
90) Remote Inc., an automobile company, decides to expand its operation abroad by setting up three new manufacturing plants. Since enough funds were not available for this expansion process, Remote decides to list its company on its national stock exchange and issue securities for raising additional capital. The market for Remote’s securities can be described as a(n) ______ market.
a) secondary
b) insider
c) primary
d) limit order
Difficulty: Medium
Learning Objective 1: 17-03: Discuss financial markets.
Section Reference 1: Financial Markets
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
Question type: True/False
91) Households are net users of funds, while businesses are net savers.
Difficulty: Easy
Learning Objective 1: 17-01: Understand the financial system.
Section Reference 1: Understanding the Financial System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
92) The financial system describes the process by which funds flow from savers to users.
Difficulty: Easy
Learning Objective 1: 17-01: Understand the financial system.
Section Reference 1: Understanding the Financial System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
93) Households, businesses, government, financial institutions, and financial markets together form what is known as the financial system.
Difficulty: Easy
Learning Objective 1: 17-01: Understand the financial system.
Section Reference 1: Understanding the Financial System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
94) Securities represent obligations on the part of issuers—businesses and governments—to provide purchasers with expected or stated returns on the funds invested or loaned.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
95) The vast majority of funds flow through direct transfers.
Difficulty: Easy
Learning Objective 1: 17-01: Understand the financial system.
Section Reference 1: Understanding the Financial System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
96) Money market instruments are purchased by investors when they are in need of a quick resell and are generally high-risk securities.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
97) Money market instruments are short-term debt securities issued by individuals who are savers.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
98) A general obligation bond is a bond issue whose proceeds will be used to pay for a project that will produce revenue, such as a toll road or bridge.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
99) Treasury bills have a minimum denomination of $1,000.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
100) Interest is always exempt from state income taxes in any type of bonds.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
101) Generally, commercial paper is considered a very high-risk security.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
102) Commercial paper is securities sold by corporations, such as Raytheon, that mature from 1 to 270 months from the date of issue.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
103) Bonds are issued in various denominations—face values—usually between $100 and $2,500.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
104) CDs per depositor with denominations of $1,000,000 or less are federally insured.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
105) Bondholders are creditors, and therefore they have a claim on the firm’s assets that must be satisfied before any claims of stockholders in the event of the firm’s bankruptcy, reorganization, or liquidation.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
106) Morgan wants to purchase a low-risk bond. Therefore, he should buy a government bond.
Difficulty: Medium
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
107) The Treasury sells bonds that mature in 2, 5, 10, and 30 years from the date of issue.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
108) Municipal bonds are exempt from interest payments of federal income tax.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
109) The federal government generally issues the municipal bonds.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
110) A town is considering putting in a toll road that will produce revenue for the town. To provide funding, the town will sell revenue bonds.
Difficulty: Medium
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
111) Secured bonds are backed by a specific pledge of company assets.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
112) Mortgage pass-through securities are relatively safe even though all mortgages in the pool are not insured.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
113) Partly because of subprime mortgages, the credit crisis came about.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
114) Speculative or junk bonds are bonds with ratings of BB and below.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
115) Bonds with the highest level of risk are rated AAA.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
116) The price of a bond is affected by its interest rate.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
117) The market interest rate does not have any effect on bond prices.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
118) As market interest rates rise, bond prices rises.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
119) Issuers tend to call bonds when market interest rates are declining.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
120) Owners of common stock expect returns on their investment in the form of cash dividend payments, expected price appreciation, or both.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
121) The market value of a stock is the price at which the stock was originally offered during its initial public offering.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
122) Preferred stockholders receive fixed dividends.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
123) One of the most important factors of a stock’s market value is company earnings.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
124) Sales of most corporate and municipal securities are made via auctions.
Difficulty: Easy
Learning Objective 1: 17-03: Discuss financial markets.
Section Reference 1: Financial Markets
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
125) When a company offers stock for sale to the general public for the first time, it is called an initial public offering.
Difficulty: Easy
Learning Objective 1: 17-03: Discuss financial markets.
Section Reference 1: Financial Markets
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
126) To the investing public, securities are sold in two ways: in open auctions and through investment bankers.
Difficulty: Easy
Learning Objective 1: 17-03: Discuss financial markets.
Section Reference 1: Financial Markets
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
127) Fortunately, any firm can be listed on the New York Stock Exchange.
Difficulty: Easy
Learning Objective 1: 17-04: Understand the stock markets.
Section Reference 1: Understanding Stock Markets
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
128) The New York Stock Exchange (NYSE) is a secondary market.
Difficulty: Easy
Learning Objective 1: 17-03: Discuss financial markets.
Section Reference 1: Financial Markets
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
129) In the secondary market, firms and governments issue securities and sell them initially to the public.
Difficulty: Easy
Learning Objective 1: 17-03: Discuss financial markets.
Section Reference 1: Financial Markets
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
130) Most investors are members of the NYSE, or other stock markets, and therefore they do not need to use the services of a brokerage firm to buy or sell stocks.
Difficulty: Easy
Learning Objective 1: 17-04: Understand the stock markets.
Section Reference 1: Understanding Stock Markets
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
131) Many developing countries and virtually all developed countries have stock exchanges.
Difficulty: Easy
Learning Objective 1: 17-04: Understand the stock markets.
Section Reference 1: Understanding Stock Markets
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
132) The NASDAQ is a global electronic marketplace where securities are bought and sold.
Difficulty: Easy
Learning Objective 1: 17-04: Understand the stock markets.
Section Reference 1: Understanding Stock Markets
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
133) Savings banks have greatly expanded their business lending activities in recent years while cutting back on their home mortgage lending activity.
Difficulty: Easy
Learning Objective 1: 17-05: Describe financial institutions and the growth of financial technology (FinTech).
Section Reference 1: Financial Institutions
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
134) Deposit insurance means that, in the event the bank fails, depositors are paid in full by the FDIC, up to $250,000.
Difficulty: Easy
Learning Objective 1: 17-05: Describe financial institutions and the growth of financial technology (FinTech).
Section Reference 1: Financial Institutions
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
135) Banks consider the borrower's ability and willingness to repay the loan when evaluating loan applications.
Difficulty: Easy
Learning Objective 1: 17-05: Describe financial institutions and the growth of financial technology (FinTech).
Section Reference 1: Financial Institutions
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
136) In order to join a credit union, you have to share something in common with other credit union members.
Difficulty: Easy
Learning Objective 1: 17-05: Describe financial institutions and the growth of financial technology (FinTech).
Section Reference 1: Financial Institutions
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
137) Life insurance companies tend to invest excess funds in short-term securities, while pension funds tend to invest excess funds in long-term securities.
Difficulty: Easy
Learning Objective 1: 17-05: Describe financial institutions and the growth of financial technology (FinTech).
Section Reference 1: Financial Institutions
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
138) Underwriting is the process used by insurance companies to determine whom to insure and what to charge.
Difficulty: Easy
Learning Objective 1: 17-05: Describe financial institutions and the growth of financial technology (FinTech).
Section Reference 1: Financial Institutions
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
139) Clearing of checks is one of the Federal Reserve's tasks.
Difficulty: Easy
Learning Objective 1: 17-06: Explain the role of the Federal Reserve System.
Section Reference 1: The Role of the Federal Reserve System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
140) The Federal Open Markets Committee sets policies regarding bank mergers and lending standards.
Difficulty: Easy
Learning Objective 1: 17-06: Explain the role of the Federal Reserve System.
Section Reference 1: The Role of the Federal Reserve System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
141) Banks with federal and state charters must belong to the Federal Reserve System.
Difficulty: Easy
Learning Objective 1: 17-06: Explain the role of the Federal Reserve System.
Section Reference 1: The Role of the Federal Reserve System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
142) Raising the reserve requirement tends to increase the supply of money, thereby lowering interest rates.
Difficulty: Easy
Learning Objective 1: 17-06: Explain the role of the Federal Reserve System.
Section Reference 1: The Role of the Federal Reserve System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
143) Inflationary pressures will begin to build if the money supply grows too rapidly.
Difficulty: Easy
Learning Objective 1: 17-06: Explain the role of the Federal Reserve System.
Section Reference 1: The Role of the Federal Reserve System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
144) M1 consists of currency in circulation and balances in bank checking accounts.
Difficulty: Easy
Learning Objective 1: 17-06: Explain the role of the Federal Reserve System.
Section Reference 1: The Role of the Federal Reserve System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
145) The discount rate is the rate banks charge one another for short-term loans.
Difficulty: Easy
Learning Objective 1: 17-06: Explain the role of the Federal Reserve System.
Section Reference 1: The Role of the Federal Reserve System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
146) The reserve requirement tool is rarely used by the Fed.
Difficulty: Easy
Learning Objective 1: 17-06: Explain the role of the Federal Reserve System.
Section Reference 1: The Role of the Federal Reserve System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
147) Regulation of U.S. financial markets is primarily a function of the federal government; states do not regulate them in any way.
Difficulty: Easy
Learning Objective 1: 17-07: Describe the regulation of the financial system.
Section Reference 1: Regulation of the Financial System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
148) When the Fed buys government securities, it adds to the supply of money and credit, which causes a reduction in interest rates.
Difficulty: Easy
Learning Objective 1: 17-06: Explain the role of the Federal Reserve System.
Section Reference 1: The Role of the Federal Reserve System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
149) The National Association of Securities Dealers (NASD) purpose is to ensure that brokers perform their basic functions honestly and fairly, under constant supervision.
Difficulty: Easy
Learning Objective 1: 17-07: Describe the regulation of the financial system.
Section Reference 1: Regulation of the Financial System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
150) Any time an investor accumulates more than 5% of a company’s outstanding stock, the SEC requires reports.
Difficulty: Easy
Learning Objective 1: 17-07: Describe the regulation of the financial system.
Section Reference 1: Regulation of the Financial System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
151) Banks in other nations often respond to changes in the U.S. financial system by making similar changes in their own systems.
Difficulty: Easy
Learning Objective 1: 17-08: Discuss the global perspective of the financial system
Section Reference 1: The Financial System: A Global Perspective
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
152) Unfortunately, most nations do not have a central bank similar to the U.S. Federal Reserve.
Difficulty: Easy
Learning Objective 1: 17-08: Discuss the global perspective of the financial system
Section Reference 1: The Financial System: A Global Perspective
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
Question type: Essay
153) Explain how the financial system operates.
Difficulty: Easy
Learning Objective 1: 17-01: Understand the financial system.
Section Reference 1: Understanding the Financial System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
154) Describe the two ways that funds can be transferred between savers and users.
Difficulty: Easy
Learning Objective 1: 17-01: Understand the financial system.
Section Reference 1: Understanding the Financial System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
155) What are the differences among the various types of money market instruments?
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
156) Identify and explain the advantages and disadvantages of issuing shares of common stock.
Difficulty: Easy
Learning Objective 1: 17-02: List the various types of securities.
Section Reference 1: Types of Securities
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
157) Explain the process of underwriting.
Difficulty: Easy
Learning Objective 1: 17-03: Discuss financial markets.
Section Reference 1: Financial Markets
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
158) Describe the role of investment bankers in financial markets.
Difficulty: Easy
Learning Objective 1: 17-03: Discuss financial markets.
Section Reference 1: Financial Markets
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
159) Differentiate between market orders and limit orders.
Difficulty: Easy
Learning Objective 1: 17-04: Understand the stock markets.
Section Reference 1: Understanding Stock Markets
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
160) Describe the concept of financial institutions.
Difficulty: Easy
Learning Objective 1: 17-05: Describe financial institutions and the growth of financial technology (FinTech).
Section Reference 1: Financial Institutions
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
161) Explain what a credit union is and give an example of one.
Difficulty: Easy
Learning Objective 1: 17-05: Describe financial institutions and the growth of financial technology (FinTech).
Section Reference 1: Financial Institutions
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
162) Explain the Federal Reserve's most important function. How does this function affect the nation’s rate of inflation and employment?
Difficulty: Easy
Learning Objective 1: 17-06: Explain the role of the Federal Reserve System.
Section Reference 1: The Role of the Federal Reserve System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
163) Explain the Federal Reserve’s three major policy tools.
Difficulty: Easy
Learning Objective 1: 17-06: Explain the role of the Federal Reserve System.
Section Reference 1: The Role of the Federal Reserve System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
164) Briefly describe the government regulation of the financial markets and the role of the SEC.
Difficulty: Easy
Learning Objective 1: 17-07: Describe the regulation of the financial system.
Section Reference 1: Regulation of the Financial System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
165) Illustrate how financial institutions have become a global industry.
Difficulty: Easy
Learning Objective 1: 17-08: Discuss the global perspective of the financial system
Section Reference 1: The Financial System: A Global Perspective
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension