Page 72
391.
Alison lends $100 to Vanessa for one year. Alison expects that inflation will be 10%. If
Alison wishes to maintain the real value of her $100, she should expect payment from
Vanessa in the amount of:
A)
$100.
B)
$110.
C)
$120.
D)
$101.
392.
In lending to Vanessa, Alison expects the inflation rate to be 8% over the next year.
Vanessa agrees to pay Alison a 10% interest rate on the loan, but Vanessa expects
inflation to be 9%. If the actual inflation rate is 9%:
A)
the real rate of interest is 1%.
B)
the real rate of interest is 9%.
C)
Vanessa ends up paying a lower real interest rate than she had expected.
D)
Alison ends up receiving a higher real interest rate than she had expected.
393.
Businesses will undertake projects if the rate of return is:
A)
positive.
B)
greater than or equal to the interest rate levied on the loan.
C)
greater than 1.
D)
less than the cost of borrowing for the project.
394.
Crowding out results in a(n):
A)
decrease in private investment spending resulting from government deficit
spending.
B)
increase in accumulation of physical capital, which leads to higher economic
growth.
C)
increase in private investment spending resulting from government deficit
spending.
D)
increase in consumption spending as a result of higher investment spending.
395.
Linking savers and investors is an important aspect of:
A)
a well-functioning financial system.
B)
government.
C)
the public sector.
D)
consumers.
Page 73
396.
Financial assets:
A)
are paper claims that provide the buyer of the claim future income from the seller
of the claim.
B)
in the form of loans by an individual are an asset to the individual receiving the
loan.
C)
are accompanied by high transaction costs.
D)
have no financial risk.
397.
A liquid asset:
A)
can be easily converted to a loan.
B)
can be easily converted to cash with little or no loss of value.
C)
are the only assets which financial markets work with.
D)
carries no financial risk.
398.
Someone who is risk-averse is:
A)
willing to expend whatever resources necessary to gain an uncertain amount of
money.
B)
willing to spend more resources to avoid losing a given sum of money than to gain
the same sum of money.
C)
irrational in the need to hold all assets in liquid form.
D)
one who does not believe in financial risk.
399.
A checking account with $500 is:
A)
more liquid than a person’s new car.
B)
less liquid than a checking account with $1,000.
C)
as liquid as a stock share with a $500 value.
D)
less liquid than a house with a market value of $250,000.
400.
Borrowers who cannot be served by the stock and bond markets:
A)
can use banks for their financing needs.
B)
can use the government for their financing needs.
C)
are crowded out of the market.
D)
must hold all of their assets in liquid form.
401.
Four types of financial intermediaries are:
A)
mutual funds, pension funds, government, and the central bank.
B)
mutual funds, pension funds, life insurance companies, and banks.
C)
banks, stock markets, pension funds, and the central bank.
D)
the central bank, government, the stock market, and the Dow Jones Industrial
Average.
Page 74
402.
The efficient markets hypothesis says that:
A)
stock markets reflect irrational behavior, and therefore stock prices could be
overvalued or undervalued.
B)
stock prices embody much public information and therefore are not overpriced or
underpriced.
C)
the three stock market indexes will provide consistent information about the stock
market.
D)
financial fluctuations in markets do not affect the macro economy in a noticeable
way.
Answer Key
Page 76
45.
A
46.
B
47.
C
48.
B
49.
A
50.
C
51.
D
52.
C
53.
D
54.
A
55.
D
56.
B
57.
A
58.
B
59.
D
60.
A
61.
A
62.
C
63.
A
64.
D
65.
A
66.
B
67.
C
68.
D
69.
A
70.
B
71.
C
72.
A
73.
C
74.
B
75.
B
76.
A
77.
C
78.
D
79.
C
80.
B
81.
D
82.
A
83.
A
84.
C
85.
A
86.
B
87.
A
88.
C
89.
D
90.
B
Page 77
91.
C
92.
D
93.
B
94.
C
95.
C
96.
D
97.
C
98.
D
99.
B
100.
B
101.
B
102.
B
103.
D
104.
D
105.
A
106.
B
107.
C
108.
D
109.
A
110.
B
111.
C
112.
B
113.
D
114.
C
115.
C
116.
D
117.
D
118.
D
119.
B
120.
D
121.
D
122.
A
123.
D
124.
C
125.
C
126.
D
127.
B
128.
D
129.
C
130.
C
131.
B
132.
C
133.
D
134.
A
135.
A
136.
C
Page 78
137.
D
138.
C
139.
B
140.
A
141.
A
142.
C
143.
B
144.
C
145.
C
146.
B
147.
D
148.
C
149.
B
150.
C
151.
B
152.
B
153.
B
154.
D
155.
B
156.
D
157.
A
158.
B
159.
C
160.
B
161.
D
162.
C
163.
A
164.
C
165.
C
166.
A
167.
B
168.
C
169.
B
170.
D
171.
A
172.
A
173.
C
174.
C
175.
C
176.
B
177.
A
178.
B
179.
C
180.
D
181.
C
182.
A
Page 79
183.
A
184.
D
185.
C
186.
B
187.
A
188.
B
189.
C
190.
D
191.
A
192.
B
193.
C
194.
D
195.
D
196.
D
197.
A
198.
C
199.
B
200.
C
201.
C
202.
B
203.
C
204.
C
205.
B
206.
D
207.
D
208.
A
209.
D
210.
D
211.
A
212.
B
213.
C
214.
D
215.
A
216.
B
217.
D
218.
C
219.
D
220.
A
221.
A
222.
B
223.
C
224.
D
225.
B
226.
A
227.
D
228.
A
Page 80
229.
B
230.
C
231.
D
232.
A
233.
B
234.
B
235.
C
236.
C
237.
D
238.
D
239.
A
240.
B
241.
A
242.
B
243.
B
244.
D
245.
D
246.
A
247.
B
248.
C
249.
D
250.
A
251.
B
252.
A
253.
C
254.
D
255.
B
256.
B
257.
D
258.
A
259.
B
260.
C
261.
B
262.
A
263.
B
264.
B
265.
D
266.
D
267.
A
268.
B
269.
A
270.
D
271.
A
272.
B
273.
A
274.
C
Page 81
275.
A
276.
B
277.
A
278.
B
279.
A
280.
B
281.
A
282.
A
283.
A
284.
A
285.
B
286.
B
287.
A
288.
A
289.
B
290.
B
291.
B
292.
A
293.
B
294.
B
295.
A
296.
A
297.
B
298.
A
299.
B
300.
B
301.
A
302.
B
303.
B
304.
A
305.
B
306.
A
307.
B
308.
A
309.
B
310.
B
311.
A
312.
A
313.
B
314.
A
315.
B
316.
A
317.
B
318.
B
319.
B
320.
B
Page 82
321.
A
322.
B
323.
A
324.
B
325.
A
326.
B
327.
A
328.
B
329.
A
330.
B
331.
A
332.
B
333.
A
334.
A
335.
B
336.
B
337.
A
338.
A
339.
A
340.
B
341.
A
342.
A
343.
B
344.
A
345.
A
346.
B
347.
A
348.
A
349.
A
350.
B
351.
B
352.
A
353.
A
354.
A
355.
A
356.
B
357.
358.
359.
360.
361.
362.
363.
364.
365.
366.
Page 83
367.
368.
369.
370.
371.
372.
C
373.
B
374.
B
375.
A
376.
A
377.
A
378.
C
379.
A
380.
A
381.
B
382.
A
383.
B
384.
D
385.
B
386.
C
387.
B
388.
B
389.
A
390.
B
391.
B
392.
A
393.
B
394.
A
395.
A
396.
A
397.
B
398.
B
399.
A
400.
A
401.
B
402.
B