Which of the following securities assist in financing importing and exporting operations?

Which of the following securities assist in financing importing and exporting operations?

Both CBP and the importing/exporting community have a shared responsibility to maximize compliance with laws and regulations. In carrying out this task, CBP encourages importers/exporters to become familiar with applicable laws and regulations and work together with the CBP Office of Trade to protect American consumers from harmful and counterfeit imports by ensuring the goods that enter the U.S. marketplace are genuine, safe, and lawfully sourced.​​​​​​

The information on this page promotes the understanding of this responsibility, as there may be specific requirements related to a particular commodity, such as those set by Partner Government Agencies (PGA).

Tips for New Importers and Exporters

A bond with a maturity of less than one year is classified as which of the following?

Choose one answer.

a. Money market instrument
Which of the following securities assist in financing importing and exporting operations?
b. Shot-term market instrument
Which of the following securities assist in financing importing and exporting operations?
c. Capital market instrument
Which of the following securities assist in financing importing and exporting operations?
d. One year market instrument
Which of the following securities assist in financing importing and exporting operations?

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A debt instrument can be issued by which of the following?

Choose one answer.

a. Corporation
Which of the following securities assist in financing importing and exporting operations?
b. Individual
Which of the following securities assist in financing importing and exporting operations?
c. Government
Which of the following securities assist in financing importing and exporting operations?
d. All of the above
Which of the following securities assist in financing importing and exporting operations?

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A deposits funds with B for safekeeping. B lends the funds to C and charges C interest. Which of the following is true?

Choose one answer.

a. C is a financial intermediary.
Which of the following securities assist in financing importing and exporting operations?
b. B is a financial intermediary.
Which of the following securities assist in financing importing and exporting operations?
c. A is a financial intermediary.
Which of the following securities assist in financing importing and exporting operations?
d. A, B, and C do not fulfill any financial role.
Which of the following securities assist in financing importing and exporting operations?

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A financial instrument that promises to pay the holder a certain fixed amount periodically, and upon maturity pays the face value of the instrument is called which of the following?

Choose one answer.

a. Bond
Which of the following securities assist in financing importing and exporting operations?
b. Equity
Which of the following securities assist in financing importing and exporting operations?
c. Receivable
Which of the following securities assist in financing importing and exporting operations?
d. Credit
Which of the following securities assist in financing importing and exporting operations?

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A financial instrument which does not promise the holder any fixed payment but entitles him/her to a claim of the net income is called which of the following?

Choose one answer.

a. Bond
Which of the following securities assist in financing importing and exporting operations?
b. Equity
Which of the following securities assist in financing importing and exporting operations?
c. Receivable
Which of the following securities assist in financing importing and exporting operations?
d. Credit
Which of the following securities assist in financing importing and exporting operations?

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A government issues securities with maturities of six months. These securities would be known as which of the following?

Choose one answer.

a. Equity market instruments
Which of the following securities assist in financing importing and exporting operations?
b. Capital Market instruments
Which of the following securities assist in financing importing and exporting operations?
c. Short-term debt instruments
Which of the following securities assist in financing importing and exporting operations?
d. Medium-term instruments
Which of the following securities assist in financing importing and exporting operations?

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A new ten-year bond will be bought and sold in what market?

Choose one answer.

a. Primary market
Which of the following securities assist in financing importing and exporting operations?
b. Ten-year market
Which of the following securities assist in financing importing and exporting operations?
c. Short-term market
Which of the following securities assist in financing importing and exporting operations?
d. Secondary market
Which of the following securities assist in financing importing and exporting operations?

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Complete the following statement. Adverse selection occurs when:

Choose one answer.

a. borrowers get loans by falsely presenting how profitable their projects really are.
Which of the following securities assist in financing importing and exporting operations?
b. borrowers do not get the loans, because they suffer discrimination.
Which of the following securities assist in financing importing and exporting operations?
c. lenders do not lend to borrowers with bad credit.
Which of the following securities assist in financing importing and exporting operations?
d. lenders lend only to borrowers with good credit.
Which of the following securities assist in financing importing and exporting operations?

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Complete the following statement. Capital market instruments have maturities of:

Choose one answer.

a. Less than one year.
Which of the following securities assist in financing importing and exporting operations?
b. More than one year.
Which of the following securities assist in financing importing and exporting operations?
c. Any number of years.
Which of the following securities assist in financing importing and exporting operations?
d. Usually ten years.
Which of the following securities assist in financing importing and exporting operations?

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Complete the following statement. Money market instruments have maturities of:

Choose one answer.

a. Less than one year.
Which of the following securities assist in financing importing and exporting operations?
b. More than one year.
Which of the following securities assist in financing importing and exporting operations?
c. Any number of years.
Which of the following securities assist in financing importing and exporting operations?
d. Usually ten years.
Which of the following securities assist in financing importing and exporting operations?

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Complete the following statement. The federal funds market is the market where:

Choose one answer.

a. the federal government sells overnight securities.
Which of the following securities assist in financing importing and exporting operations?
b. the federal government buys overnight securities.
Which of the following securities assist in financing importing and exporting operations?
c. banks reserves at the Federal Reserve are bought and sold overnight.
Which of the following securities assist in financing importing and exporting operations?
d. the Federal Reserve Bank loans overnight funds to banks.
Which of the following securities assist in financing importing and exporting operations?

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Complete the following statement. The problem of adverse selection in financial markets, which financial intermediaries have evolved to minimize, refers to the difficulty in:

Choose one answer.

a. Separating creditworthy borrowers from non-credit worthy borrowers
Which of the following securities assist in financing importing and exporting operations?
b. Not knowing borrowers who will take more risk after the loan contract than those who will not
Which of the following securities assist in financing importing and exporting operations?
c. Providing incentives for borrowers to behave responsibly
Which of the following securities assist in financing importing and exporting operations?
d. Punishing borrowers when they default on their loan contracts
Which of the following securities assist in financing importing and exporting operations?

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Consider whether the following statement is true or false and how so. Money is useful only when it can be held in the hand.

Choose one answer.

a. This is true, because that is only when you can use it to buy something.
Which of the following securities assist in financing importing and exporting operations?
b. This is true, because money has to be a commodity.
Which of the following securities assist in financing importing and exporting operations?
c. This is false, because money is an accounting device that does not need be tangible.
Which of the following securities assist in financing importing and exporting operations?
d. None of the above
Which of the following securities assist in financing importing and exporting operations?

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Corporate bonds are issued by which of the following?

Choose one answer.

a. Any corporation looking for funds
Which of the following securities assist in financing importing and exporting operations?
b. Corporations emerging from bankruptcy that need funds
Which of the following securities assist in financing importing and exporting operations?
c. Corporations with strong credit ratings that need funds
Which of the following securities assist in financing importing and exporting operations?
d. Corporations that have the approval of the Board of Directors
Which of the following securities assist in financing importing and exporting operations?

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Fill in the blanks. Financial intermediaries are the major means of moving funds from savers to borrowers, because they are able to provide financial services at ______ by taking advantage of ______.

Choose one answer.

a. lower cost; economies of scale
Which of the following securities assist in financing importing and exporting operations?
b. lower cost; adverse selection
Which of the following securities assist in financing importing and exporting operations?
c. higher cost; economies of scale
Which of the following securities assist in financing importing and exporting operations?
d. higher cost; adverse selection
Which of the following securities assist in financing importing and exporting operations?

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Fill in the blanks. Financial intermediaries are efficient at moving funds from savers to borrowers, because they ______ by ______.

Choose one answer.

a. lower risk; spreading it among many
Which of the following securities assist in financing importing and exporting operations?
b. lower risk: confining it to the very rich
Which of the following securities assist in financing importing and exporting operations?
c. raise risk; charging higher interest rates
Which of the following securities assist in financing importing and exporting operations?
d. raise risk; charging lower interest rates
Which of the following securities assist in financing importing and exporting operations?

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Fill in the blanks. In a world where there is only direct financing, small savers would be subject to ______, because their portfolios would not be sufficiently ______.

Choose one answer.

a. high risks, diversified
Which of the following securities assist in financing importing and exporting operations?
b. low risks, large to securitize
Which of the following securities assist in financing importing and exporting operations?
c. no risk, diversified
Which of the following securities assist in financing importing and exporting operations?
d. no risk, fully diversified
Which of the following securities assist in financing importing and exporting operations?

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Fill in the blanks. The presence of asymmetric information in financial markets leads to ______ as people with investment opportunities ______.

Choose one answer.

a. less economic growth; will not borrow at low interest rates
Which of the following securities assist in financing importing and exporting operations?
b. less economic growth; cannot have access to loans
Which of the following securities assist in financing importing and exporting operations?
c. more economic growth; are force to used their own funds
Which of the following securities assist in financing importing and exporting operations?
d. more economic growth; can borrow from banks
Which of the following securities assist in financing importing and exporting operations?

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Fill in the blanks. Underwriting is undertaken by __________ when they __________.

Choose one answer.

a. commercial banks, give out loans
Which of the following securities assist in financing importing and exporting operations?
b. commercial banks, foreclose on properties
Which of the following securities assist in financing importing and exporting operations?
c. investment banks, guarantee security prices and buy them
Which of the following securities assist in financing importing and exporting operations?
d. investment banks, guarantee security prices and sell them
Which of the following securities assist in financing importing and exporting operations?

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Fill in the blanks. When a company wants to raise money from financial markets, it may go to _________, which will help it issue a(n) __________.

Choose one answer.

a. the stock market, loan
Which of the following securities assist in financing importing and exporting operations?
b. the capital market, equity
Which of the following securities assist in financing importing and exporting operations?
c. an investment bank, initial public offering (IPO)
Which of the following securities assist in financing importing and exporting operations?
d. commercial bank, initial public offering (IPO)
Which of the following securities assist in financing importing and exporting operations?

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Financial intermediaries succeed in lending and borrowing by doing which of the following?

Choose one answer.

a. Reducing moral hazard
Which of the following securities assist in financing importing and exporting operations?
b. Increasing moral hazard
Which of the following securities assist in financing importing and exporting operations?
c. Withholding information from borrowers
Which of the following securities assist in financing importing and exporting operations?
d. Paying attention to borrowers
Which of the following securities assist in financing importing and exporting operations?

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First All Bank is a financial intermediary. This means that First All Bank does which of the following?

Choose one answer.

a. Lends its own funds money to borrowers
Which of the following securities assist in financing importing and exporting operations?
b. Holds deposits for depositors and charges fees for the service
Which of the following securities assist in financing importing and exporting operations?
c. Takes deposits from depositors and lends them to borrowers
Which of the following securities assist in financing importing and exporting operations?
d. Seeks borrowers for depositors
Which of the following securities assist in financing importing and exporting operations?

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How do financial markets promote economic development?

Choose one answer.

a. They enable entrepreneurs without funds to have access to funds.
Which of the following securities assist in financing importing and exporting operations?
b. They make the wealthy wealthier.
Which of the following securities assist in financing importing and exporting operations?
c. They enable investment bankers to earn higher salaries.
Which of the following securities assist in financing importing and exporting operations?
d. They make people with capital gains income pay lower taxes.
Which of the following securities assist in financing importing and exporting operations?

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How do financial markets promote economic efficiency?

Choose one answer.

a. They match borrowers who have productive business ideas with savers.
Which of the following securities assist in financing importing and exporting operations?
b. They enable lenders to minimize the time it takes to find a borrower.
Which of the following securities assist in financing importing and exporting operations?
c. They enable borrowers to minimize the time it takes to find a lender.
Which of the following securities assist in financing importing and exporting operations?
d. All of the above
Which of the following securities assist in financing importing and exporting operations?

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I lend funds to Jake, who has a reputation of being trustworthy. He turns around and lends the funds to Jane, whom I do not know. Which of the following characterizes Jake’s role?

Choose one answer.

a. Money lender
Which of the following securities assist in financing importing and exporting operations?
b. Intermediary
Which of the following securities assist in financing importing and exporting operations?
c. Broker
Which of the following securities assist in financing importing and exporting operations?
d. Dealer
Which of the following securities assist in financing importing and exporting operations?

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If money is a unit of account, then which of the following is true?

Choose one answer.

a. Money stores value.
Which of the following securities assist in financing importing and exporting operations?
b. Money is used to measure the value of things.
Which of the following securities assist in financing importing and exporting operations?
c. Money is used to buy goods and services.
Which of the following securities assist in financing importing and exporting operations?
d. Money has no value.
Which of the following securities assist in financing importing and exporting operations?

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In a certain society, people use shells as a means of payment and store of value. The unit of account is gold. Which of the following is true of this economy?

Choose one answer.

a. This economy is not a monetary economy, because shells are not money.
Which of the following securities assist in financing importing and exporting operations?
b. This economy is not a monetary economy, because there are no denominations.
Which of the following securities assist in financing importing and exporting operations?
c. This economy is a monetary economy, because all the functions of money are being performed.
Which of the following securities assist in financing importing and exporting operations?
d. This economy is a monetary economy, because they use gold.
Which of the following securities assist in financing importing and exporting operations?

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In a public school, everybody will accept a bubblegum as payment for goods or services rendered, even if they do not like bubblegum. Bubblegum in this school is considered which of the following?

Choose one answer.

a. Income
Which of the following securities assist in financing importing and exporting operations?
b. Money
Which of the following securities assist in financing importing and exporting operations?
c. Insurance for when you want to chew gum
Which of the following securities assist in financing importing and exporting operations?
d. Something to barter with
Which of the following securities assist in financing importing and exporting operations?

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In direct finance, as opposed to indirect finance, the transaction is between what entities?

Choose one answer.

a. The lender and the borrower
Which of the following securities assist in financing importing and exporting operations?
b. The lender the borrower and the intermediary
Which of the following securities assist in financing importing and exporting operations?
c. The borrower and the bank
Which of the following securities assist in financing importing and exporting operations?
d. The lender and the bank
Which of the following securities assist in financing importing and exporting operations?

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James, John, and Kojo buy houses with funds from First All Bank. First All Bank puts all three loan agreements together, divides them into one hundred pieces of financial instruments, and sells them to several investors. The one hundred financial instruments can be accurately described as which of the following?

Choose one answer.

a. Financial liabilities
Which of the following securities assist in financing importing and exporting operations?
b. Financial assets
Which of the following securities assist in financing importing and exporting operations?
c. Bank securities
Which of the following securities assist in financing importing and exporting operations?
d. Mortgage-backed securities
Which of the following securities assist in financing importing and exporting operations?

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Joan borrows $100.00 from her sister with the promise to repay at the end of the month. Her sister goes to the bank to withdraw $100.00 from her bank account to give it to her. This is an instance of which of the following?

Choose one answer.

a. Direct borrowing
Which of the following securities assist in financing importing and exporting operations?
b. Direct financing
Which of the following securities assist in financing importing and exporting operations?
c. Direct lending
Which of the following securities assist in financing importing and exporting operations?
d. Indirect financing
Which of the following securities assist in financing importing and exporting operations?

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Loans to households to buy houses generate which of the following?

Choose one answer.

a. Money market instruments
Which of the following securities assist in financing importing and exporting operations?
b. Equity market instruments
Which of the following securities assist in financing importing and exporting operations?
c. Mortgage-backed securities
Which of the following securities assist in financing importing and exporting operations?
d. Commercial papers
Which of the following securities assist in financing importing and exporting operations?

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Money functions as which of the following?

Choose one answer.

a. Medium of exchange, store of value, and unit of account
Which of the following securities assist in financing importing and exporting operations?
b. Medium of exchange, store of value, and income
Which of the following securities assist in financing importing and exporting operations?
c. Store of value and income
Which of the following securities assist in financing importing and exporting operations?
d. Store of value and a payment mechanism
Which of the following securities assist in financing importing and exporting operations?

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Moral hazard occurs when a borrower does which of the following?

Choose one answer.

a. Undertakes a less risky business venture after obtaining a loan
Which of the following securities assist in financing importing and exporting operations?
b. Undertakes a more risky business venture after obtaining a loan
Which of the following securities assist in financing importing and exporting operations?
c. Absconds with the loan proceeds and does not repay
Which of the following securities assist in financing importing and exporting operations?
d. Suffers a setback through no fault of his/hers and is unable to repay
Which of the following securities assist in financing importing and exporting operations?

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Pam asks her mother for a loan. Her mother does not have it, so she borrows from her sister, and gives it to Pam. This transaction can be described as which of the following?

Choose one answer.

a. Refinance
Which of the following securities assist in financing importing and exporting operations?
b. Direct finance
Which of the following securities assist in financing importing and exporting operations?
c. Indirect finance
Which of the following securities assist in financing importing and exporting operations?
d. Financial market transaction
Which of the following securities assist in financing importing and exporting operations?

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Repurchase agreements (repos) can be classified as which of the following type of economic instrument?

Choose one answer.

a. Short-term debt instruments
Which of the following securities assist in financing importing and exporting operations?
b. Capital market instruments
Which of the following securities assist in financing importing and exporting operations?
c. Equity market instruments
Which of the following securities assist in financing importing and exporting operations?
d. Long-term debt instruments
Which of the following securities assist in financing importing and exporting operations?

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Stocks are issued by which of the following?

Choose one answer.

a. Individuals
Which of the following securities assist in financing importing and exporting operations?
b. Partnerships
Which of the following securities assist in financing importing and exporting operations?
c. Corporations
Which of the following securities assist in financing importing and exporting operations?
d. Governments
Which of the following securities assist in financing importing and exporting operations?

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The payment you receive for working is called which of the following?

Choose one answer.

a. Money
Which of the following securities assist in financing importing and exporting operations?
b. Income
Which of the following securities assist in financing importing and exporting operations?
c. Interest
Which of the following securities assist in financing importing and exporting operations?
d. Rents
Which of the following securities assist in financing importing and exporting operations?

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Treasury bills are issued by which of the following?

Choose one answer.

a. Domestic corporations
Which of the following securities assist in financing importing and exporting operations?
b. Individuals
Which of the following securities assist in financing importing and exporting operations?
c. Governments
Which of the following securities assist in financing importing and exporting operations?
d. Foreign corporations
Which of the following securities assist in financing importing and exporting operations?

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What are commercial papers?

Choose one answer.

a. Long-term instruments issued by large banks and well-known corporations
Which of the following securities assist in financing importing and exporting operations?
b. Short-term instruments issued by large banks and well-known corporations
Which of the following securities assist in financing importing and exporting operations?
c. Medium-term instruments issued by corporations who cannot borrow from banks
Which of the following securities assist in financing importing and exporting operations?
d. Long-term instruments issued by corporation who do not want to borrow from banks
Which of the following securities assist in financing importing and exporting operations?

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What are convertible corporate bonds?

Choose one answer.

a. Corporate bonds that allow the holder to convert them into shares
Which of the following securities assist in financing importing and exporting operations?
b. Corporate bonds that can be converted into cash at any time
Which of the following securities assist in financing importing and exporting operations?
c. Corporate bonds that have no maturity dates
Which of the following securities assist in financing importing and exporting operations?
d. Corporate bonds that have maturity dates determined by the bondholder
Which of the following securities assist in financing importing and exporting operations?

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What are equities?

Choose one answer.

a. Capital market instruments
Which of the following securities assist in financing importing and exporting operations?
b. Money market instruments
Which of the following securities assist in financing importing and exporting operations?
c. Short-term market instruments
Which of the following securities assist in financing importing and exporting operations?
d. Over-the-counter market instruments
Which of the following securities assist in financing importing and exporting operations?

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What are Eurodollars?

Choose one answer.

a. U.S. dollars which an individual takes on vacation to Europe
Which of the following securities assist in financing importing and exporting operations?
b. Bonds issued in Europe but denominated in U.S. dollars
Which of the following securities assist in financing importing and exporting operations?
c. U.S. dollar deposits owned by Europeans
Which of the following securities assist in financing importing and exporting operations?
d. U.S. dollars deposited in banks outside the United States
Which of the following securities assist in financing importing and exporting operations?

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What are treasury bills?

Choose one answer.

a. Capital market instruments
Which of the following securities assist in financing importing and exporting operations?
b. Money market instruments
Which of the following securities assist in financing importing and exporting operations?
c. Over-the-market instruments
Which of the following securities assist in financing importing and exporting operations?
d. Equity market instrument
Which of the following securities assist in financing importing and exporting operations?

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What is a Eurobond?

Choose one answer.

a. A bond issued and sold in the UK but denominated in U.S. dollars
Which of the following securities assist in financing importing and exporting operations?
b. A bond issued by the European Union
Which of the following securities assist in financing importing and exporting operations?
c. Any bond issued by any country in Europe
Which of the following securities assist in financing importing and exporting operations?
d. A bond issued in the U.S. in dollars but bought by Europeans
Which of the following securities assist in financing importing and exporting operations?

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What is a secondary market?

Choose one answer.

a. A market where new securities are bought and sold
Which of the following securities assist in financing importing and exporting operations?
b. A market where U.S. government treasuries are bought and sold
Which of the following securities assist in financing importing and exporting operations?
c. A market where newly issued and outstanding securities are bought and sold
Which of the following securities assist in financing importing and exporting operations?
d. A market where outstanding securities are bought and sold
Which of the following securities assist in financing importing and exporting operations?

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What is an asset-backed security?

Choose one answer.

a. A loan to buy an asset
Which of the following securities assist in financing importing and exporting operations?
b. A loan with an asset as collateral
Which of the following securities assist in financing importing and exporting operations?
c. A loan with no asset as collateral
Which of the following securities assist in financing importing and exporting operations?
d. A loan with a co-signer
Which of the following securities assist in financing importing and exporting operations?

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What is the Federal Funds rate?

Choose one answer.

a. The Federal Funds rate is the interest rate on loans the Federal Reserve Bank makes to banks.
Which of the following securities assist in financing importing and exporting operations?
b. The Federal Funds rate is the interest rate on loans made in the federal funds market.
Which of the following securities assist in financing importing and exporting operations?
c. The Federal Funds rate is the interest rate on loans the Federal Reserve Bank makes to the government.
Which of the following securities assist in financing importing and exporting operations?
d. The Federal Funds rate is the interest rate on loans banks make to the Federal Reserve Bank.
Which of the following securities assist in financing importing and exporting operations?

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What would be a consequence of the failure of financial markets?

Choose one answer.

a. There will be no savings.
Which of the following securities assist in financing importing and exporting operations?
b. There will be no income earned.
Which of the following securities assist in financing importing and exporting operations?
c. There will be no money in the economy.
Which of the following securities assist in financing importing and exporting operations?
d. Economic activity will decline.
Which of the following securities assist in financing importing and exporting operations?

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When a business borrows directly from a saver, the business incurs which of the following?

Choose one answer.

a. Liability
Which of the following securities assist in financing importing and exporting operations?
b. A credit
Which of the following securities assist in financing importing and exporting operations?
c. Equity
Which of the following securities assist in financing importing and exporting operations?
d. An asset
Which of the following securities assist in financing importing and exporting operations?

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When a business borrows directly from financial markets, it issues which of the following?

Choose one answer.

a. Securities
Which of the following securities assist in financing importing and exporting operations?
b. Equities
Which of the following securities assist in financing importing and exporting operations?
c. Dividends
Which of the following securities assist in financing importing and exporting operations?
d. Credits
Which of the following securities assist in financing importing and exporting operations?

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When a person lends to a business in the financial market, the person acquires which of the following?

Choose one answer.

a. An asset
Which of the following securities assist in financing importing and exporting operations?
b. A liability
Which of the following securities assist in financing importing and exporting operations?
c. A debt
Which of the following securities assist in financing importing and exporting operations?
d. A credit
Which of the following securities assist in financing importing and exporting operations?

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When an individual takes out a loan from a bank to buy a car, the individual issues which of the following?

Choose one answer.

a. Security
Which of the following securities assist in financing importing and exporting operations?
b. Equity
Which of the following securities assist in financing importing and exporting operations?
c. Commercial paper
Which of the following securities assist in financing importing and exporting operations?
d. Certificate of deposit
Which of the following securities assist in financing importing and exporting operations?

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Which of the following is a main reason for the dominance of financial intermediaries in the economy?

Choose one answer.

a. They are able to reduce transaction costs through economies of scale.
Which of the following securities assist in financing importing and exporting operations?
b. They are able to lend large sums of money to those who need it.
Which of the following securities assist in financing importing and exporting operations?
c. They employ of a lot of people to market their loans.
Which of the following securities assist in financing importing and exporting operations?
d. They have good management skills.
Which of the following securities assist in financing importing and exporting operations?

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Which of the following is the best functional definition of money?

Choose one answer.

a. Anything that the government says is money
Which of the following securities assist in financing importing and exporting operations?
b. Anything that provides utility for people
Which of the following securities assist in financing importing and exporting operations?
c. Anything that is generally acceptable as a medium of exchange
Which of the following securities assist in financing importing and exporting operations?
d. Anything that is desirable, because it can be consumed
Which of the following securities assist in financing importing and exporting operations?

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Which scenario best describes direct finance and not indirect finance?

Choose one answer.

a. ABC Corporation uses its retained earnings to finance a new project.
Which of the following securities assist in financing importing and exporting operations?
b. ABC Corporation sells its old equipment to finance a new project.
Which of the following securities assist in financing importing and exporting operations?
c. ABC Corporation raises funds by selling commercial paper to DEF Finance Company.
Which of the following securities assist in financing importing and exporting operations?
d. ABC Corporation raises funds by borrowing from its bank.
Which of the following securities assist in financing importing and exporting operations?

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Who are the participants in financial markets?

Choose one answer.

a. Households
Which of the following securities assist in financing importing and exporting operations?
b. Households and businesses
Which of the following securities assist in financing importing and exporting operations?
c. Households, businesses, and governments
Which of the following securities assist in financing importing and exporting operations?
d. Households, businesses, governments, and foreigners
Which of the following securities assist in financing importing and exporting operations?

.

.

Why are bonds issued by municipalities to finance large projects attractive to investors?

Choose one answer.

a. Because the interest rates on them are higher than the interest rate on corporate bonds
Which of the following securities assist in financing importing and exporting operations?
b. Because the interest rates are exempt from federal income tax
Which of the following securities assist in financing importing and exporting operations?
c. Because they are short-term instruments and therefore very liquid
Which of the following securities assist in financing importing and exporting operations?
d. Because the capital gains on them are higher than on many securities
Which of the following securities assist in financing importing and exporting operations?

.

.

Why are financial markets important in the economy?

Choose one answer.

a. They can make a lot of people wealthy.
Which of the following securities assist in financing importing and exporting operations?
b. They can make businesses and people wealthy.
Which of the following securities assist in financing importing and exporting operations?
c. They make it possible to transfer savings to borrowers.
Which of the following securities assist in financing importing and exporting operations?
d. They make it possible for governments to borrow.
Which of the following securities assist in financing importing and exporting operations?

.

.

Why is an efficient secondary market essential for an efficient financial market?

Choose one answer.

a. It makes it easier for firms to sell new bonds in the primary market.
Which of the following securities assist in financing importing and exporting operations?
b. It makes it easier for firms to sell new bonds in the secondary market.
Which of the following securities assist in financing importing and exporting operations?
c. It makes it easier for firms to sell new bonds in both the secondary and primary markets.
Which of the following securities assist in financing importing and exporting operations?
d. It makes it easier for firms to buy and sell new bonds in the secondary and a primary markets.
Which of the following securities assist in financing importing and exporting operations?

.

.

Why is indirect finance more important than direct finance in the U.S. economy?

Choose one answer.

a. It moves more funds from savers to borrowers than direct finance.
Which of the following securities assist in financing importing and exporting operations?
b. It moves as much funds from savers to borrowers as direct finance.
Which of the following securities assist in financing importing and exporting operations?
c. It is the only means by which funds can move from savers to borrowers.
Which of the following securities assist in financing importing and exporting operations?
d. It is responsible for all the economic activity in the U.S.
Which of the following securities assist in financing importing and exporting operations?

.

.

Why would a modern economy not operate efficiently without money?

Choose one answer.

a. People could not trade.
Which of the following securities assist in financing importing and exporting operations?
b. People would not want to work, because there would be no money to pay them.
Which of the following securities assist in financing importing and exporting operations?
c. People would take time away from work to search for trading partners.
Which of the following securities assist in financing importing and exporting operations?
d. People would produce only what they want to consume.
Which of the following securities assist in financing importing and exporting operations?

.

.

Without financial intermediaries, why would small savers not benefit from financial markets?

Choose one answer.

a. Nobody would want to borrow from them, because their funds would be too small.
Which of the following securities assist in financing importing and exporting operations?
b. Nobody would want to borrow from them, because they are not banks.
Which of the following securities assist in financing importing and exporting operations?
c. The cost of a one-time loan of a small amount would be too high to make it worth their while to lend.
Which of the following securities assist in financing importing and exporting operations?
d. The return on lending would be too high for them to want to lend.
Which of the following securities assist in financing importing and exporting operations?

.

.

A commercial paper with a ten year maturity pays an annual interest rate of 7%, while a U.S. government bond with the same maturity pays 5%. What could account for the difference?

Choose one answer.

a. The commercial paper is more attractive to investors.
Which of the following securities assist in financing importing and exporting operations?
b. The commercial paper is less risky.
Which of the following securities assist in financing importing and exporting operations?
c. The U.S. government bond is more liquid.
Which of the following securities assist in financing importing and exporting operations?
d. The U.S. government bond is riskier.
Which of the following securities assist in financing importing and exporting operations?

.

.

Amelia gives Ben a one-hundred dollar loan payable in a year. She tells him that when he repays her, he should make sure that the repayment can buy as many hamburgers as the initial one hundred dollars bought. What would be the correct inference from Amelia’s stipulation?

Choose one answer.

a. The interest rate on the loan is zero.
Which of the following securities assist in financing importing and exporting operations?
b. The real interest rate on the loan is zero.
Which of the following securities assist in financing importing and exporting operations?
c. The nominal interest rate on the loan is zero.
Which of the following securities assist in financing importing and exporting operations?
d. The nominal interest rate on the loan is equal to the real interest rate.
Which of the following securities assist in financing importing and exporting operations?

.

.

Arianna took a one-year loan from Sammy at an interest rate of 7% at a time when expected inflation was 3%. The actual inflation turned out to be 10%. Which of the following is true?

Choose one answer.

a. In real terms, Jane paid less than she expected to pay.
Which of the following securities assist in financing importing and exporting operations?
b. In real terms, Jane paid more than she expected to pay.
Which of the following securities assist in financing importing and exporting operations?
c. In nominal terms, Jane paid more than she expected to pay.
Which of the following securities assist in financing importing and exporting operations?
d. Jane paid no more nor less than she expected to pay.
Which of the following securities assist in financing importing and exporting operations?

.

.

Complete the following statement. Interest rates on Greek Sovereign Bonds are higher than on German Sovereign Bonds. One possible explanation may be that:

Choose one answer.

a. there is a higher demand for Greek Sovereign Bonds than there is for German Sovereign Bonds.
Which of the following securities assist in financing importing and exporting operations?
b. Greek Sovereign Bonds are more liquid than German Sovereign Bonds.
Which of the following securities assist in financing importing and exporting operations?
c. Greek Sovereign Bonds are more risky than German Sovereign Bonds.
Which of the following securities assist in financing importing and exporting operations?
d. there is a lower demand for German Sovereign Bonds than there is for Greek Sovereign Bonds.
Which of the following securities assist in financing importing and exporting operations?

.

.

Complete the following statement. The more easily a security can be sold and bought:

Choose one answer.

a. the more risky it is.
Which of the following securities assist in financing importing and exporting operations?
b. the more liquid it is.
Which of the following securities assist in financing importing and exporting operations?
c. the less desirable it is.
Which of the following securities assist in financing importing and exporting operations?
d. the higher the interest rate it pays.
Which of the following securities assist in financing importing and exporting operations?

.

.

Complete the following statement. The present discounted value of a stream of cash payments will always be:

Choose one answer.

a. Less than the sum of the stream of payments.
Which of the following securities assist in financing importing and exporting operations?
b. More than the sum of the stream of payments.
Which of the following securities assist in financing importing and exporting operations?
c. About the same as the sum of the stream of payments.
Which of the following securities assist in financing importing and exporting operations?
d. Exactly equal to the sum of the stream payments.
Which of the following securities assist in financing importing and exporting operations?

.

.

Consider the following equation, where PV is the present value, CFi is the cash flow at time i, and n is the number of years. Which of the following is a proper interpretation of r?

Which of the following securities assist in financing importing and exporting operations?

Choose one answer.

a. The interest rate
Which of the following securities assist in financing importing and exporting operations?
b. The discount rate
Which of the following securities assist in financing importing and exporting operations?
c. The nominal interest rate
Which of the following securities assist in financing importing and exporting operations?
d. The real interest rate
Which of the following securities assist in financing importing and exporting operations?

.

.

Erica borrows $1,000.00 from Jorge. Jorge demands repayment in a year in the amount of $1,100.00. What is the yield to maturity?

Choose one answer.

a. $100.00
Which of the following securities assist in financing importing and exporting operations?
b. 10.00%
Which of the following securities assist in financing importing and exporting operations?
c. 90.91%
Which of the following securities assist in financing importing and exporting operations?
d. 9.09%
Which of the following securities assist in financing importing and exporting operations?

.

.

Erica borrows $1,000.00 from Jorge. Jorge demands repayment in a year in the amount of $1,100.00. What is the yield to maturity?

Choose one answer.

a. The same as the simple interest rate
Which of the following securities assist in financing importing and exporting operations?
b. Greater than the simple interest rate
Which of the following securities assist in financing importing and exporting operations?
c. Less than the simple interest rate
Which of the following securities assist in financing importing and exporting operations?
d. Cannot be determined from the given information
Which of the following securities assist in financing importing and exporting operations?

.

.

Everything else remaining constant, if the risk associated with holding security increases, what will happen to the price and interest rate?

Choose one answer.

a. The price of the security will increase, and the interest rate will increase.
Which of the following securities assist in financing importing and exporting operations?
b. The price of the security will increase, and the interest rate will decrease.
Which of the following securities assist in financing importing and exporting operations?
c. The price of the security will decrease, and the interest rate will decrease.
Which of the following securities assist in financing importing and exporting operations?
d. The price of the security will decrease, and the interest rate will increase.
Which of the following securities assist in financing importing and exporting operations?

.

.

How is risk premium defined?

Choose one answer.

a. The spread between the interest rates on default-free and default-risk bonds of the same maturity
Which of the following securities assist in financing importing and exporting operations?
b. The spread between interest rates on default-free and default risk bonds with different maturities
Which of the following securities assist in financing importing and exporting operations?
c. The yield to maturity plus the expected inflation over the period the bond is held
Which of the following securities assist in financing importing and exporting operations?
d. The yield to maturity plus the actual inflation over the period the bond is held
Which of the following securities assist in financing importing and exporting operations?

.

.

If the risk associated with holding an asset increases and expected inflation also increases, then what will happen to the equilibrium interest rate?

Choose one answer.

a. It will increase.
Which of the following securities assist in financing importing and exporting operations?
b. It will decrease.
Which of the following securities assist in financing importing and exporting operations?
c. It will remain the same.
Which of the following securities assist in financing importing and exporting operations?
d. It cannot be determined.
Which of the following securities assist in financing importing and exporting operations?

.

.

In Table 1 below, what will be the interest rate on a two-year bond?

TABLE 1
Expected interest rate on one-year bonds over the next five years is as follows:

Which of the following securities assist in financing importing and exporting operations?

Choose one answer.

a. 2%
Which of the following securities assist in financing importing and exporting operations?
b. 2.5%
Which of the following securities assist in financing importing and exporting operations?
c. 3.0%
Which of the following securities assist in financing importing and exporting operations?
d. 5.0%
Which of the following securities assist in financing importing and exporting operations?

.

.

In Table 1 below, what will be the slope of the yield curve?

TABLE 1
Expected interest rate on one-year bonds over the next five years is as follows:

Which of the following securities assist in financing importing and exporting operations?

Choose one answer.

a. Downward sloping
Which of the following securities assist in financing importing and exporting operations?
b. Flat
Which of the following securities assist in financing importing and exporting operations?
c. Upward Sloping
Which of the following securities assist in financing importing and exporting operations?
d. Flat then upward sloping
Which of the following securities assist in financing importing and exporting operations?

.

.

The interest rate is determined by which of the following?

Choose one answer.

a. The demand for securities
Which of the following securities assist in financing importing and exporting operations?
b. The supply of securities
Which of the following securities assist in financing importing and exporting operations?
c. The demand and supply of securities
Which of the following securities assist in financing importing and exporting operations?
d. The needs of banks
Which of the following securities assist in financing importing and exporting operations?

.

.

The rate of return on a security or bond can be negative under which circumstance?

Choose one answer.

a. The interest rate falls, and you sell before maturity.
Which of the following securities assist in financing importing and exporting operations?
b. The interest rate rises, and you sell before maturity.
Which of the following securities assist in financing importing and exporting operations?
c. The interest rate does not change, and you sell it at par before maturity.
Which of the following securities assist in financing importing and exporting operations?
d. The interest rate does not change, and you hold it to maturity.
Which of the following securities assist in financing importing and exporting operations?

.

.

The real interest rate is measured by which of the following?

Choose one answer.

a. The difference between the actual interest rate and the observed interest rate
Which of the following securities assist in financing importing and exporting operations?
b. The sum of the nominal interest rate and inflation
Which of the following securities assist in financing importing and exporting operations?
c. The difference between the nominal interest rate and inflation
Which of the following securities assist in financing importing and exporting operations?
d. The difference between the nominal interest rate and the prime rate
Which of the following securities assist in financing importing and exporting operations?

.

.

The U.S. government is running a big budget deficit and plans to finance the deficit by borrowing. If everything else remaining constant, then what will happen to the demand for bonds?

Choose one answer.

a. It will increase.
Which of the following securities assist in financing importing and exporting operations?
b. It will decrease.
Which of the following securities assist in financing importing and exporting operations?
c. It will not change.
Which of the following securities assist in financing importing and exporting operations?
d. It cannot be determined since other factors can change.
Which of the following securities assist in financing importing and exporting operations?

.

.

The U.S. government is running a big budget deficit and plans to finance the deficit by borrowing. If everything else remaining constant, then what will happen to the supply of bonds and the interest rate?

Choose one answer.

a. The supply will increase, and the interest rate will decrease.
Which of the following securities assist in financing importing and exporting operations?
b. The supply will decrease, and the interest rate will decrease.
Which of the following securities assist in financing importing and exporting operations?
c. The supply will not change, but the interest rate will increase.
Which of the following securities assist in financing importing and exporting operations?
d. The supply will increase, and the interest rate will increase.
Which of the following securities assist in financing importing and exporting operations?

.

.

The U.S. government is running a big budget deficit and plans to finance it by borrowing. If everything else remaining constant, then what will happen to the price of bonds and the interest rate?

Choose one answer.

a. The price will increase, and the interest rate will increase.
Which of the following securities assist in financing importing and exporting operations?
b. The price will increase, and the interest rate will decrease.
Which of the following securities assist in financing importing and exporting operations?
c. The price will decrease, and the interest rate will increase.
Which of the following securities assist in financing importing and exporting operations?
d. The price will decrease, and the interest rate will decrease.
Which of the following securities assist in financing importing and exporting operations?

.

.

Under what condition will real interest rate in the economy be negative?

Choose one answer.

a. When the real interest rate is equal to inflation
Which of the following securities assist in financing importing and exporting operations?
b. When the nominal interest rate is greater than the real interest rate
Which of the following securities assist in financing importing and exporting operations?
c. When inflation is greater than the nominal interest rate
Which of the following securities assist in financing importing and exporting operations?
d. When inflation is equal to the nominal interest rate
Which of the following securities assist in financing importing and exporting operations?

.

.

What does an upward sloping yield curve imply?

Choose one answer.

a. Future short-term rates are expected to fall.
Which of the following securities assist in financing importing and exporting operations?
b. Future short-term rates are expected to rise.
Which of the following securities assist in financing importing and exporting operations?
c. Future long-term rates are expected to fall.
Which of the following securities assist in financing importing and exporting operations?
d. Future long-term rates are expected to fall.
Which of the following securities assist in financing importing and exporting operations?

.

.

What is the yield to maturity?

Choose one answer.

a. The rate at which the stream of cash flows from an instrument must be discounted to equal its value today
Which of the following securities assist in financing importing and exporting operations?
b. Always the ratio of the price at which the instrument is sold, divided by the price at which it is bought
Which of the following securities assist in financing importing and exporting operations?
c. The rate at which the stream of cash flow must be increased to equal its future value
Which of the following securities assist in financing importing and exporting operations?
d. The difference between the future value and the present value
Which of the following securities assist in financing importing and exporting operations?

.

.

Why is one hundred dollars today not the same as one hundred dollars a year from now?

Choose one answer.

a. Because one hundred dollars a year from now will buy less than one hundred dollars-worth of goods and services
Which of the following securities assist in financing importing and exporting operations?
b. Because one hundred dollars a year from now will buy more than one hundred dollars-worth of goods and services.
Which of the following securities assist in financing importing and exporting operations?
c. Because the statement does not take account of the time value of money
Which of the following securities assist in financing importing and exporting operations?
d. Because people value what they receive in the future more than what they receive today
Which of the following securities assist in financing importing and exporting operations?

.

.

Why is the yield to maturity on municipal bonds with maturity of 15 years lower than the yield to maturity on U.S. government bonds with maturity of 15 years?

Choose one answer.

a. U.S. government bonds are riskier than municipal bonds.
Which of the following securities assist in financing importing and exporting operations?
b. U.S. government bonds are less liquid than municipal bonds.
Which of the following securities assist in financing importing and exporting operations?
c. Municipal bonds are less liquid than U.S. government bonds.
Which of the following securities assist in financing importing and exporting operations?
d. Municipal bond interest payments are exempt from federal income taxes.
Which of the following securities assist in financing importing and exporting operations?

.

.

Why would the interest rate on U.S. government bonds be lower than the interest rate on Mexican government bonds?

Choose one answer.

a. U.S. government bonds have shorter maturities than Mexican government bonds.
Which of the following securities assist in financing importing and exporting operations?
b. The U.S. government’s deficit is larger than the Mexican government deficit.
Which of the following securities assist in financing importing and exporting operations?
c. The Mexican government’s debt is the same as the U.S. government’s debt, but the former is default-free.
Which of the following securities assist in financing importing and exporting operations?
d. U.S. government bonds are more liquid than Mexican government bonds.
Which of the following securities assist in financing importing and exporting operations?

.

.

You buy a municipal bond with a face value of $1,000.00. The fixed interest payment is $100.00 a year. The bond matures in ten years. Five years before maturity, you sell the bond for $1,000.00. What will the rate of return be?

Choose one answer.

a. The same as the yield to maturity
Which of the following securities assist in financing importing and exporting operations?
b. Greater than the yield to maturity
Which of the following securities assist in financing importing and exporting operations?
c. Less than the yield to maturity
Which of the following securities assist in financing importing and exporting operations?
d. Cannot be calculated
Which of the following securities assist in financing importing and exporting operations?

.

.

You buy a municipal bond with a face value of $1,000.00. The fixed interest payment is $100.00 a year. The bond matures in ten years. Five years before maturity, you decide to sell. What will the yield to maturity be?

Choose one answer.

a. The same as the fixed interest rate
Which of the following securities assist in financing importing and exporting operations?
b. Higher than the fixed interest rate
Which of the following securities assist in financing importing and exporting operations?
c. Lower than the fixed interest rate
Which of the following securities assist in financing importing and exporting operations?
d. Cannot be calculated
Which of the following securities assist in financing importing and exporting operations?

.

.

You win a lottery which promises to pay you $1,000.00 over five years in equal installments. The interest rate is 5%. The amount you won is actually closest to what amount?

Choose one answer.

a. $1,000.00
Which of the following securities assist in financing importing and exporting operations?
b. $965.00
Which of the following securities assist in financing importing and exporting operations?
c. $865.00
Which of the following securities assist in financing importing and exporting operations?
d. $765.00
Which of the following securities assist in financing importing and exporting operations?

.

.

A firm accepts and keeps funds for several people with the promise that they can withdraw them anytime they want. The same firm then lends the funds to borrowers. Which of the following best identifies this type of firm?

Choose one answer.

a. An insurance company
Which of the following securities assist in financing importing and exporting operations?
b. A pension fund
Which of the following securities assist in financing importing and exporting operations?
c. A depository institution
Which of the following securities assist in financing importing and exporting operations?
d. A finance company
Which of the following securities assist in financing importing and exporting operations?

.

.

Banks are regulated, because governments want them to do which of the following?

Choose one answer.

a. Lend to sectors that will make the economy grow
Which of the following securities assist in financing importing and exporting operations?
b. Lend to sectors dictated by the government
Which of the following securities assist in financing importing and exporting operations?
c. Avoid excessive risk
Which of the following securities assist in financing importing and exporting operations?
d. Avoid making too much profit
Which of the following securities assist in financing importing and exporting operations?

.

.

Complete the following statement. Asymmetric information reduces financial transactions, because:

Choose one answer.

a. it makes it costly to borrow and lend.
Which of the following securities assist in financing importing and exporting operations?
b. it makes it costly to lend, so nobody wants to lend.
Which of the following securities assist in financing importing and exporting operations?
c. it makes it cheaper to borrow, so nobody wants to lend.
Which of the following securities assist in financing importing and exporting operations?
d. it makes it cheaper to lend, so nobody wants to lend.
Which of the following securities assist in financing importing and exporting operations?

.

.

Complete the following statement. Banks are regulated because governments want them to:

Choose one answer.

a. Maximize profit.
Which of the following securities assist in financing importing and exporting operations?
b. Operate safely.
Which of the following securities assist in financing importing and exporting operations?
c. Minimize cost.
Which of the following securities assist in financing importing and exporting operations?
d. Increase the money supply.
Which of the following securities assist in financing importing and exporting operations?

.

.

Fill in the blanks. By lending to many borrowers, financial intermediaries ______ through ______.

Choose one answer.

a. lower costs; economies of scale
Which of the following securities assist in financing importing and exporting operations?
b. raise costs; economies of scale
Which of the following securities assist in financing importing and exporting operations?
c. raise costs; increasing marginal returns
Which of the following securities assist in financing importing and exporting operations?
d. lower costs; decreasing marginal returns
Which of the following securities assist in financing importing and exporting operations?

.

.

Fill in the blanks. Financial markets foster economic growth by facilitating the transfer of funds from ______ to ______.

Choose one answer.

a. the poor; the rich
Which of the following securities assist in financing importing and exporting operations?
b. the government; the poor
Which of the following securities assist in financing importing and exporting operations?
c. the rich; the poor
Which of the following securities assist in financing importing and exporting operations?
d. savers; borrowers
Which of the following securities assist in financing importing and exporting operations?

.

.

In an effort to minimize bank failures through deposits insurance, regulators may increase which of the following?

Choose one answer.

a. Moral hazard
Which of the following securities assist in financing importing and exporting operations?
b. Adverse selection
Which of the following securities assist in financing importing and exporting operations?
c. Principal agency problems
Which of the following securities assist in financing importing and exporting operations?
d. Sequential service constraint
Which of the following securities assist in financing importing and exporting operations?

.

.

The asymmetric information problem that occurs after a financial transaction is called which of the following?

Choose one answer.

a. Agency problem
Which of the following securities assist in financing importing and exporting operations?
b. Moral hazard problem
Which of the following securities assist in financing importing and exporting operations?
c. Adverse selection problem
Which of the following securities assist in financing importing and exporting operations?
d. Lending problem
Which of the following securities assist in financing importing and exporting operations?

.

.

To minimize asymmetric information in financial markets, banks and financial institutions have to do which of the following?

Choose one answer.

a. Disclose information to the public and the government
Which of the following securities assist in financing importing and exporting operations?
b. Disclose information to shareholders
Which of the following securities assist in financing importing and exporting operations?
c. Keep their proprietary information from potential saboteurs
Which of the following securities assist in financing importing and exporting operations?
d. Tell the government whenever they change their portfolio of assets
Which of the following securities assist in financing importing and exporting operations?

.

.

Which of the following reasons accurately explains why governments regulate banks?

Choose one answer.

a. To impose capital requirements
Which of the following securities assist in financing importing and exporting operations?
b. To only allow them to buy safe stocks
Which of the following securities assist in financing importing and exporting operations?
c. To appoint the members of the Board of Directors
Which of the following securities assist in financing importing and exporting operations?
d. To only allow them to borrow from the Federal Reserve Bank
Which of the following securities assist in financing importing and exporting operations?

.

.

Which of the following reasons accurately explains why governments regulate banks?

Choose one answer.

a. To require them to be under a bank holding company
Which of the following securities assist in financing importing and exporting operations?
b. To require them to buy only preferred common stocks
Which of the following securities assist in financing importing and exporting operations?
c. To supervise their activities
Which of the following securities assist in financing importing and exporting operations?
d. To prevent them from branching
Which of the following securities assist in financing importing and exporting operations?

.

.

Which of the following reasons explains why financial institutions are heavily regulated?

Choose one answer.

a. When they fail, owners of the bank lose their capital.
Which of the following securities assist in financing importing and exporting operations?
b. When they fail, depositors lose their deposits.
Which of the following securities assist in financing importing and exporting operations?
c. When they fail, the government has to bail them out.
Which of the following securities assist in financing importing and exporting operations?
d. When they fail, it causes disruptions in economic activity.
Which of the following securities assist in financing importing and exporting operations?

.

.

A central bank mandate might be established in order to do which of the following?

Choose one answer.

a. Maintain price stability
Which of the following securities assist in financing importing and exporting operations?
b. Make the most profit for shareholders
Which of the following securities assist in financing importing and exporting operations?
c. Reduce the price level
Which of the following securities assist in financing importing and exporting operations?
d. Control government spending
Which of the following securities assist in financing importing and exporting operations?

.

.

Complete the following statement. If the Federal Reserve Bank uses the money supply as a target, then:

Choose one answer.

a. it cannot at the same time control the monetary base.
Which of the following securities assist in financing importing and exporting operations?
b. it cannot at the same time control the reserve deposit ratio.
Which of the following securities assist in financing importing and exporting operations?
c. it cannot at the same time control the interest rate.
Which of the following securities assist in financing importing and exporting operations?
d. it cannot at the same time control the price level.
Which of the following securities assist in financing importing and exporting operations?

.

.

Complete the following statement. The effectiveness of monetary policy is often said to be asymmetric. This means that monetary policy is:

Choose one answer.

a. Ineffective during both expansions recessions.
Which of the following securities assist in financing importing and exporting operations?
b. Ineffective during recessions.
Which of the following securities assist in financing importing and exporting operations?
c. Ineffective during expansions.
Which of the following securities assist in financing importing and exporting operations?
d. Ineffective at the trough of the business cycle.
Which of the following securities assist in financing importing and exporting operations?

.

.

In seeking to increase the money supply, the Federal Reserve Bank could do which of the following?

Choose one answer.

a. Buy government bonds and thus increase reserves
Which of the following securities assist in financing importing and exporting operations?
b. Sell government bonds and thus increase reserves
Which of the following securities assist in financing importing and exporting operations?
c. Buy government bonds and thus decrease reserves
Which of the following securities assist in financing importing and exporting operations?
d. Sell government bonds and thus decrease reserves
Which of the following securities assist in financing importing and exporting operations?

.

.

One of the ways the Federal Reserve Bank can control the money supply is to do which of the following?

Choose one answer.

a. Alter the required reserve ratio
Which of the following securities assist in financing importing and exporting operations?
b. Alter the currency to deposit ratio
Which of the following securities assist in financing importing and exporting operations?
c. Forbid the banks from taking deposits
Which of the following securities assist in financing importing and exporting operations?
d. Encourage the banks to take more deposits
Which of the following securities assist in financing importing and exporting operations?

.

.

The central bank can influence economic activity by doing which of the following?

Choose one answer.

a. Conducting fiscal policy
Which of the following securities assist in financing importing and exporting operations?
b. Conducting monetary policy
Which of the following securities assist in financing importing and exporting operations?
c. Advising the president
Which of the following securities assist in financing importing and exporting operations?
d. Advising Congress
Which of the following securities assist in financing importing and exporting operations?

.

.

The Federal Open Market Committee (FOMC) of the Federal Reserve Bank is primarily responsible for which of the following?

Choose one answer.

a. Conducting open market operations
Which of the following securities assist in financing importing and exporting operations?
b. Conducting closed market operations
Which of the following securities assist in financing importing and exporting operations?
c. Conducting fiscal policy
Which of the following securities assist in financing importing and exporting operations?
d. Chartering state banks
Which of the following securities assist in financing importing and exporting operations?

.

.

The Federal Reserve Bank of the U.S. is often said to have dual mandates. What is the purpose of dual mandates?

Choose one answer.

a. They prevent the price level from increasing and keep the exchange rate stable.
Which of the following securities assist in financing importing and exporting operations?
b. They prevent the price level from increasing and ensure full employment.
Which of the following securities assist in financing importing and exporting operations?
c. They maintain price stability and ensure full employment.
Which of the following securities assist in financing importing and exporting operations?
d. They maintain price stability and ensure zero unemployment.
Which of the following securities assist in financing importing and exporting operations?

.

.

To achieve the mandate of full employment, the Federal Reserve Bank could do which of the following?

Choose one answer.

a. Target the money supply and give up control of the interest rate
Which of the following securities assist in financing importing and exporting operations?
b. Target the price level and increase the money supply
Which of the following securities assist in financing importing and exporting operations?
c. Target both the interest rate and the money supply
Which of the following securities assist in financing importing and exporting operations?
d. Do nothing and let the market decide what the interest rate should be
Which of the following securities assist in financing importing and exporting operations?

.

.

What is meant by interest rate targeting in the conduct of monetary policy?

Choose one answer.

a. The practice of keeping the interest rate within a certain range to achieve some macroeconomic goal
Which of the following securities assist in financing importing and exporting operations?
b. The practice of setting the money supply at a certain level and letting the interest be determined by the market
Which of the following securities assist in financing importing and exporting operations?
c. The practice of banks telling borrowers how much interest rate they will pay for loans
Which of the following securities assist in financing importing and exporting operations?
d. The practice of setting the rate at which the money supply will with the level of interest rate
Which of the following securities assist in financing importing and exporting operations?

.

.

What is one of the major roles of central banks, such as the Federal Reserve Bank?

Choose one answer.

a. To make profit for the government
Which of the following securities assist in financing importing and exporting operations?
b. To make profit for shareholders
Which of the following securities assist in financing importing and exporting operations?
c. To maintain price stability
Which of the following securities assist in financing importing and exporting operations?
d. To increase the money supply
Which of the following securities assist in financing importing and exporting operations?

.

.

What is the preferred method the Federal Reserve Bank uses to control the money supply?

Choose one answer.

a. Altering the reserve deposits ratio
Which of the following securities assist in financing importing and exporting operations?
b. Using moral suasion
Which of the following securities assist in financing importing and exporting operations?
c. Changing margin requirements
Which of the following securities assist in financing importing and exporting operations?
d. Conducting open market operations
Which of the following securities assist in financing importing and exporting operations?

.

.

When the central bank sells securities, what does it seek to do?

Choose one answer.

a. Increase the money supply
Which of the following securities assist in financing importing and exporting operations?
b. Decrease the money supply
Which of the following securities assist in financing importing and exporting operations?
c. Reduce the interest rate
Which of the following securities assist in financing importing and exporting operations?
d. Increase the monetary base
Which of the following securities assist in financing importing and exporting operations?

.

.

When the Federal Reserve Bank increases the monetary base, this is a sign that it wants which of the following to occur?

Choose one answer.

a. Money supply to increase and the interest rate and employment to increase
Which of the following securities assist in financing importing and exporting operations?
b. Money supply to increase and the interest rate and employment to decrease
Which of the following securities assist in financing importing and exporting operations?
c. Money supply and the interest rate to increase as well as employment to decrease
Which of the following securities assist in financing importing and exporting operations?
d. Money supply and employment to increase as well as the interest rate to decrease
Which of the following securities assist in financing importing and exporting operations?

.

.

Who heads the Federal Reserve System?

Choose one answer.

a. FOMC
Which of the following securities assist in financing importing and exporting operations?
b. Federal Advisory Council
Which of the following securities assist in financing importing and exporting operations?
c. Board of Governors
Which of the following securities assist in financing importing and exporting operations?
d. Discount Rate Committee
Which of the following securities assist in financing importing and exporting operations?

.

.

Who owns the U.S. Federal Reserve?

Choose one answer.

a. The government
Which of the following securities assist in financing importing and exporting operations?
b. Member banks
Which of the following securities assist in financing importing and exporting operations?
c. All the banks in the U.S.
Which of the following securities assist in financing importing and exporting operations?
d. Only the state banks
Which of the following securities assist in financing importing and exporting operations?

.

.

As an economy grows and people’s disposable income rises, what is likely to happen to the demand for foreign goods?

Choose one answer.

a. It will decrease, because more goods can be produced at home.
Which of the following securities assist in financing importing and exporting operations?
b. It will remain the same, because they are foreign goods.
Which of the following securities assist in financing importing and exporting operations?
c. It will increase, because the demand for all good will increase.
Which of the following securities assist in financing importing and exporting operations?
d. Exports from the country will increase, but imports will remain the same.
Which of the following securities assist in financing importing and exporting operations?

.

.

C lowers its exchange rate with its major trading partner, U. With everything else being equal, which of the following is true?

Choose one answer.

a. U will export more to C.
Which of the following securities assist in financing importing and exporting operations?
b. C will export more to U.
Which of the following securities assist in financing importing and exporting operations?
c. C will export no more to U than before.
Which of the following securities assist in financing importing and exporting operations?
d. U will export nor more to C than before.
Which of the following securities assist in financing importing and exporting operations?

.

.

C produces refrigerators at a lower cost than U. With everything else being equal, the likely consequence might be which of the following?

Choose one answer.

a. The real exchange rate of U will rise.
Which of the following securities assist in financing importing and exporting operations?
b. The real exchange rate of U will fall.
Which of the following securities assist in financing importing and exporting operations?
c. The nominal exchange rate of C will rise.
Which of the following securities assist in financing importing and exporting operations?
d. The nominal exchange rate of U will fall.
Which of the following securities assist in financing importing and exporting operations?

.

.

C produces refrigerators at a lower cost than U. With everything else being equal, what are the consequences of this observation?

Choose one answer.

a. The real exchange rate of U will fall, and U will import more refrigerators from C.
Which of the following securities assist in financing importing and exporting operations?
b. The real exchange rate of U will rise, and U will import more refrigerators from C.
Which of the following securities assist in financing importing and exporting operations?
c. The nominal exchange rate of C will rise, and C will import more from U.
Which of the following securities assist in financing importing and exporting operations?
d. The nominal exchange rate of C will fall, and C will import more from U.
Which of the following securities assist in financing importing and exporting operations?

.

.

Complete the following statement. In the long run, the value of the U.S. dollar will rise relative to other currencies:

Choose one answer.

a. if U.S. businesses become less productive.
Which of the following securities assist in financing importing and exporting operations?
b. if U.S. citizens choose to vacation at home.
Which of the following securities assist in financing importing and exporting operations?
c. if foreigners choose to vacation at home.
Which of the following securities assist in financing importing and exporting operations?
d. if U.S. businesses become more productive.
Which of the following securities assist in financing importing and exporting operations?

.

.

Country C commits to maintaining parity of its currency with that of country U. What inference can be drawn from such a policy with everything else being equal?

Choose one answer.

a. C’s currency is floating even if U’s currency is not.
Which of the following securities assist in financing importing and exporting operations?
b. C’s currency is fixed even if U’s currency is not.
Which of the following securities assist in financing importing and exporting operations?
c. U gains no trade advantage against C from devaluing its currency.
Which of the following securities assist in financing importing and exporting operations?
d. U and C have currencies that float independently.
Which of the following securities assist in financing importing and exporting operations?

.

.

If a country’s income rises and the country increases its imports of another country’s goods, what will happen to the exchange rate of the importing country?

Choose one answer.

a. It will fall.
Which of the following securities assist in financing importing and exporting operations?
b. It will rise.
Which of the following securities assist in financing importing and exporting operations?
c. It will remain the same.
Which of the following securities assist in financing importing and exporting operations?
d. It cannot be determined.
Which of the following securities assist in financing importing and exporting operations?

.

.

If European goods are more to U.S. citizens what will be the result?

Choose one answer.

a. The value of the dollar will decrease compared to the euro.
Which of the following securities assist in financing importing and exporting operations?
b. The value of the dollar will increase compared to the euro.
Which of the following securities assist in financing importing and exporting operations?
c. The U.S. will export more goods to Europe
Which of the following securities assist in financing importing and exporting operations?
d. More U.S. citizens will travel to Europe.
Which of the following securities assist in financing importing and exporting operations?

.

.

If the exchange rate is allowed to be determined by the forces of demand and supply, the exchange rate regime is classified as which of the following?

Choose one answer.

a. Fixed exchange rate regime
Which of the following securities assist in financing importing and exporting operations?
b. Managed exchange rate regime
Which of the following securities assist in financing importing and exporting operations?
c. Demand set exchange rate regime
Which of the following securities assist in financing importing and exporting operations?
d. Floating exchange rate regime
Which of the following securities assist in financing importing and exporting operations?

.

.

The demand for foreign currency by U.S. businesses and citizens derives from which of the following?

Choose one answer.

a. The income of foreigners
Which of the following securities assist in financing importing and exporting operations?
b. The preference of foreigners for U.S. goods
Which of the following securities assist in financing importing and exporting operations?
c. The income of U.S. residents
Which of the following securities assist in financing importing and exporting operations?
d. The desire to accumulate foreign currency
Which of the following securities assist in financing importing and exporting operations?

.

.

The real exchange rate of the U.S. dollar in terms of the euro can be defined as which of the following?

Choose one answer.

a. The amount of euros one U.S. dollar can buy
Which of the following securities assist in financing importing and exporting operations?
b. The amount of U.S. dollars one euro can buy
Which of the following securities assist in financing importing and exporting operations?
c. The value of U.S. dollars that is exchanged for euros daily
Which of the following securities assist in financing importing and exporting operations?
d. The value of goods one U.S. dollar can buy in a euro area
Which of the following securities assist in financing importing and exporting operations?

.

.

What will make the equilibrium exchange rate increase?

Choose one answer.

a. An increase in the demand for a country’s exports
Which of the following securities assist in financing importing and exporting operations?
b. A decrease in the demand for a country’s exports
Which of the following securities assist in financing importing and exporting operations?
c. An increase in the country’s imports
Which of the following securities assist in financing importing and exporting operations?
d. A reduction in the interest rate in the country
Which of the following securities assist in financing importing and exporting operations?

.

.

Why is the foreign exchange market important for economic welfare?

Choose one answer.

a. The foreign exchange market makes it possible to buy foreign goods.
Which of the following securities assist in financing importing and exporting operations?
b. The foreign exchange market makes it possible for foreigners to buy our goods.
Which of the following securities assist in financing importing and exporting operations?
c. The foreign exchange market makes it possible for countries to show pride in their currencies.
Which of the following securities assist in financing importing and exporting operations?
d. Both A and B
Which of the following securities assist in financing importing and exporting operations?

.

.

Without foreign exchange markets, citizens of different countries would have to do which of the following?

Choose one answer.

a. Live without foreign goods
Which of the following securities assist in financing importing and exporting operations?
b. Travel abroad to get foreign goods
Which of the following securities assist in financing importing and exporting operations?
c. Produce whatever they wanted to consume
Which of the following securities assist in financing importing and exporting operations?
d. Barter
Which of the following securities assist in financing importing and exporting operations?

.

.

An increase in the money supply, with everything else held constant, results in which of the following?

Choose one answer.

a. The LM curve will shift to the left and decrease the interest rate.
Which of the following securities assist in financing importing and exporting operations?
b. The LM curve will shift to the right and decrease the interest rate.
Which of the following securities assist in financing importing and exporting operations?
c. The IS curve will shift to the right and increase the interest rate.
Which of the following securities assist in financing importing and exporting operations?
d. The IS curve will shift to the right and decrease the interest rate.
Which of the following securities assist in financing importing and exporting operations?

.

.

Based on the diagram below, which of the following best describes what will happen when the money supply increases?

Which of the following securities assist in financing importing and exporting operations?

Choose one answer.

a. Interest rate falls, and GDP rises.
Which of the following securities assist in financing importing and exporting operations?
b. Interest rate rises, and GDP rises.
Which of the following securities assist in financing importing and exporting operations?
c. Interest rate falls, and GDP rises.
Which of the following securities assist in financing importing and exporting operations?
d. Interest rate rises, and GDP falls.
Which of the following securities assist in financing importing and exporting operations?

.

.

Complete the following statement. According to a monetarist, attempts to use policy to stabilize the economy:

Choose one answer.

a. is likely to succeed in stabilizing the economy.
Which of the following securities assist in financing importing and exporting operations?
b. is likely to introduce instability in the economy.
Which of the following securities assist in financing importing and exporting operations?
c. will create higher inflation.
Which of the following securities assist in financing importing and exporting operations?
d. will create higher deflation.
Which of the following securities assist in financing importing and exporting operations?

.

.

If the money supply is growing at a rate of 3% a year, velocity is constant and real GDP is growing is growing at 2% a year, at what will inflation be in the economy?

Choose one answer.

a. 6%
Which of the following securities assist in financing importing and exporting operations?
b. 5%
Which of the following securities assist in financing importing and exporting operations?
c. 3%
Which of the following securities assist in financing importing and exporting operations?
d. 1%
Which of the following securities assist in financing importing and exporting operations?

.

.

If the money supply is growing at a rate of 5%, real GDP is growing at a rate of 2% and velocity is growing at a rate of 1%, what will inflation be in the economy?

Choose one answer.

a. 8%
Which of the following securities assist in financing importing and exporting operations?
b. 7%
Which of the following securities assist in financing importing and exporting operations?
c. 5%
Which of the following securities assist in financing importing and exporting operations?
d. 1%
Which of the following securities assist in financing importing and exporting operations?

.

.

What are the implications for policy when economic agents form rational expectations in making forecasts?

Choose one answer.

a. Monetary policy is effective.
Which of the following securities assist in financing importing and exporting operations?
b. Monetary policy is only effective when coupled with fiscal policy.
Which of the following securities assist in financing importing and exporting operations?
c. Fiscal policy is only effective when it is not accommodated by monetary policy.
Which of the following securities assist in financing importing and exporting operations?
d. Monetary policy is ineffective.
Which of the following securities assist in financing importing and exporting operations?

.

.

What are the implications for the economy when economic agents form expectations adaptively?

Choose one answer.

a. Real GDP cannot be increased by monetary policy.
Which of the following securities assist in financing importing and exporting operations?
b. Real GDP can be increased only by reducing the money supply.
Which of the following securities assist in financing importing and exporting operations?
c. Real GDP can be increased by monetary policy over time.
Which of the following securities assist in financing importing and exporting operations?
d. Only nominal GDP can be increased by monetary policy.
Which of the following securities assist in financing importing and exporting operations?

.

.

What do economists mean by the demand for money?

Choose one answer.

a. The amount of money people want to hold at different interest rates
Which of the following securities assist in financing importing and exporting operations?
b. The amount of income people want to hold at different interest rates
Which of the following securities assist in financing importing and exporting operations?
c. The amount of money the central bank wants people to hold at different interest rates
Which of the following securities assist in financing importing and exporting operations?
d. The amount of money supplied by the central bank at different interest rates
Which of the following securities assist in financing importing and exporting operations?

.

.

What will be the impact of monetary policy if the LM curve is horizontal?

Choose one answer.

a. There will be no effect on the interest rate.
Which of the following securities assist in financing importing and exporting operations?
b. The interest rate will increase.
Which of the following securities assist in financing importing and exporting operations?
c. The interest rate will decrease.
Which of the following securities assist in financing importing and exporting operations?
d. The interest rate will immediately fall to zero.
Which of the following securities assist in financing importing and exporting operations?

.

.

What would an increase in the money supply do in the economy?

Choose one answer.

a. Lower the interest rate, reduce the demand for money and increase GDP
Which of the following securities assist in financing importing and exporting operations?
b. Lower the interest, increase investment and increase GDP
Which of the following securities assist in financing importing and exporting operations?
c. Raises the interest rate, increase investment and reduce GDP
Which of the following securities assist in financing importing and exporting operations?
d. Raises interest rate, increase investment and reduce GDP
Which of the following securities assist in financing importing and exporting operations?

.

.

When the economy is caught in a liquidity trap, which of the following is true?

Choose one answer.

a. An increase in money supply will not lower the interest rate.
Which of the following securities assist in financing importing and exporting operations?
b. An increase in the money supply will lower interest rate.
Which of the following securities assist in financing importing and exporting operations?
c. An increase in the money supply will raise the GDP.
Which of the following securities assist in financing importing and exporting operations?
d. An increase in the money supply will lower the GDP.
Which of the following securities assist in financing importing and exporting operations?

.

.

Which of the following statements is true of the demand for money?

Choose one answer.

a. The demand for money is positively related to the interest rate but negatively to income.
Which of the following securities assist in financing importing and exporting operations?
b. The demand for money is positively related to the interest rate and positively to income.
Which of the following securities assist in financing importing and exporting operations?
c. The demand for money is negatively related to the interest rate and negatively to income.
Which of the following securities assist in financing importing and exporting operations?
d. The demand for money is negatively related to the interest rate but positively to income.
Which of the following securities assist in financing importing and exporting operations?

.

.

Why do Keynesians advocate activist fiscal policy as opposed to activist monetary policy?

Choose one answer.

a. They believe that the economy is inherently stable and fiscal policy is more effective than monetary policy in stabilizing the economy.
Which of the following securities assist in financing importing and exporting operations?
b. They believe that the economy is inherently unstable and fiscal policy is more effective than monetary policy in stabilizing the economy.
Which of the following securities assist in financing importing and exporting operations?
c. They believe that monetary policy is too effective in stabilizing an inherently unstable economy and should be used sparingly.
Which of the following securities assist in financing importing and exporting operations?
d. They believe fiscal policy is quick, flexible, and more effective compared to monetary policy in stabilizing the economy.
Which of the following securities assist in financing importing and exporting operations?

.

.

Why do monetarists see monetary policy as more effective than fiscal policy?

Choose one answer.

a. They believe that monetary policy will have a bigger impact on nominal income than an increase in government expenditure.
Which of the following securities assist in financing importing and exporting operations?
b. They believe that monetary policy will have as big an impact on nominal income as a change in government expenditure.
Which of the following securities assist in financing importing and exporting operations?
c. They believe that monetary policy will cause real GDP to increase by a larger amount than an increase in government expenditure.
Which of the following securities assist in financing importing and exporting operations?
d. They believe that monetary policy will cause the price level to increase by a larger amount than an increase in government expenditure.
Which of the following securities assist in financing importing and exporting operations?

.

.

Why is the constant money-growth-rate rule (CMG) a non-activist monetary policy instead of an activist monetary policy?

Choose one answer.

a. Because under CMG policy makers are using their discretion
Which of the following securities assist in financing importing and exporting operations?
b. Because under CMG policy makers are not using their discretion
Which of the following securities assist in financing importing and exporting operations?
c. Because under CMG policy makers have flexibility
Which of the following securities assist in financing importing and exporting operations?
d. Because under CMG the money supply can grow at a rate that is variable
Which of the following securities assist in financing importing and exporting operations?

.

.

Why might monetary policy be preferred to fiscal policy in stabilizing the economy?

Choose one answer.

a. It does not have a recognition lag and is therefore timely.
Which of the following securities assist in financing importing and exporting operations?
b. It is always effective whether the economy is in a recession or in expansion.
Which of the following securities assist in financing importing and exporting operations?
c. It is flexible and can be speedily implemented.
Which of the following securities assist in financing importing and exporting operations?
d. It follows rules that are times tested to be effective.
Which of the following securities assist in financing importing and exporting operations?

.

.

With everything else held constant, when income increases, what happens to the demand for money?

Choose one answer.

a. The demand for money decreases.
Which of the following securities assist in financing importing and exporting operations?
b. The demand for money increases.
Which of the following securities assist in financing importing and exporting operations?
c. The quantity demanded of money decreases.
Which of the following securities assist in financing importing and exporting operations?
d. The quantity demanded of money increases.
Which of the following securities assist in financing importing and exporting operations?

.

.

Which of the following securities will provide an investor with protection against purchasing power risk?

Which of the following securities will provide an investor with protection against purchasing-power risk? Treasury Inflation-Protected Securities (TIPS) are U.S. government securities that are inflation-adjusted based on the Consumer Price Index (CPI).

Which of the following securities is exempt from state taxes?

Income from bonds issued by the federal government and its agencies, including Treasury securities, is generally exempt from state and local taxes.

Which of the following securities is subject to prepayment risk?

The two common securities subject to prepayment risk are callable bonds and mortgage-backed securities. The bond issuer of the callable bonds may settle the obligation to the holder earlier than the agreed maturity date. The settlement of the principal amount terminates the contract.

Which of the following securities will trade without accrued interest trade flat )?

Your answer, Income bonds., was correct!. Bonds that trade flat do not trade with accrued interest. These include income bonds (also known as adjustment bonds), zeroes, bonds in default, and bonds that settle on an interest payment date.