THERE ARE 10 MULTIPLE CHOICE QUESTIONS and 1 SHORT ANSWER THE CHOICES CAN BE FOUND BELOW THE QUESTIONS, EACH QUESTION HAS 4 CHOICES. THE CHOICES ARE NOT NUMBERED BUT EACH CHOICE IS IN A SEPARATE LINE, JUST WRITE THE CORRECT ANSWER UNDER EACH QUESTION IN RED COLOR.
Question 1(3 points)
The general role of financial intermediaries is to:
Question 1 options:
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Provide funds to the federal government to finance a trade deficit.
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Channel money from savers to those who want to borrow.
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Provide advice to consumers on how they should handle their finances.
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Help ensure there is enough money in circulation.
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Question 2(3 points)
Which of the following would be considered a financial intermediary:
Question 2 options:
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Citibank.
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The Federal Reserve Board
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Chicago Board of Trade.
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New York Stock Exchange.
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Question 3(3 points)
The Money market includes _______ ; while an asset found in the capital market would include _______ :
Question 3 options:
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Bank certificates of deposit (CD's) with maturates of less than one year; T-bills.
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Debt instruments with maturities of more than one year; corporate stocks.
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Bank certificates of deposit (CD's) with maturities of less than one year; T-bonds.
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Corporate bonds with maturities of more than one year and stocks.
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Question 4(3 points)
Due to the increased globalization of financial markets, we can expect all of the following, except:
Question 4 options:
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A part of the US government's budget deficit will be financed by foreign savers.
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If less foreign money is saved in the United States, US interest rates will increase.
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A smaller inflow of foreign savings into U.S. financial markets.
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An increased influence of US financial markets on the rate of return for financial assets held by foreign savers.
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Question 5(3 points)
When economists refer to the role of money as a medium of exchange, they mean that:
Question 5 options:
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Worn out currency is easily exchanged at a bank.
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Currency may be exchanged for gold.
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Money explains the workings of the US economy.
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Money is a generally accepted means of payment for settlement of trade in goods and services.
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Question 6(3 points)
The M2 money aggregate equals:
Question 6 options:
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Currency + demand deposits.
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Currency + demand deposits + small denomination time deposits + money market mutual fund shares.
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Currency + demand deposits + large denomination time deposits.
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Currency.
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Question 7(3 points)
Which of the following assets is the most liquid?
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A dollar bill.
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A personal check.
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A corporate bond.
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A blue chip stock.
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Question 8(3 points)
Ecuador's currency is best described by:
Question 8 options:
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The central bank (e.g. Federal Reserve) is responsible for printing the domestic currency and there is a floating exchange rate.
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Banks are responsible for printing the domestic currency and there is a floating exchange rate.
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The central bank has no ability to print the domestic currency and dollarization was adopted to minimize domestic inflation.
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The central bank is responsible for printing the domestic currency and the value of the currency is adjusted to maintain a fixed level to another currency.
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Question 9(3 points)
The maturity of a debt instrument refers to?
Question 9 options:
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The interest rate, expressed as a percentage of its principal.
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The interest rate, expressed as an absolute amount.
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The length of time until it expires.
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The length of time until the first interest payment is due.
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Question 10(3 points)
Which of the following is not true of secondary stock markets?
Question 10 options:
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Most of the trading takes place in already issued stock.
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Every time a share of a company's stock changes hands, that company receives a payment.
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They help carry out direct finance.
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Secondary markets include the New York Stock Exchange.
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Question 11(10 points)
How have financial innovations increased the liquidity of home mortgages since the late 1970s? Has this increase in liquidity tended to increase or decrease the interest rate on home mortgages? Explain why. Answer this question in a few lines