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| 1 | |
The law of demand holds for loans, so that when the interest rate rises, |
| | A) | The quantity of loans demanded falls. |
| | B) | The quantity of loans supplied falls. |
| | C) | The quantity of loans demanded rises. |
| | D) | The quantity of loans supplied rises. |
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| 2 | |
As the interest rate rises, lenders are willing to supply __________ loans. |
| | A) | larger and larger |
| | B) | subprime |
| | C) | more |
| | D) | only the least risky |
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| 3 | |
A financial intermediary collects money from __________ and funnels the funds to __________. |
| | A) | the suppliers of capital; the users of capital |
| | B) | the users of capital; banks |
| | C) | the suppliers of capital; the government |
| | D) | borrowers; lenders |
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| 4 | |
Venture capital firms generally provide funds to |
| | A) | established businesses. |
| | B) | risky start-up businesses. |
| | C) | government agencies. |
| | D) | manufacturing companies. |
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| 5 | |
The risk–return principle holds that the only way to get higher expected returns over the long run is to |
| | A) | take fewer risks. |
| | B) | take more risks. |
| | C) | diversify your risks. |
| | D) | find the risk equilibrium. |
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| 6 | |
The total return on a share of stock is equal to the |
| | A) | change in the stock price, plus the dividend, divided by the original price. |
| | B) | change in the dividend, plus the change in the stock price, minus the original price. |
| | C) | change in the stock price divided by the dividend. |
| | D) | current price of the stock, minus the original price, plus the dividend. |
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| 7 | |
Which of the following markets is not counted among the financial intermediaries? |
| | A) | The bond market. |
| | B) | The stock market. |
| | C) | The mortgage market. |
| | D) | All of these markets are financial intermediaries. |
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| 8 | |
One of the benefits to the economy of having multiple types of financial intermediaries is |
| | A) | more competition. |
| | B) | more oversight. |
| | C) | easier application of financial system regulations. |
| | D) | slower movement of capital from lenders to borrowers. |
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| 9 | |
Bubbles occur in financial markets when investors believe that prices that have been |
| | A) | rising will continue to rise. |
| | B) | falling will continue to fall. |
| | C) | rising will begin to fall. |
| | D) | falling will begin to rise. |
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| 10 | |
In the late 1990s, there was a bubble in the |
| | A) | housing market. |
| | B) | stock market. |
| | C) | bond market. |
| | D) | Beanie Baby market. |
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