Q1: Capital formation refers to the:U.S. governmentsstate and local governmentshouseholdscorporationsQ2: Which of the following borrowing sectors is the most important on an annual basis forraising funds in the credit markets?financial investmentreal investmentcontractual investmentvoluntary investmentQ3: What type of investment occurs when claims to wealth in the form of financial assets arepurchased or when debt obligations are repaid?individualsbusiness firmsfinancial intermediariesgovernmentsQ4: Which one the following four basic economic units consistently represents a savings surplusunit?Q5: The short-term accumulation of financial assets on the part of business corporations:are held in short-term, safe, and liquid debt obligationsadd to the level of long-term savings of the economy as a wholedo not enter the monetary stream to fund consumers, government, or other businessesare held in the form of long-term obligations of the federal governmentQ6: Private financial intermediation generally represents an important annual source of fundssupplied to credit markets. Which of the following intermediaries has failed to supply fundsduring one or more recent years?commercial banksthrift institutionsinsurance and pension fundsother financial intermediariesent years?Q7: Government-held reserves which are invested primarily in the in the obligations of federal,local, and state governments include:life insurancepension fundsretirement fundsmoney market fundsQ8: What type of investment occurs when claims to wealth in the form of real assets arecreated or acquired?financial investmentreal investmentcontractual investmentvoluntary investmentQ9: Which of the following is the most liquid form of savings?cash balancestime depositsinsurance reservessecuritiesQ10: Which of the following represent the most important instrument used to raise funds in thecredit markets?corporate bondstax-exempt obligationsconsumer debtmortgagesQ11: If interest rates increase because of a previously unanticipated inflation rate risk:long-lived debt instruments will decline more than short-lived debt instrumentslong-lived debt instruments will decline less than short-lived debt instrumentsneither set of debt instruments will declineall other things being equal, both should decline equallyQ12: Which of the following is not considered to be a basic theory used to explain the termstructure of interest rates?expectations theoryloanable funds theoryliquidity premium theorymarket segmentation theoryQ13: The relationship between interest rates or yields and the time to maturity for debtinstruments of comparable quality is calledthe yield to maturitythe term structure of interest ratesthe maturity risk premiumthe expectations hypothesisQ14: Which of the following interest rates are not determined in the money market?U.S. Treasury bill rateprime ratecommercial paper ratefederal funds rateQ15: Which of the following costs serves to compensate the lender for loss of liquidity?administrative costs of making the loancost of paying for the risk involvedcost to offset the likelihood of inflationcost for use of money during the period of the loanQ16: ______________ occurs during economic expansions when demand for goods and servicesis greater than supply.Administrative inflationSpeculative inflationCost-push inflationDemand-pull inflationQ17: When referring to a “downward sloping” yield curve:as maturities shorten, interest rates declineas maturities shorten, interest rates riseas maturities lengthen, interest rates remain the sameas maturities lengthen, interest rates riseQ18: The basic sources of loanable funds are:short-term funds and currencycurrent savings and the creation of new funds through the expansion of credit by depositoryinstitutionscontractual savings and commercial bank creditbank loans and the creation of new funds through the contraction of credit by depositoryinstitutionsQ19: Inflation caused by an increase in the money supply is called:demand-pull inflationcost-push inflationadministrative inflationa combination of administrative and speculative inflationQ20: Which of the following characteristics of most debt instruments do not cause bond prices tovary inversely with changes in financial market interest rates?coupon ratesmaturity datespar redemption valuesbond rating
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