Financial markets promote economic efficiency by

channeling funds from savers to investors.

The bond markets are important because they are

the markets where interest rates are determined.

Financial intermediaries

provide a channel for linking who want to save with who want to invest.

Changes in stock prices

affect firmsʹ decisions to sell stock to finance investment spending.

Anything that is generally accepted in payment for goods and services

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SWhy study money, banking and financial system

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1
The price of one countryʹs currency in terms of another countryʹs currency is called the
interest rate
exchange rate
prime rate
Dow Jones industrial average
2
Financial markets promote economic efficiency by
channeling funds from investors to savers.
reducing investment.
channeling funds from savers to investors.
creating inflation.
3
The bond markets are important because they are
the markets where all borrowers get their funds.
the markets where foreign exchange rates are determined.
the markets where interest rates are determined.
easily the most widely followed financial markets in the United States.
4
Which of the following is not a financial institution?
a life insurance company
a pension fund
a business college
a credit union
5
Financial intermediaries
produce nothing of value and are therefore a drain on societyʹs resources.
can hurt the performance of the economy.
provide a channel for linking who want to save with who want to invest.
hold very little of the average Americanʹs wealth
6
Changes in stock prices
affect firmsʹ decisions to sell stock to finance investment spending.
occur in regular patterns.
do not affect peopleʹs wealth and their willingness to spend.
are unimportant to decision makers.
7
The price paid for the rental of borrowed funds is commonly referred to a
interest rate
exchange rate
inflation rate.
aggregate price level
8
Financial institutions that accept deposits and make loans are called ________.
exchanges
over-the-counter markets
commercial banks
finance companies
9
Money is defined as
a risk-free repository of spending power.
the unrecognized liability of governments.
Anything that is generally accepted in payment for goods and services
Bills of exchange.
10
The management of money and interest rates is called ________ policy and is conducted by a nationʹs ________ bank.
fiscal; superior
fiscal; central
monetary; central
monetary; superior

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