Chapter 1

                      Introducing Money, Banking, and Financial Markets

D1 Interpretive
    1. __________________ generate(s) prices whenever securities are bought or sold.
        A) Financial markets
        B) Financial institutions
        C) The Federal Reserve
        D) The Securities and Exchange Commission
        Answer: A

D1 Factual
    2. The definition of money does not refer to
        A) coins and currency.
        B) the monetary economy.
        C) unemployment.
        D) a tool used by the central bank to influence aggregate economic activity.
        Answer: C

D1 Applied
    3. Which of the following is not a reference to “banking” in “money, banking, and financial markets?”
        A) Commercial banks
        B) Savings banks
        C) Financial intermediaries
        D) Markets in which financial assets can be traded
        Answer: D

D2 Interpretive
    3. Which of the following statements is not true about money?
        A) Money is sometimes viewed as a lubricant that greases the wheels of economic activity.
        B) Without money, some transactions would be unimaginably difficult.
        C) Money influences the behavior of the economy as a whole.
        D) All of the above are true.
        Answer: D

D2 Interpretive
    4. Which of the following statements about banks is false?
        A) They play a critical role in the economy.
        B) They provide a place where individuals and businesses can invest their funds to earn interest with a minimum of risk.
        C) They make loans, and are therefore very different from other financial institutions like finance companies and insurance companies.
        D) They indirectly issue money in the form of deposits.
        Answer: C

D1 Factual
    5. The central bank of the United States is the
        A) Federal Reserve.
        B) Securities and Exchange Commission.
        C) Federal Deposit Insurance Corporation....