Chapter 1 Practice QuizMultiple Choice. Choose the one alternative that best completes the statement or answers the question.1. The bond markets are important because they area. the markets where foreign exchange rates are determined.b. the markets where interest rates are determined.c. easily the most widely followed financial markets in the United States.d. the markets where all borrowers get their funds.2. Banks are important to the study of money and the economy because theya. are the only important financial institutions in the U.S. economy.b. create inflation.c. channel funds from investors to savers.d. have been a source of rapid financial innovation.3. Everything else held constant, a weaker dollar will likely hurta. textile exporters in South Carolina.b. furniture importers in California.c. automobile manufacturers in Michigan that use domestically produced inputs.d. wheat farmers in Montana who sell domestically.4. A budget __________ occurs when government expenditures exceed tax revenues for a particular time. period.a. surplus b. surgec. surfeit d. deficit5. Money is defined asa. anything that is generally accepted in payment for goods and services or in the repayment of debt.b. a risk-free repository of spending power.c. the unrecognized liability of governments.d. bills of exchange.6. The organization responsible for the conduct of monetary policy in the United States is thea. Federal Reserve System.b. Bureau of Monetary Affairs.c. U.S. Treasury.d. Comptroller of the Currency.7. When stock prices falla. an individual's wealth may decrease bur their willingness to spend is not impacted.b. an individual's wealth may decrease and their willingness to spend may decrease.c. a business firm will be more likely to sell stock to finance investment spending.d. an individual's wealth is not impacted nor is their willingness to spend.8. During a recession output declines, resulting ina. lower unemployment in the economy.b. higher wages for the workers.c. no impact on the unemployment in the economy.d. higher unemployment in the economy.9. Evidence from the United States and other countries indicates thata. there is little support for the assertion that "inflation is always and everywhere a monetary phenomenon."b. countries with low monetary growth rates tend to experience higher rates of inflation, all else being constant.c. there is a strong positive association between inflation and growth rate of money over long periods of time.d. money growth is clearly unrelated to inflation.10. Financial markets promote economic efficiency bya. channeling funds from savers to investors.b. channeling funds from investors to savers.c. reducing investment.d. creating inflation.Answers on the next page.Answers to Chapter 1 Practice Quiz.1. B2. D3. B4. D5. A6. A7. B8. D9. C10.
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