Econ 2035 Final (LSU) Exam
Questions with Guaranteed Pass
Solutions 2025-2026 Updated.
easily stolen - Answer Compared to checks, paper currency and coins have the major
drawbacks that they ___.
A) are not the most liquid assets
B) are hard to counterfeit
C) are easily stolen
D) must be backed by gold
lenders; borrowers - Answer In the bond market, the bond demanders are the ___ and the
bond suppliers are the ___.
A) borrowers; lenders
B) borrowers; advancers
C) lenders; borrowers
D) lenders; advancers
the supply curve for bonds shifts to the right and the interest rate rises - Answer Everything
else held constant, when the government has higher budget deficits
A) the supply curve for bonds shifts to the right and the interest rate rises
B) the supply curve for bonds shifts to the right and the interest rate falls
C) the demand curve for bonds shifts to the left and the interest rate rises
D) the demand curve for bonds shifts to the left and the interest rate falls
the quantity of money is measured at given point in time - Answer When we say that money
is a stock variable, we mean that
A) we must attach a time period to the measure
B) money never loses purchasing power
C) it is sold in the equity market
D) the quantity of money is measured at a given point in time
eurobond - Answer If Microsoft sells a bond in London and it is denominated in dollars, the
bond is a
A) British bond
B) foreign bond
,C) currency bond
D) Eurobond
demand; rise - Answer If the interest rate on a bond is above the equilibrium interest rate,
there is an excess ___ for bonds and the bond price will ___.
A) demand; rise
B) supply; rise
C) demand; fall
D) supply; fall
borrow $2500 from a friend - Answer Which of the following can be described as direct
finance?
A) You take out a mortgage from your local bank
B) You buy shares of common stock in the secondary market
C) You borrow $2500 from a friend
D) You buy shares in a mutual fund
life insurance company - Answer Which of the following is a contractual savings institution?
A) A savings and loan association
B) A mutual fund
C) A credit union
D) A life insurance company
left; rise - Answer If prices in the bond market become more volatile, everything else held
constant, the demand curve for bonds shifts ___ and interest rates ___.
A) left; fall
B) right; fall
C) left; rise
D) right; rise
The nominal interest rate is 25 percent and the expected inflation rate is 50 percent - Answer
In which of the following situations would you prefer to be the borrower?
A) The nominal interest rate is 13 percent and the expected inflation rate is 15 percent
B) The nominal interest rate is 4 percent and the expected inflation rate is 1 percent
C) The nominal interest rate is 9 percent and the expected inflation rate is 7 percent
D) The nominal interest rate is 25 percent and the expected inflation rate is 50 percent
,greater; coupon; below - Answer The yield to maturity is ___ than the ___ rate when the
bond price is ___ its face value.
A) greater; coupon; above
B) greater; perpetuity; above
C) greater; coupon; below
D) less; perpetuity; below
A 5 percent coupon bond with a price of $600 - Answer Which of the following $1,000 face-
value securities has the highest yield to maturity?
A) A 5 percent coupon bond with a price of $600
B) A 5 percent coupon bond with a price of $800
C) A 5 percent coupon bond with a price of $1,000
D) A 5 percent coupon bond with a price of $1,200
rise; right - Answer Everything else held constant, an increase in the liquidity of bonds results
in a ___ in demand for bonds and the demand curve shifts to the ___.
A) rise; left
B) fall; right
C) fall; left
D) rise; right
falls; falls - Answer Everything else held constant, if the expected return on U.S. Treasury
bonds falls from 8 to 7 percent and the expected return on corporate bonds falls from 10 to 8
percent, then the expected return of corporate bonds ___ relative to U.S. Treasury bonds and
the demand for corporate bonds ___.
A) falls; falls
B) falls; rises
C) rises; falls
D) rises; rises
interest rate changes - Answer Interest-rate risk is the riskiness of an asset's returns due to
A) changes in the asset's maturity
B) default of the borrower
C) interest-rate changes
D) changes in the coupon rate
, financial intermediaries - Answer provide a channel for linking those who want to save with
those who want to invest
reduces the number of prices that need to be calculated - Answer Because it is a unit of
account, money
A) does not earn interest
B) increases transaction costs
C) discourages specialization
D) reduces the number of prices that need to be calculated
moral hazard - Answer An example of the problem of ___ is when a corporation uses the
funds raised from selling bonds to fund corporate expansion to pay for Caribbean cruises for all
of its employees and their families.
A) credit risk
B) moral hazard
C) adverse selection
D) risk sharing
Small-denomination time deposits - Answer Which of the following is not included in the M1
measure of money but is included in the M2 measure of money?
A) Demand deposits
B) Traveler's checks
C) Small-denomination time deposits
D) Currency
spreading the cost of borrowed funds over many customers - Answer An example of
economies of scale in the provision of financial services is
A) spreading the cost of writing a standardized contract over many borrowers
B) spreading the cost of borrowed funds over many customers
C) investing in a diversified collection of assets
D) providing depositors with a variety of savings certificates
right; left - Answer When the Treasury bond market becomes less liquid, other things equal,
the demand curve for corporate bonds shifts to the ___ and the demand curve for Treasury
bonds shifts to the ___.
A) left; right
B) right; left
Questions with Guaranteed Pass
Solutions 2025-2026 Updated.
easily stolen - Answer Compared to checks, paper currency and coins have the major
drawbacks that they ___.
A) are not the most liquid assets
B) are hard to counterfeit
C) are easily stolen
D) must be backed by gold
lenders; borrowers - Answer In the bond market, the bond demanders are the ___ and the
bond suppliers are the ___.
A) borrowers; lenders
B) borrowers; advancers
C) lenders; borrowers
D) lenders; advancers
the supply curve for bonds shifts to the right and the interest rate rises - Answer Everything
else held constant, when the government has higher budget deficits
A) the supply curve for bonds shifts to the right and the interest rate rises
B) the supply curve for bonds shifts to the right and the interest rate falls
C) the demand curve for bonds shifts to the left and the interest rate rises
D) the demand curve for bonds shifts to the left and the interest rate falls
the quantity of money is measured at given point in time - Answer When we say that money
is a stock variable, we mean that
A) we must attach a time period to the measure
B) money never loses purchasing power
C) it is sold in the equity market
D) the quantity of money is measured at a given point in time
eurobond - Answer If Microsoft sells a bond in London and it is denominated in dollars, the
bond is a
A) British bond
B) foreign bond
,C) currency bond
D) Eurobond
demand; rise - Answer If the interest rate on a bond is above the equilibrium interest rate,
there is an excess ___ for bonds and the bond price will ___.
A) demand; rise
B) supply; rise
C) demand; fall
D) supply; fall
borrow $2500 from a friend - Answer Which of the following can be described as direct
finance?
A) You take out a mortgage from your local bank
B) You buy shares of common stock in the secondary market
C) You borrow $2500 from a friend
D) You buy shares in a mutual fund
life insurance company - Answer Which of the following is a contractual savings institution?
A) A savings and loan association
B) A mutual fund
C) A credit union
D) A life insurance company
left; rise - Answer If prices in the bond market become more volatile, everything else held
constant, the demand curve for bonds shifts ___ and interest rates ___.
A) left; fall
B) right; fall
C) left; rise
D) right; rise
The nominal interest rate is 25 percent and the expected inflation rate is 50 percent - Answer
In which of the following situations would you prefer to be the borrower?
A) The nominal interest rate is 13 percent and the expected inflation rate is 15 percent
B) The nominal interest rate is 4 percent and the expected inflation rate is 1 percent
C) The nominal interest rate is 9 percent and the expected inflation rate is 7 percent
D) The nominal interest rate is 25 percent and the expected inflation rate is 50 percent
,greater; coupon; below - Answer The yield to maturity is ___ than the ___ rate when the
bond price is ___ its face value.
A) greater; coupon; above
B) greater; perpetuity; above
C) greater; coupon; below
D) less; perpetuity; below
A 5 percent coupon bond with a price of $600 - Answer Which of the following $1,000 face-
value securities has the highest yield to maturity?
A) A 5 percent coupon bond with a price of $600
B) A 5 percent coupon bond with a price of $800
C) A 5 percent coupon bond with a price of $1,000
D) A 5 percent coupon bond with a price of $1,200
rise; right - Answer Everything else held constant, an increase in the liquidity of bonds results
in a ___ in demand for bonds and the demand curve shifts to the ___.
A) rise; left
B) fall; right
C) fall; left
D) rise; right
falls; falls - Answer Everything else held constant, if the expected return on U.S. Treasury
bonds falls from 8 to 7 percent and the expected return on corporate bonds falls from 10 to 8
percent, then the expected return of corporate bonds ___ relative to U.S. Treasury bonds and
the demand for corporate bonds ___.
A) falls; falls
B) falls; rises
C) rises; falls
D) rises; rises
interest rate changes - Answer Interest-rate risk is the riskiness of an asset's returns due to
A) changes in the asset's maturity
B) default of the borrower
C) interest-rate changes
D) changes in the coupon rate
, financial intermediaries - Answer provide a channel for linking those who want to save with
those who want to invest
reduces the number of prices that need to be calculated - Answer Because it is a unit of
account, money
A) does not earn interest
B) increases transaction costs
C) discourages specialization
D) reduces the number of prices that need to be calculated
moral hazard - Answer An example of the problem of ___ is when a corporation uses the
funds raised from selling bonds to fund corporate expansion to pay for Caribbean cruises for all
of its employees and their families.
A) credit risk
B) moral hazard
C) adverse selection
D) risk sharing
Small-denomination time deposits - Answer Which of the following is not included in the M1
measure of money but is included in the M2 measure of money?
A) Demand deposits
B) Traveler's checks
C) Small-denomination time deposits
D) Currency
spreading the cost of borrowed funds over many customers - Answer An example of
economies of scale in the provision of financial services is
A) spreading the cost of writing a standardized contract over many borrowers
B) spreading the cost of borrowed funds over many customers
C) investing in a diversified collection of assets
D) providing depositors with a variety of savings certificates
right; left - Answer When the Treasury bond market becomes less liquid, other things equal,
the demand curve for corporate bonds shifts to the ___ and the demand curve for Treasury
bonds shifts to the ___.
A) left; right
B) right; left
