Econ 343 Test 3 Questions And
Answers
/. Financial intermediariesʹ low transaction costs allow them to provide ________
services that make it easier for customers to conduct transactions.
A) conduction B) equitable C) liquidity D) transcendental - Answer-✅C
/.The analysis of how asymmetric information problems affect economic behavior is
called ________ theory.
A) parallel B) principal C) agency D) uneven - Answer-✅C
/.An example of the ________ problem would be if Brian borrowed money from Sean in
order to purchase a used car and instead took a trip to Atlantic City using those funds.
A) adverse selection B) moral hazard C) costly state verification D) agency - Answer-✅B
/.Which of the following is NOT one of the eight basic puzzles about financial structure?
A) Indirect finance, which involves the activities of financial intermediaries, is many
times more important than direct finance, in which businesses raise funds directly from
lenders in financial markets.
B) Debt contracts are typically extremely complicated legal documents that place
substantial restrictions on the behavior of the borrower.
C) There is very little regulation of the financial system.
D) Collateral is a prevalent feature of debt contracts for both households and business. -
Answer-✅C
/.The current structure of financial markets can be best understood as the result of
attempts by financial market participants to
A) reduce transaction costs.
B) cartelize the provision of financial services.
C) deal with the great number of small firms in the United States.
D) adapt to continually changing government regulations. - Answer-✅A
/.Commercial and farm mortgages, in which property is pledged as collateral, account
for
A) one-half of borrowing by nonfinancial businesses.
B) two-thirds of borrowing by nonfinancial businesses.
C) one-quarter of borrowing by nonfinancial businesses.
D) one-twentieth of borrowing by nonfinancial businesses. - Answer-✅C
/.Of the sources of external funds for nonfinancial businesses in the United States,
loans from banks and other financial intermediaries account for approximately
________ of the total. A) 6% B) 40% C) 56% D) 60% - Answer-✅C
, /.Of the four sources of external funding for nonfinancial businesses, the least often
used in the U.S. is
A) bank loans. B) nonbank loans. C) stock. D) bonds. - Answer-✅C
/.American businesses get their external funds primarily from
A) bank loans.
B) stock issues.
C) bonds and commercial paper issues.
D) loans from nonbank financial intermediaries. - Answer-✅D
/.Direct finance involves the sale to ________ of marketable securities such as stocks
and bonds.
A) households B) pension funds C) insurance companies D) financial intermediaries -
Answer-✅A
/.By bundling share purchases of many investors together mutual funds can take
advantage of economies of scale and thereby lower
A) moral hazard. B) diversification.
C) adverse selection. D) transactions costs. - Answer-✅D
/.Financial intermediariesʹ low transaction costs allow them to provide ________
services that make it easier for customers to conduct transactions.
A) liquidity B) equitable C) conduction D) transcendental - Answer-✅A
/.Financial intermediaries develop ________ in things such as computer technology
which allows them to lower transactions costs.
A) equity B) regulations C) expertise D) diversification - Answer-✅C
/.One purpose of regulation of financial markets is to
A) guarantee that the maximum rates of interest are paid on deposits.
B) limit the profits of financial institutions.
C) promote the provision of information to shareholders, depositors and the public.
D) increase competition among financial institutions. - Answer-✅C
/.Which of the following is not one of the eight basic puzzles about financial structure?
A) Issuing marketable securities is not the primary way businesses finance their
operations.
B) Banks are the most important source of external funds to finance businesses.
C) Indirect finance, which involves the activities of financial intermediaries, is many
times more important than direct finance, in which businesses raise funds directly from
lenders in financial markets.
D) Stocks are the most important source of finance for American businesses. - Answer-
✅D
/.The predominant form of household debt is
Answers
/. Financial intermediariesʹ low transaction costs allow them to provide ________
services that make it easier for customers to conduct transactions.
A) conduction B) equitable C) liquidity D) transcendental - Answer-✅C
/.The analysis of how asymmetric information problems affect economic behavior is
called ________ theory.
A) parallel B) principal C) agency D) uneven - Answer-✅C
/.An example of the ________ problem would be if Brian borrowed money from Sean in
order to purchase a used car and instead took a trip to Atlantic City using those funds.
A) adverse selection B) moral hazard C) costly state verification D) agency - Answer-✅B
/.Which of the following is NOT one of the eight basic puzzles about financial structure?
A) Indirect finance, which involves the activities of financial intermediaries, is many
times more important than direct finance, in which businesses raise funds directly from
lenders in financial markets.
B) Debt contracts are typically extremely complicated legal documents that place
substantial restrictions on the behavior of the borrower.
C) There is very little regulation of the financial system.
D) Collateral is a prevalent feature of debt contracts for both households and business. -
Answer-✅C
/.The current structure of financial markets can be best understood as the result of
attempts by financial market participants to
A) reduce transaction costs.
B) cartelize the provision of financial services.
C) deal with the great number of small firms in the United States.
D) adapt to continually changing government regulations. - Answer-✅A
/.Commercial and farm mortgages, in which property is pledged as collateral, account
for
A) one-half of borrowing by nonfinancial businesses.
B) two-thirds of borrowing by nonfinancial businesses.
C) one-quarter of borrowing by nonfinancial businesses.
D) one-twentieth of borrowing by nonfinancial businesses. - Answer-✅C
/.Of the sources of external funds for nonfinancial businesses in the United States,
loans from banks and other financial intermediaries account for approximately
________ of the total. A) 6% B) 40% C) 56% D) 60% - Answer-✅C
, /.Of the four sources of external funding for nonfinancial businesses, the least often
used in the U.S. is
A) bank loans. B) nonbank loans. C) stock. D) bonds. - Answer-✅C
/.American businesses get their external funds primarily from
A) bank loans.
B) stock issues.
C) bonds and commercial paper issues.
D) loans from nonbank financial intermediaries. - Answer-✅D
/.Direct finance involves the sale to ________ of marketable securities such as stocks
and bonds.
A) households B) pension funds C) insurance companies D) financial intermediaries -
Answer-✅A
/.By bundling share purchases of many investors together mutual funds can take
advantage of economies of scale and thereby lower
A) moral hazard. B) diversification.
C) adverse selection. D) transactions costs. - Answer-✅D
/.Financial intermediariesʹ low transaction costs allow them to provide ________
services that make it easier for customers to conduct transactions.
A) liquidity B) equitable C) conduction D) transcendental - Answer-✅A
/.Financial intermediaries develop ________ in things such as computer technology
which allows them to lower transactions costs.
A) equity B) regulations C) expertise D) diversification - Answer-✅C
/.One purpose of regulation of financial markets is to
A) guarantee that the maximum rates of interest are paid on deposits.
B) limit the profits of financial institutions.
C) promote the provision of information to shareholders, depositors and the public.
D) increase competition among financial institutions. - Answer-✅C
/.Which of the following is not one of the eight basic puzzles about financial structure?
A) Issuing marketable securities is not the primary way businesses finance their
operations.
B) Banks are the most important source of external funds to finance businesses.
C) Indirect finance, which involves the activities of financial intermediaries, is many
times more important than direct finance, in which businesses raise funds directly from
lenders in financial markets.
D) Stocks are the most important source of finance for American businesses. - Answer-
✅D
/.The predominant form of household debt is
