Money and Financial Markets Exam 1
Question and answers already passed
2025/2026
Financial Markets - correct answer ✔Markets in which funds are transferred from people who have an
excess of available funds to people who have a shortage of funds
"we also live in a world of created excess funds" by the banking system (Haymond)
A Security - correct answer ✔Claim on the issuer's future income or assets
Bond - correct answer ✔Debt Security that promises to make payments periodically for a specified
period of time
Interest Rate - correct answer ✔the cost of borrowing or the price paid for the rental of funds
Common Stock - correct answer ✔Represents a share of ownership in a corporation
Share of stock - correct answer ✔claim on the earnings and assets of the corporation
Financial Intermediaries - correct answer ✔institutions that borrow funds from people who have saved
and make loans to other people:
Banks: accept deposits and make loans
Other Financial Institutions: insurance companies, finance companies, pension funds, mutual funds and
investment banks
,Financial Innovation - correct answer ✔the advent of the information age and e-finance
Financial crises - correct answer ✔major disruptions in financial markets that are characterized by
sharp declines in asset prices and the failures of many financial and nonfinancial firms.
Evidence suggest that money plays an important role in generating business cycles - correct answer ✔
Recessions (unemployment) and expansions affect all of us - correct answer ✔
Monetary theory - correct answer ✔ties changes in the money supply to changes in aggregate
economic activity and the price level
"but there are more important changes at the micro level" (Haymond)
Aggregate Price Level - correct answer ✔the average price of goods and services in an economy
A continual rise in the price level (inflation) affects all economic players - correct answer ✔
Data shows a connection between the money supply and the price level - correct answer ✔
Monetary Policy - correct answer ✔the management of the money supply and interest rates
conducted by the US by the FED
Fiscal Policy - correct answer ✔Deals with government spending and taxation
, Budget deficit is the excess of expenditures over revenues for a particular year
Budget surplus is the excess of revenues over expenditures for a particular year
Any deficit must be financed by borrowing
Financial Markets have become increasingly integrated throughout the worldq - correct answer ✔
International Financial System has tremendous impact on domestic economies - correct answer ✔
Function of Financial Markets - correct answer ✔Perform the essential function of channeling funds
from economic players that have saved surplus funds to those that have a shortage of funds (dont forget
credit creation)
Direct Finance - correct answer ✔borrowers borrow funds directly from lenders in financial markets by
selling them securities
Function of financial markets - correct answer ✔Promotes economic efficiency by producing an
efficient allocation of capital, which increases production
Directly improve the well-being of consumers by allowing them to time purchases better
Structure of Financial Markets - correct answer ✔Debt and Equity Markets
- debt instruments (maturity)
- Equities (dividends)
Primary and secondary Markets
- investment banks underwrite securities in primary markets
- brokers and dealers work in secondary markets
Question and answers already passed
2025/2026
Financial Markets - correct answer ✔Markets in which funds are transferred from people who have an
excess of available funds to people who have a shortage of funds
"we also live in a world of created excess funds" by the banking system (Haymond)
A Security - correct answer ✔Claim on the issuer's future income or assets
Bond - correct answer ✔Debt Security that promises to make payments periodically for a specified
period of time
Interest Rate - correct answer ✔the cost of borrowing or the price paid for the rental of funds
Common Stock - correct answer ✔Represents a share of ownership in a corporation
Share of stock - correct answer ✔claim on the earnings and assets of the corporation
Financial Intermediaries - correct answer ✔institutions that borrow funds from people who have saved
and make loans to other people:
Banks: accept deposits and make loans
Other Financial Institutions: insurance companies, finance companies, pension funds, mutual funds and
investment banks
,Financial Innovation - correct answer ✔the advent of the information age and e-finance
Financial crises - correct answer ✔major disruptions in financial markets that are characterized by
sharp declines in asset prices and the failures of many financial and nonfinancial firms.
Evidence suggest that money plays an important role in generating business cycles - correct answer ✔
Recessions (unemployment) and expansions affect all of us - correct answer ✔
Monetary theory - correct answer ✔ties changes in the money supply to changes in aggregate
economic activity and the price level
"but there are more important changes at the micro level" (Haymond)
Aggregate Price Level - correct answer ✔the average price of goods and services in an economy
A continual rise in the price level (inflation) affects all economic players - correct answer ✔
Data shows a connection between the money supply and the price level - correct answer ✔
Monetary Policy - correct answer ✔the management of the money supply and interest rates
conducted by the US by the FED
Fiscal Policy - correct answer ✔Deals with government spending and taxation
, Budget deficit is the excess of expenditures over revenues for a particular year
Budget surplus is the excess of revenues over expenditures for a particular year
Any deficit must be financed by borrowing
Financial Markets have become increasingly integrated throughout the worldq - correct answer ✔
International Financial System has tremendous impact on domestic economies - correct answer ✔
Function of Financial Markets - correct answer ✔Perform the essential function of channeling funds
from economic players that have saved surplus funds to those that have a shortage of funds (dont forget
credit creation)
Direct Finance - correct answer ✔borrowers borrow funds directly from lenders in financial markets by
selling them securities
Function of financial markets - correct answer ✔Promotes economic efficiency by producing an
efficient allocation of capital, which increases production
Directly improve the well-being of consumers by allowing them to time purchases better
Structure of Financial Markets - correct answer ✔Debt and Equity Markets
- debt instruments (maturity)
- Equities (dividends)
Primary and secondary Markets
- investment banks underwrite securities in primary markets
- brokers and dealers work in secondary markets
