Question 1

The Federal National Mortgage Association (or Fannie Mae) was created to

Accepted Answer

A)  Make mortgages hard to obtain
B)  Make mortgages less likely to go into foreclosure
C)  Make a larger market in mortgages by establishing a secondary financial market in mortgages
D)  Make mortgages available to new immigrants to the US
E)  None of the above

Question 2

Subprime mortgages and home equity loans contributed little to the increase in the demand for residential real estate,increasing prices dramatically.

Accepted Answer

A) True 
 B)False

Question 3

Stockholders can receive a capital gain when they purchase a financial asset.

Accepted Answer

A) True 
 B)False

Question 4

If the Open Market Committee of the Federal Reserve sells securities,this action will

Accepted Answer

A)  Decrease the money supply
B)  Increase the money supply
C)  Reduce the reserve requirement
D)  Decrease the discount rate
E)  Do none of the above

Question 5

The interest rate on an adjustable rate mortgage (ARM) is

Accepted Answer

A)  Set to equal the Fed Funds rate
B)  Adjusted on a daily basis
C)  Set to rise at the end of every year for the life of the mortgage
D)  Adjusted periodically based upon current market conditions
E)  Adjusted based upon the value of the house purchase

Question 6

Stocks and bonds are essentially interchangeable financial assets,since owners of both of these instruments receive regular interest payments.

Accepted Answer

A) True 
 B)False

Question 7

If the supply of money decreases,the value of a dollar increases.

Accepted Answer

A) True 
 B)False

Question 8

An increase in the Required Reserve Ratio will allow banks to create less money.

Accepted Answer

A) True 
 B)False

Question 9

The Financial Crisis of 2008 affected

Accepted Answer

A)  Only commercial banks
B)  Only investment banks
C)  Only insurance companies
D)  All of the above
E)  The revenues of only state governments

Question 10

Each of the following is a financial intermediary except

Accepted Answer

A)  Commercial banks
B)  Investment banks
C)  Insurance companies
D)  Credit unions
E)  All of the above are financial intermediaries

Question 11

A subprime mortgage

Accepted Answer

A)  Made obtaining a mortgage easier for low income households
B)  Is a mortgage that does not meet the requirements for a conventional mortgage
C)  Is usually structured as an adjustable rate mortgage
D)  All of the above
E)  Is no different from a conventional mortgage

Question 12

A policy implemented by the Clinton administration resulted in tighter financial requirements for less creditworthy borrowers,so that financial markets were less risky.

Accepted Answer

A) True 
 B)False

Question 13

If you keep some cash in a safe place so that you have it to use later,money is serving which function?

Accepted Answer

A)  A medium of exchange
B)  A measure of value
C)  A store of value
D)  A barter facilitator
E)  All of the above

Question 14

A dividend

Accepted Answer

A)  Must be paid by a commercial banks
B)  Must be paid by corporations to owners of the company's stock
C)  Is a distribution of a corporation's profits to stockholders
D)  Is a financial instrument that is bought and sold by commercial banks
E)  None of the above

Question 15

Silversmiths became banks when they started lending out money based upon the excess silver that they held for their customers.

Accepted Answer

A) True 
 B)False

Question 16

Any time the Discount Rate increases,the money supply also increases.

Accepted Answer

A) True 
 B)False

Question 17

Collateralized debt obligations always exclude subprime mortgages,because these are too risky for most investors.

Accepted Answer

A) True 
 B)False

Question 18

A number of banks encountered problems because a change in accounting rules required firms to mark assets at their original purchase price.

Accepted Answer

A) True 
 B)False

Question 19

One of the main functions of banks is to create money.

Accepted Answer

A) True 
 B)False

Question 20

Money serves as

Accepted Answer

A)  A unit of account
B)  A store of value
C)  A medium of exchange
D)  All of the above
E)  An emblem of personal wealth

Exam 12: Money,Banking and the Financial System: Old Problems With New Twists

Each of the following is a financial intermediary except

Correct AnswerverifiedShow Answer

Silversmiths became banks when they started lending out money based upon the excess silver that they held for their customers.

Correct AnswerverifiedShow Answer

A subprime mortgage

Correct AnswerverifiedShow Answer

The Federal National Mortgage Association (or Fannie Mae) was created to

Correct AnswerverifiedShow Answer

If the Open Market Committee of the Federal Reserve sells securities,this action will

Correct AnswerverifiedShow Answer

The Financial Crisis of 2008 affected

Correct AnswerverifiedShow Answer

If the supply of money decreases,the value of a dollar increases.

Correct AnswerverifiedShow Answer

A policy implemented by the Clinton administration resulted in tighter financial requirements for less creditworthy borrowers,so that financial markets were less risky.

Correct AnswerverifiedShow Answer

A number of banks encountered problems because a change in accounting rules required firms to mark assets at their original purchase price.

Correct AnswerverifiedShow Answer

Money serves as

Correct AnswerverifiedShow Answer

If you keep some cash in a safe place so that you have it to use later,money is serving which function?

Correct AnswerverifiedShow Answer

A dividend

Correct AnswerverifiedShow Answer

Subprime mortgages and home equity loans contributed little to the increase in the demand for residential real estate,increasing prices dramatically.

Correct AnswerverifiedShow Answer

Stockholders can receive a capital gain when they purchase a financial asset.

Correct AnswerverifiedShow Answer

The interest rate on an adjustable rate mortgage (ARM) is

Correct AnswerverifiedShow Answer

Stocks and bonds are essentially interchangeable financial assets,since owners of both of these instruments receive regular interest payments.

Correct AnswerverifiedShow Answer

Any time the Discount Rate increases,the money supply also increases.

Correct AnswerverifiedShow Answer

Collateralized debt obligations always exclude subprime mortgages,because these are too risky for most investors.

Correct AnswerverifiedShow Answer

An increase in the Required Reserve Ratio will allow banks to create less money.

Correct AnswerverifiedShow Answer

One of the main functions of banks is to create money.

Correct AnswerverifiedShow Answer

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