the economics of money, banking, and financial markets

9 "

© 2014 Pearson Canada Inc."

1.2 Why Study Financial Institutions and Banking?

1. 
   

   Channelling funds from individuals with savings to those desiring funds when the saver does
   not purchase the borrower's security is known as ____.
   A) barter
   B) redistribution
   C) financial intermediation
   D) taxation
   Answer: C
   Diff: 2 Type: MC Page Ref: 5
   Skill: Applied
   Objective List: 1.2 Identify what it means to study financial institutions

   
   


2. 
   

   A financial crisis is ____.
   A) not possible in the modern financial environment
   B) a major disruption in the financial markets
   C) a feature of developing economies only
   D) typically followed by an economic boom
   Answer: B
   Diff: 1 Type: MC Page Ref: 5
   Skill: Recall
   Objective List: 1.2 Identify what it means to study financial institutions

   
   


3. 
   

   Banks are important to the study of money and the economy because they ____.
   A) channel funds from investors to savers
   B) have been a source of rapid financial innovation
   C) are the only important financial institution in the US economy
   D) create inflation
   Answer: B
   Diff: 1 Type: MC Page Ref: 5
   Skill: Recall
   Objective List: 1.2 Identify what it means to study financial institutions

   
   


4. 
   

   Financial crises are characterized by ____.
   A) surging employment
   B) hyperinflation
   C) decline in asset prices
   D) high profits in the financial sector
   Answer: C
   Diff: 1 Type: MC Page Ref: 5
   Skill: Recall
   Objective List: 1.2 Identify what it means to study financial institutions