the economics of money, banking, and financial markets

219 #

© 2014 Pearson Canada Inc.#

8.2 Transaction Costs

1. 
   

   The current structure of financial markets can be best understood as the result of attempts by
   financial market participants to ____.
   A) adapt to continually changing government regulations
   B) deal with the great number of small firms in the United States
   C) reduce transaction costs
   D) cartelize the provision of financial services
   Answer: C
   Diff: 1 Type: MC Page Ref: 164
   Skill: Recall
   Objective List: 8.1 Depict how asymmetric information results in adverse selection and moral
   hazard

   
   


2. 
   

   The two ways financial intermediaries can reduce transactions costs are ____ and
   ____.
   A) economies of scale; expertise
   B) moral hazard; adverse selection
   C) direct finance; indirect finance
   D) stocks; bonds
   Answer: A
   Diff: 1 Type: MC Page Ref: 164
   Skill: Recall
   Objective List: 8.1 Depict how asymmetric information results in adverse selection and moral
   hazard

   
   


3. 
   

   The reduction in transactions costs per dollar of investment as the size of transactions
   increases is known as ____.
   A) discounting
   B) economies of scale
   C) economies of trade
   D) diversification
   Answer: B
   Diff: 1 Type: MC Page Ref: 164
   Skill: Recall
   Objective List: 8.1 Depict how asymmetric information results in adverse selection and moral
   hazard