the economics of money, banking, and financial markets

220 #

© 2014 Pearson Canada Inc.#

4. 
   

   Which of the following is not a benefit to an individual purchasing a mutual fund?
   A) Reduced risk
   B) Lower transactions costs
   C) Free-riding
   D) Diversification
   Answer: C
   Diff: 2 Type: MC Page Ref: 164
   Skill: Recall
   Objective List: 8.1 Depict how asymmetric information results in adverse selection and moral
   hazard

   
   


5. 
   

   Financial intermediaries develop ____ in things such as computer technology which
   allows them to lower transactions costs.
   A) expertise
   B) diversification
   C) regulations
   D) equity
   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

   
   


6. 
   

   Financial intermediaries' low transaction costs allow them to provide ____ services that
   make it easier for customers to conduct transactions.
   A) liquidity
   B) conduction
   C) transcendental
   D) equitable
   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

   
   


7. 
   

   A solution to the high transaction costs is to bundle the funds of many investors so that they
   can take advantage of ____.
   A) economies of scale
   B) high interest rates
   C) high rates of return
   D) lower risk
   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