the economics of money, banking, and financial markets

227 #

© 2014 Pearson Canada Inc.#

8. 
   

   With regard to external sources of financing for nonfinancial businesses in Canada, which of
   the following are accurate statements?
   A) Direct finance accounts for a larger share of external business financing in Canada than
   indirect finance.
   B) Since 1970, most of the newly issued corporate bonds and commercial paper have been sold
   directly to Canadian households.
   C) Indirect finance accounts for a larger share of external business financing in Canada than
   direct finance.
   D) Smaller businesses almost always raise funds by issuing marketable securities.
   Answer: C
   Diff: 2 Type: MC Page Ref: 167 - 169
   Skill: Recall
   Objective List: 8.1 Depict how asymmetric information results in adverse selection and moral
   hazard

   
   


9. 
   

   Government agencies require that firms that sell securities in public markets adhere to have
   ____.
   A) intermediation
   B) nondisclosure
   C) independent audits
   D) collateral
   Answer: C
   Diff: 1 Type: MC Page Ref: 167
   Skill: Recall
   Objective List: 8.1 Depict how asymmetric information results in adverse selection and moral
   hazard

   
   


10. 
    

    Government regulations require publicly traded firms to provide information, reducing
    ____.
    A) transactions costs
    B) the need for diversification
    C) the adverse selection problem
    D) economies of scale
    Answer: C
    Diff: 1 Type: MC Page Ref: 167
    Skill: Recall
    Objective List: 8.1 Depict how asymmetric information results in adverse selection and moral
    hazard