the economics of money, banking, and financial markets

855 $

© 2014 Pearson Canada Inc.$

16. 
    

    According to Tobin's q theory, when equity prices are high the market price of existing
    capital is ____ relative to new capital, so expenditure on fixed investment is ____.
    A) cheap; low
    B) expensive; low
    C) cheap; high
    D) expensive; high
    Answer: D
    Diff: 2 Type: MC Page Ref: 641
    Skill: Recall
    Objective List: 27.1 Outline the transmission mechanisms of monetary policy

    
    


17. 
    

    Franco Modigliani has found that an expansionary monetary policy can cause stock market
    prices to ____ and consumption to ____.
    A) increase; increase
    B) increase; decrease
    C) decrease; decrease
    D) decrease; increase
    Answer: A
    Diff: 2 Type: MC Page Ref: 641
    Skill: Recall
    Objective List: 27.1 Outline the transmission mechanisms of monetary policy

    
    


18. 
    

    The ____ proposes that two types of monetary transmission channels arise as a result of
    problems in credit markets
    A) interest rate channel
    B) asset price channel
    C) credit view
    D) Tobin q theory
    Answer: A
    Diff: 1 Type: MC Page Ref: 639
    Skill: Applied
    Objective List: 27.1 Outline the transmission mechanisms of monetary policy

    
    


19. 
    

    A rise in stock prices ____ the net worth of firms and so leads to ____ investment
    spending because of the reduction in moral hazard.
    A) raises; higher
    B) raises; lower
    C) reduces; higher
    D) reduces; lower
    Answer: A
    Diff: 2 Type: MC Page Ref: 642
    Skill: Recall
    Objective List: 27.1 Outline the transmission mechanisms of monetary policy