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Financial markets promote economic efficiency by

• channeling funds from investors to savers.

• creating inflation.

• channeling funds from savers to investors.

• reducing Investment.

The stock market is important because it is

• where interest rates are determined.

• the most widely followed financial markets

• where foreign exchange rates are determined. get funds.

• the market where most borrowers

Everything else held constant, a decline in interest rates will cause spending on housing to

• fall.

• Remain unchanged.

• either rise, fall, or remain the same.

• Rise

Changes in stock prices

• do not affect people's wealth and their willingness to spend.

• affect firms' decisions to sell stock to finance investment spending.

• occur in regular patterns.

• are unimportant to decision makers.

A financial crisis is

• not possible in the modem financial environment.

• a major disruption in the financial markets.

• a feature of developing economies only.

• Typibal followed by economic boom.

Which of the following is not a financial institution?

• a life insurance company

• a person fund

• a credit union

• A business college

There is a___ association between inflation and the growth rate of money ___

• positive; demand

• positive; supply

• negative; demand

• negative; supply

_____________ policy involves decisions about government spending and taxation.

• Monetary

• Fiscal

• Financial

• Systemic

Budgets deficits can be a concern because they might

• ultimately lead to higher inflation.

• lead to lower interest rates

• lead to a slower rate of money growth.

• lead to higher bond prices

Well-functioning financial markets

• cause inflation.

• eliminate the need for indirect finance.

• cause financial crises.

• produce an efficient allocation of capital.