Davidson; Management - 3rd Australasian Edition



1.
An SSU's
A.
income and expenditures for the period are equal.
B.
income for the period exceeds expenditures.
C.
expenditures for the period exceed receipts.
D.
spending is entirely financed by credit cards


2.
Which of the following is an example of indirect financing?
A.
an SSU purchasing a financial claim from a DSU
B.
an SSU purchasing a financial claim from a dealer
C.
an SSU purchasing a financial claim from a commercial bank
D.
an SSU purchasing a financial claim from an underwriter


3.
An efficient financial system
A.
eliminates search and transactions costs
B.
is a mere theoretical possibility
C.
promotes economic growth and social progress
D.
depends on high volumes of “direct” transactions


4.
Financial institutions facilitate the flow of investment funds
A.
from savers to borrowers
B.
from SSUs to DSUs
C.
from the household sector to the business sector
D.
any of the above


5.
Which of the following are “economic units”?
A.
households
B.
businesses
C.
governments
D.
all of the above


6.
Which of the following best describes the "two faces of debt" concept?
A.
DSUs are sometimes SSUs.
B.
Every financial asset is someone else's liability.
C.
Intermediaries may own both direct and indirect financial assets.
D.
The government is unable to control its federal spending.


7.
Profitability of financial intermediaries derives from all of the following except
A.
government regulation of interest rates
B.
economies of scale
C.
ability to manage credit risk
D.
control of transactions costs


8.
All but one of the following is comparative advantage of financial     intermediaries:
A.
ability to finance businesses and governments.
B.
ability to achieve economies of scale.
C.
ability to reduce transaction costs.
D.
ability to find confidential information.


9.
Which of the following would tend to hold corporate bonds in significant amounts?
A.
life insurance company
B.
credit union
C.
mutual savings bank
D.
commercial bank


10.
Direct finance is best exemplified by
A.
the purchase of mutual fund shares.
B.
depositing in a credit union.
C.
borrowing from a friend or relative.
D.
employee contributions to a pension fund.


11.
The flow of funds from saving to investment through direct financing involves
A.
the saver holding the lender's IOU.
B.
two separate contracts.
C.
the lender holding the borrower's IOU.
D.
several different financial institutions.


12.
Brokers and dealers work in direct financial markets to
A.
make commissions.
B.
minimize the bid-ask spread.
C.
bring sellers and buyers together.
D.
underwrite new issues of securities.


13.
All but one describes a dealer involved in direct financial market:
A.
provides liquidity to sellers
B.
buys and sells from inventory
C.
earns return from bid-ask spread
D.
transforms claims


14.
All but one of the following is associated with investment banking:
A.
Taking deposits.
B.
Marketing new issues of securities.
C.
Underwriting securities.
D.
Completing regulatory paperwork and rendering advice.


15.
Which of the following statements about the money market is true?
A.
The money market is a dealer market linked by efficient communications systems.
B.
Money market transactions are seldom over $1 million.
C.
Market transactions include more primary than secondary market trades.
D.
Most money market transactions are conducted by mail.


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