Practice Ch 14 Questions Flashcards
(14 cards)
In financial markets, the suppliers are:
A. people or organizations that have cash on hand and are willing to let others use it for a price.
B. people or organizations that have a need to spend on something now but do not have the income to do so.
C. businesses starting new ventures or expanding facilities and the government when it needs to finance public spending.
D. any person, business, or organization with excess cash.
A. people or organizations that have cash on hand and are willing to let others use it for a price.
In financial markets, the demanders are:
A. individuals, businesses, and government entities that are willing to forgo spending right now and choose to save cash in return for repayment in the future.
B. people or organizations that have cash on hand and are willing to let others use it for a price.
C. any person, business, or organization with excess cash.
D. people or organizations that have a need to spend on something now but do not have the income to do so.
D. people or organizations that have a need to spend on something now but do not have the income to do so.
When Americans____ by buying securities such as stocks and bonds or putting money in a bank, they provide funds for firms wishing to engage in_________ by buying assets used to produce goods and services. Households with extra money left over after buying things they want or need purchase securities or put their funds in savings accounts, and banks help transfer those funds to firms. By matching and working with these borrowers and lenders, banks act as an ________________.”
save, investment, intermediary
The principal economic cost of growth is:
A. higher interest rates.
B. consumption sacrificed for capital formation.
C. higher inflation rates.
D. investment in stocks and bonds.
B. consumption sacrificed for capital formation.
The ongoing search by savers for high returns leads the bond and stock markets to direct funds to the uses that appear:
most likely to be productive.
Which of the following is classified as a bank function?
acting as an intermediary
providing liquidity
diversifying risk
a. It implies ownership in the issuing firm and is therefore known as equity financing.
stock
b. Businesses can use these to raise funds for capital investment.
loan, stock, bond, retained earnings
c. This form of financing does not actually pay interest.
stock
d. This type of financing offers diversification for the saver/lender.
loan
e. It pays some form of interest, and principal is paid at maturity.
bond
When compared to financial investments in debt-based assets (e.g., bonds), financial investments in equity-based assets (e.g., stocks) usually pay a_____ rate of return because debt assets typically carry a _____ level of risk.
a higher, a lower
Stockholders receive returns on their financial investment in the form of ______ and _____.
capital gains; dividends
