ECO 316 Week 1 Quiz - All Questions Answered Correctly - Best Tutorial

Question 1.The most important economic benefit from specialization is that it 

•   makes it possible for an economy to begin using money.   
•   leads to an increase in the standard of living in an economy.   
•   makes barter possible.   
•   eliminates the need for financial markets.   

Question 2.If you buy a bond issued by Intel, the bond is a(n):

•   liability to Intel and an asset to you.   
•   liability to you and an asset to Intel.   
•   liability to both you and Intel.   
•   asset to both you and Intel.

Question 3.Securitization is the process of 

•   issuing stocks to finance capital spending.   
•   issuing bonds to finance purchases of equipment and structures.   
•   reducing risk by decreasing corporate debt loads.   
•   converting loans into securities.   

Question 4.Money is a medium of exchange in that 

•   money is generally accepted for buying and selling goods and services.   
•   currency may be exchanged for gold at any national bank.   
•   other assets may be better or worse in facilitating exchange than money.   
•   it must maintain most of its value over time.   

Question 5.Financial intermediaries 

•   include banks and other depository institutions.   
•   include the New York and American Stock exchanges.   
•   directly issue claims on individual borrowers to savers.   
•   are owned and operated by the federal government.   

Question 6.Why do individuals hold money when it does not provide the services that, say, a house does?

•   Money is the most liquid asset.   
•   Money is the only form in which wealth may be held.   
•   Money increases in value faster than other assets.   
•   Money is useful in avoiding taxes on certain transactions.  

Question 7.The purpose of diversification is to 

•   increase the liquidity of a financial portfolio.   
•   reduce the brokerage fees involved in managing a financial portfolio.   
•   reduce risk.   
•   reduce tax liability.
  

Question 8.Monetary policy refers to the government's 

•   decisions on how much money to spend.   
•   decisions on how much money to collect in taxes.   
•   plans for retiring the national debt.   
•   management of the money supply and interest rates to achieve macroeconomic objectives.
  

Question 9.Economists define liquidity as 

•   the difference between the return on the asset and the return on a long-term U.S. Treasury bond.   
•   the fraction the asset makes up of an investor's portfolio.   
•   the ease with which an asset can be exchanged for money.   
•   the difference between the total demand for an asset and the total supply of the asset. 

Question 10.If you purchase a Treasury bond, the Treasury bond is 

•   an asset to you as well as an asset to the U.S. government.   
•   an asset to you, but a liability to the U.S. government.   
•   a liability to you, but an asset to the U.S. government.   
•   a liability to you as well as a liability to the U.S. government.