I need help answering the following multiple choice questions
11. The managers of a firm met with a loan officer from a local bank to apply for a loan. They told the bank's loan
officer that the loan is intended to finance an expansion in the companyâs production facility. Based on this
information, the loan officer granted the loan. However unexpected tariffs increased the cost of raw materials
needed in the production process and the loan had to be used to pay for materials rather than the planned
expansion. This incident is an example of
A) moral hazard.
B) market risk.
C) adverse selection.
D) banks' failing to charge high enough interest rates on business loans.
E) a situation in which direct finance, rather than indirect finance, should be employed.
12. From the choices below, indicate what is likely the most important asset category (in terms of $ value) in a
Money Market Mutual Fund.
A) Corporate Bonds B) Treasury Bills C) Non-Negotiable CDs D) Equities
13. Compared to interest rates on long-term U.S. Treasury debt, interest rates on short-term U.S. Treasury debt tends to
fluctuate________ and is usually __________ over time.
A) more: higher B) less: lower C) more; lower D) less; higher
14. Which of the following is true about legal tender?
A) Only legal tender may be used to pay taxes in the U.S.
B) Having legal tender status from the government is sufficient for something to be used as money.
C) Cash and checking accounts are legal tender.
D) None of the above is accurate.
15. When economists refer to the role of money as a unit of account, they mean that
A) most accounting systems reflect that goods are purchased with currency.
B) all goods are priced in terms of all other goods.
C) money gives traders a single, consistent way of measuring value in the economy.
D) money makes it possible for specialization to take place.
E) agents do not have to exercise their claim on scarce resources immediately.
16. The Federal Reserve System:
A) is required to make loans in the Fed Funds market
B) is required to create the money necessary for the U.S. Government to pay its bills.
C) is required to make loans to the U.S. Treasury.
D) is required to maintain price stability.
17. The interest rate that the Fed targets to indicate its stance on monetary policy is known as:
A) the discount rate. B) the prime rate. C) the fed funds rate. D) the standard rate.
18. Of money's three functions, the one that allows us to make decisions that maximize our satisfaction is its function as a
A) medium of exchange B) unit of account. C) standard of deferred payment D) store of value.
19. In the United States, money is backed by
A) gold and silver. B) Federal Reserve notes.
C) Congress D) Social infrastructure, political stability, and economic potential.
20. Which of the following would not be considered to be part of the money supply?
A) Currency in ATM machines
B) Coins stored in childrenâs piggy banks
C) U.S. Federal Reserve notes being used for transactions in India
D) A & B above
E) None of the above. All are part of the U.S. money supply.
