II. True or False Questions
1. The velocity of money is determined by the central bank.

 True  False
2. A multiple increase in GNP could result from an initial increase in the stock of money.

 True  False

3. It is primarily the central bank that determines the size and the structure of Ml, that is, how much of that total will be in demand deposits and how much in currency.
 True  False

4. Money may be tight if the money supply grows at a faster rate than the demand for money.

 True  False


5. Inflation is defined as an increase in the general level of prices for goods and services.

 True  False


6. A provision for loan loss results in less net income for a bank on a bank's income statement.

 True  False


7. One of the important factors leading to the growth of financial intermediaries has been the decreased cost of information and analysis of direct securities.

 True  False


8. Financial intermediaries are financial institutions that issue claims against themselves and use the proceeds to acquire financial claims against others.

 True  False


9. Unlike commercial banks, other depository financial intermediaries do not have to be much concerned with excess withdrawals of their deposits since they do not have to pay on demand by a depositor.

 True  False


10. An example of a non-depository financial intermediary is an insurance company.来源:www.examda.com

 True  False


11. Bond market prices and interest rates are directly related.

 True  False


12. In its open market operations, the Federal Reserve deals exclusively with commercial banks.

 True  False


13. Investors of bonds are quite clear about the exact amount of cash they will get back, provided they hold these securities until maturity.

 True  False


14. The stock price of a company is its value.

 True  False


15. Buying a mutual fund based solely on its past performance is a good strategy.

 True  False


16. Return of an investment takes two forms: income and capital gain.

 True  False


17. Corporate bonds that include a call provision can be exchanged into common stocks of the company that has issued them. This exchange is made at a predetermined price.

 True  False


18. The return stockholders will receive on their investment will depend on future dividend payments and expected stock price appreciation. Their investment is risky, because future cash dividends are variable and capital gains are uncertain.

 True  False


19. Common stockholders get a fixed dividend and they are entitled to it before preferred stockholders receive any dividend.

 True  False


20. Revenue bonds are usually of higher quality than general obligation bonds, because they are issued to finance specific projects and are fully backed by the income these projects will generate in the future.

 True  False


21. Financial innovation refers to the process that gives birth to new financial institutions, markets,and products.

 True  False


22. An important distinction between "direct" and "indirect" securities is that the former are issued by financial intermediaries while the latter are not.

 True  False


23. Inflation generally favors creditors at the expense of debtors.

 True  False


24. An asset that is readily convertible into cash is thereby highly liquid.

 True  False


25. If a bond is capitalized over a period greater than one year (one period), it involves the calculation of compound interest.

 True  False