Certain vendors that market their goods via mail order have been known to send out catalogues to different regions of the country with items priced differently across regions. Assuming prices are matched to regions on a random basis, this practice would be considered an example of group pricing, or third-degree price discrimination. Indicate whether the […]
In a bank panic, the source of contagion is the A) free-rider problem. B) too-big-to-fail problem. C) transactions cost problem. D) asymmetric information problem. ANSWER D
During a “flight to quality” A) the spread between Treasury bonds and Baa bonds increases. B) the spread between Treasury bonds and Baa bonds decreases. C) the spread between Treasury bonds and Baa bonds is not affected. D) the change in the spread between Treasury bonds and Baa bonds cannot be predicted. ANSWER A
As practiced by book publishers, versioning involves first selling the hardcover edition of a book and then switching to a paperback edition to sell additional copies. As such, this is an application of second-degree price discrimination. Indicate whether the statement is true or false ANSWER FALSE
Since it does not have to be converted into anything else to make purchases, ________ is the most liquid asset. A) money B) stock C) artwork D) gold ANSWER A
The trade balance must equal the level of private and public saving in the country. Indicate whether the statement is true or false ANSWER TRUE
If you have a very low tolerance for risk, which of the following bonds would you be least likely to hold in your portfolio? A) a U.S. Treasury bond B) a municipal bond C) a corporate bond with a rating of Aaa D) a corporate bond with a rating of Baa ANSWER D
The market where one currency is converted into another currency is called the ________ market. A) stock B) bond C) derivatives D) foreign exchange ANSWER D
If uncertainty about banks’ health causes depositors to begin to withdraw their funds from banks, the country experiences a(n) A) banking crisis. B) financial recovery. C) reduction of the adverse selection and moral hazard problems. D) increase in information available to investors. ANSWER A
Because checking accounts are ________ liquid for the depositor than savings accounts, they earn ________ interest rates. A) less; higher B) less; lower C) more; higher D) more; lower ANSWER D
