Economics of Money, Banking and Financial Markets 12th edition by Frederic Mishkin Test bank
20) When stock prices fall
A) an individual's wealth is not affected nor is their willingness to spend.
B) a business firm will be more likely to sell stock to finance investment spending.
C) an individual's wealth may decrease but their willingness to spend is not affected.
D) an individual's wealth may decrease and their willingness to spend may decrease.
Answer: D
Ques Status: Previous Edition
AACSB: Analytical Thinking
21) Changes in stock prices
A) do not affect people's wealth and their willingness to spend.
B) affect firms' decisions to sell stock to finance investment spending.
C) occur in regular patterns.
D) are unimportant to decision makers.
Answer: B
Ques Status: Previous Edition
AACSB: Reflective Thinking
22) An increase in stock prices ________ the size of people's wealth and may ________ their willingness to spend, everything else held constant.
A) increases; increase
B) increases; decrease
C) decreases; increase
D) decreases; decrease
Answer: A
Ques Status: Previous Edition
AACSB: Analytical Thinking
23) Low stock market prices might ________ consumers willingness to spend and might ________ businesses willingness to undertake investment projects.
A) increase; increase
B) increase; decrease
C) decrease; decrease
D) decrease; increase
Answer: C
Ques Status: Previous Edition
AACSB: Analytical Thinking
24) Fear of a major recession causes stock prices to fall, everything else held constant, which in turn causes consumer spending to
A) increase.
B) remain unchanged.
C) decrease.
D) cannot be determined.
Answer: C
Ques Status: Previous Edition
AACSB: Reflective Thinking
25) A share of common stock is a claim on a corporation's
A) debt.
B) liabilities.
C) expenses.
D) earnings and assets.
Answer: D
Ques Status: Previous Edition
AACSB: Application of Knowledge
26) On ________, October 19, 1987, the stock market experienced its worst one-day drop in its entire history with the DJIA falling by 22%.
A) "Terrible Tuesday"
B) "Woeful Wednesday"
C) "Freaky Friday"
D) "Black Monday"
Answer: D
Ques Status: Previous Edition
AACSB: Application of Knowledge
27) The decline in stock prices from 2000 through 2002
A) increased individuals' willingness to spend.
B) had no effect on individual spending.
C) reduced individuals' willingness to spend.
D) increased individual wealth.
Answer: C
Ques Status: Previous Edition
AACSB: Analytical Thinking
28) The Dow reached a peak of over 11,000 before the collapse of the ________ bubble in 2000.
A) housing
B) manufacturing
C) high-tech
D) banking
Answer: C
Ques Status: Previous Edition
AACSB: Application of Knowledge
29) When I purchase a corporate ________, I am lending the corporation funds for a specific time. When I purchase a corporation's ________, I become an owner in the corporation.
A) bond; stock