Podcast
Questions and Answers
What role do businesses and governments generally play in the U.S. financial markets regarding the supply of funds?
What role do businesses and governments generally play in the U.S. financial markets regarding the supply of funds?
- Businesses are net demanders, while governments are net suppliers.
- Businesses are net suppliers, while governments are net demanders.
- They both act as net suppliers of funds.
- They both act as net demanders of funds. (correct)
How do corporations typically acquire capital in secondary markets?
How do corporations typically acquire capital in secondary markets?
- By reinvesting profits earned in previous fiscal years.
- By issuing new stocks and/or bonds. (correct)
- By receiving investments directly from individual investors.
- Through government subsidies and grants.
Which factor played a role in the 2007-2009 financial crisis?
Which factor played a role in the 2007-2009 financial crisis?
- A decrease in subprime mortgages issued.
- Better capitalization of credit default swap issuers enabling them to fulfill their obligations.
- The shift from 'originate and hold' to 'originate and sell' mortgage practices. (correct)
- Stringent evaluations from credit rating agencies.
Match the market crash to the appropriate period: The dot-com bubble burst led to a bear market in _____ while the housing market crash triggered a bear market in _____.
Match the market crash to the appropriate period: The dot-com bubble burst led to a bear market in _____ while the housing market crash triggered a bear market in _____.
Which entity is typically the largest net supplier of funds in the U.S. financial system?
Which entity is typically the largest net supplier of funds in the U.S. financial system?
Are stocks categorized as money market securities?
Are stocks categorized as money market securities?
A Treasury bond (T-bond) that was originally issued with a 30-year maturity is classified as which type of security?
A Treasury bond (T-bond) that was originally issued with a 30-year maturity is classified as which type of security?
According to the loanable funds theory, what is considered the 'price' of loanable funds?
According to the loanable funds theory, what is considered the 'price' of loanable funds?
Which type of securities includes debt instruments with maturities of one year or less?
Which type of securities includes debt instruments with maturities of one year or less?
Which statement regarding financial markets is inaccurate?
Which statement regarding financial markets is inaccurate?
Flashcards
Net Demanders of Funds
Net Demanders of Funds
In the U.S., businesses and governments generally need to borrow money, making them net demanders of funds.
Corporate Fundraising
Corporate Fundraising
Corporations can raise capital by issuing stocks and bonds in secondary markets, allowing investors to trade previously issued securities.
Money Market Securities
Money Market Securities
Refers to debt securities with maturities of one year or less, which are very liquid.
U.S. Households
U.S. Households
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Stocks as Money Market Securities
Stocks as Money Market Securities
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T-Bond
T-Bond
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Loanable Funds Theory
Loanable Funds Theory
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Bear Market Causes
Bear Market Causes
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Capital vs. Money Market Returns
Capital vs. Money Market Returns
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Study Notes
- Businesses and governments in the U.S. are typically net demanders of funds.
- Corporations can raise funds by issuing stocks and/or bonds in the secondary markets.
- An increase in underwriting standards on mortgage loans did not lead to the 2007-2009 financial crisis.
- The bursting of the dot-com bubble caused the bear market in the early 2000s.
- The bursting of the housing market bubble caused the bear market in 2007-2009.
- U.S. households tend to be the largest net supplier of funds in the U.S.
- Stocks are not money market securities.
- A T-bond with an original maturity of 30 years is a capital market security.
- The loanable funds theory views interest rate as the price of loanable funds.
- Money market securities include debt securities with maturities of one year or less.
- Capital market securities do not tend to have lower expected rates of return than money market securities.
- Tax policy in the U.S. favors certain borrowings and taxes almost all savings.
- Secondary markets are not simply a legalized form of gambling.
- The change from “originate and hold” loans to “originate and sell” loans caused a decline in underwriting standards on mortgage loans in the period leading up to the financial crisis.
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