1) Financial markets promote economic efficiency by

A) channeling funds from investors to savers.

B) creating inflation.

C) channeling funds from savers to investors.

D) reducing investment.

2. A key factor in producing high economic growth is

A) eliminating foreign trade.

B) well-functioning financial markets.

C) high-interest rates.

D) stock market volatility.

3. The bond markets are important because they are

A) easily the most widely followed financial markets in the United States.

B) the markets where foreign exchange rates are determined.

C) the markets where interest rates are determined.

D) the markets where all borrowers get their funds.

4. The price paid for the rental of borrowed funds (usually expressed as a percentage of the rental of $100 per year) is commonly referred to as the

A) inflation rate.

B) exchange rate.

C) interest rate.

D) aggregate price level.

5. Compared to interest rates on long-term U.S. government bonds, interest rates on three-month Treasury bills fluctuate ________ and are ________ on average.

A) more; lower

B) less; lower

C) more; higher

D) less; higher