2.1 Function of Financial Markets 1) Every financial market has which of the following characteristics? A) It determines the level of interest rates. B) It allows common stock to be traded. C) It allows loans to be made. D) It channels funds from lenders-savers to borrowers-spenders. Answer: D Diff: 1 Type: MC Skill: Recall Objective: 2.1 Compare and contrast direct and indirect finance 2) Financial markets have the basic function of ________. A) getting people with funds to lend together with people who want to borrowfunds B) assuring that the swings in the business cycle are less pronounced C) assuring that governments need never resort to printing money D) providing a risk-free repository of spending power Answer: A Diff: 1 Type: MC Skill: Recall Objective: 2.1 Compare and contrast direct and indirect finance 3) Financial markets improve economic welfare because ________. A) they channel funds from investors to savers B) they allow consumers to time their purchase better C) they weed out inefficient firms D) eliminate the need for indirect finance Answer: B Diff: 2 Type: MC Skill: Recall Objective: 2.1 Compare and contrast direct and indirect finance 4) Well-functioning financial markets ________. A) cause inflation B) eliminate the need f