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Mishkin 10th Edition Homework Solutions Ch 10


Organization of the Instructor

s Manual

To help instructors cope with the increased demands for good teaching in recent years,

The Economics of Money, Banking, and Financial Markets,

Tenth Edition, includes the most comprehensive package of supplementary materials of any money, banking, and financial markets textbook. As part of these supplemental materials, I have designed the Instructor 

s Manual to help save you time in preparing class materials, such as class outlines, solutions to homework problems, lecture notes, and overhead transparencies. This Instructo


s Manual is divided into four parts. Part One discusses how to use the Instructor 

s Manual and the other textbook ancillaries to make your teaching of the money and banking course both more effective and less time-consuming. Part Two contains an overview of all the textbook chapters along with teaching tips that I have found effective. Part Three contains the answers to the end-of-chapter  problems for use by the instructor to prepare solution sets for the problems he or she assigns to the students as problem sets. Part Four contains transparency masters of chapter outlines, which can be used either to make overhead transparencies for use in class or to make handouts for the students. To obtain any of the available ancillaries, adopters of the text just need to get in touch with their Pearson sales representative, or alternatively they can visit the Instructor 

s Resource Center at


Economics of Money, Banking, and Financial Markets, 11e

(Mishkin) Solutions manual Test Bank Chapter 1 ANSWERS TO QUESTIONS


What is the typical relationship among interest rates on three-month Treasury bills, longterm Treasury bonds, and Baa corporate bonds?

The interest rate on three-month Treasury bills fluctuates more than the other interest rates and is lower on average. The interest rate on Baa corporate bonds is higher on average than the other interest rates.


What effect might a fall in stock prices have on business investment?

The lower price for a firm’s shares means that it can raise a

smaller amount of funds, so investment in facilities and equipment will fall.


What effect might a rise in stock prices have on consumers ’ decisions to spend?

Higher stock prices mean that consumers’ wealth is higher, and they will be more likely to

increase their spending.


Why are financial markets important to the health of the economy?

They channel funds from people who do not have a productive use for them to people who do, thereby resulting in higher economic efficiency.


What was the main cause of the recession that began in 2007?

The United States economy was hit by the worst financial crisis since the Great Depression. Defaults in subprime residential mortgages led to major losses in financial institutions,  producing not only numerous bank failures, but also the demise of two of the largest

investment banks in the United States. These factors led to the “Great Recession” which

 began late in 2007.


What is the basic activity of banks?

The basic activity of banks is to accept deposits and make loans.


What are the other important financial intermediaries in the economy, besides banks?

Savings and loan associations, mutual savings banks, credit unions, insurance companies, mutual funds, pension funds, and finance companies.

Solutions Manual for The Economics of Money Banking and Financial Markets 11th edition Frederic S. Mishkin Full complete download test bank link included):