Money and Banking Test 1 Review 2

Developed by: Dan

Test 1 Review 2

Question 1: An asset that is generally accepted as payment for goods and services or repayment of debt

	Money
	Equities
	Bond
	Financial Instrument

Question 2: Money used in exchange for goods & services

	Store of Value
	Means of payment
	Unit of account

Question 3: Money used to quote prices

	Means of Payment
	Store of Value
	Unit of Account

Question 4: Used to move purchasing power into the future

	Means of payment
	Store of Value
	Unit of account

Question 5: Objects with intrinsic value

	Fiat Money
	Commodity Money
	Checks

Question 6: Value comes from government decree (or fiat)

	Fiat Money
	Checks
	Commodity Money

Question 7: Instructions to the bank to shifts funds from your account to that of the person or firm whose name is written in the “Pay to the Order of” line.

	Commodity Money
	Checks
	Fiat Money

Question 8: Electronic message to your bank to transfer funds immediately, like a check

	Checking Card
	Credit Card
	Debit Card

Question 9: Deferred payment – Issuer makes payment for you – You have to pay it back

	Debit Card
	Credit Card
	Check Card

Question 10: Which of the following is happening to the future of money?

	Unit of account: likely to remain
	Means of payment: disappearing
	All of the above
	Store of value: disappearing

Question 11: The rate at which the general price level is increasing over time

	Deflation
	Inflation
	Deflation Rate
	Inflation Rate

Question 12: The measure of the inflation process

	Inflation
	Deflation
	Inflation Rate
	Deflation Rate

Question 13: A measure of the ease an asset can be turned into a means of payment (Money).

	Inflation
	Liquidity
	Deflation

Question 14: Narrowest definition Only most liquid assets

	M2
	M3
	M1

Question 15: Broader definition Includes assets not used as means of payment.

	M1
	M2
	M3

Question 16: When inflation is ____, money growth helps forecast inflation.

	Low
	High
	Invisible

Question 17: When inflation is ____, the relationship between it and money growth is not as close.

	Low
	Invisible
	High

Question 18: Answers the question: "How much more would it cost for people to purchase today the same basket of goods and services that they actually bought at some fixed time in the past?“ It is the Fixed Weight Index

	CPI
	GD
	Inflation

Question 19: GDP or Personal Consumption Expenditure

	Chain-Weight Index
	CPI
	Deflator

Question 20: Half way between fixed weight and a Deflator.

	Chain Weight Index
	Deflator
	CPI

Question 21: Institution stands between lender and borrower.

	Indirect Finance
	Direct Finance
	Portfolio Finance

Question 22: Borrowers sell securities directly to lenders in the financial markets

	Direct Finance
	Indirect Finance
	Portfolio Finance

Question 23: A written legal obligation of one party to transfer something of value, usually money, to another party at some future date, under certain conditions

	Liabilities
	Financial Instrument
	Assets

Question 24: Uses of Financial Instruments:

	All of the above
	Store of Value-Transfer purchasing power into the future
	Means of Payment-Purchase goods and services
	Transfer of Risk-Transfer risk from one person to another

Question 25: Overcome the costs of complexity, makes them easier to understand

	Easy
	Standardization
	Communicate Information

Question 26: Summarize essential information about issuer. Eliminate expense of collecting information

	Standardization
	Easy
	Communicate Information

Question 27: Used to transfer resources Examples: stocks and bonds

	Overlying Financial Instruments
	Derivative Financial Instruments
	Underlying Financial Instruments

Question 28: Value derived from underlying instruments Examples: Futures and options

	Derivative Financial Instruments
	Underlying Financial Instruments
	Overlying Financial Instruments

Question 29: True/false: The size, timing, likelihood payment is made, and conditions under which payment is made all affect the value of financial instruments

	False
	True
	N/A

Question 30: Financial Instrument A requires a large payment, you make the payment sooner, a payment is likely to be made, and you need the instrument badly. Financial Instrument B requires a small payment, you will make the payment later, a payment is not likely to be made, and you don't need the instrument badly. Which financial instrument is more valuable?

	B
	Both are the same
	A
	Neither are valuable

Question 31: Examples of stores of values for Financial Instruments:

	Bonds
	Home Mortgages
	All of the above
	Stocks
	Bank Loans

Question 32: Financial Instruments used to transfer risk

	Insurance companies
	Futures contracts
	All of the above
	Options

Question 33: Places where financial instruments are bought and sold.

	Financial Instruments
	Financial Markets
	Financial Institutions

Question 34: Roles of Financial Markets include:

	Risk Sharing-Provide individuals a place to buy and sell risk.
	All of the above
	Liquidity-Ensures owners can buy and sell financial instruments cheaply
	Information-Pool and communication information about issuers of financial instruments.

Question 35: Buy and Sell Newly Issued Securities

	Secondary Financial Market
	Tertiary Financial Market
	Primary Financial Market

Question 36: Trade Existing Securities

	Primary Financial Market
	Secondary Financial Market
	Tertiary Financial Market

Question 37: Physical location where trading takes place

	Over The Counter Market
	Centralized Exchange
	Electronic Communication Network

Question 38: Networks of dealers connected electronically

	Electronic Communication Network
	Over The Counter Market
	Centralized Exchange

Question 39: Electronic networks where buyers and sellers interact directly.

	Electronic Communication Network
	Over The Counter Network
	Centralized Exchange

Question 40: Financial claims are bought and sold for immediate cash payment

	Futures Markets
	Debt and Equity Markets
	Derivative Markets

Question 41: Financial claims based on underlying instruments are bought and sold for payment at a future date

	Futures Markets
	Derivatives Markets
	Debt and Equity Markets

Question 42: Well functioning markets have:

	Protect Investors
	Communicate Accurate Information
	Low Transaction Costs
	All of the above

Question 43: Financial Institutions:

	Reduce transactions cost by specializing in the issuance of standardized securities
	Issue short term liabilities and purchase long‐term loans.
	All of the above
	Reduce information costs of screening and monitoring borrowers

Question 44: Assets for a Financial Institution

	Deposits, Insurance Policies
	Savings, Options, Securities
	Bonds, Stocks, Loans, Real Estate

Question 45: Take deposits and make loans

	Security Firms
	Insurance Companies
	Pension Funds
	Depository Institutions
	Finance Companies

Question 46: Accept premiums, pay out based on events

	Security Firms
	Finance Companies
	Pension Funds
	Insurance Companies
	Government Sponsored Enterprises

Question 47: Invest contributions, provide payments to retirees

	Finance Companies
	Insurance Companies
	Government sponsored enterprises
	Pension Funds
	Security Firms

Question 48: Proved access to financial markets

	Government Sponsored Enterprises
	Insurance Companies
	Finance Companies
	Security Firms
	Pension Funds

Question 49: Raise funds in financial markets, make loans

	Financial Companies
	Pension Funds
	Government Sponsored Enterprises
	Security Firms

Question 50: Raise funds in financial markets, make loans, provide guarantees.

	Security Firms
	Finance Companies
	Pension Funds
	Government Sponsored Enterprises

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