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Economics
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Other Economics
Money and Banking Test 1 Review 2
50 Questions - Developed by:
Dan
- Updated on:
2010-02-15
- Developed on:
2010-02-05
- 49,660 taken - User Rating:
3.4
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22
votes - 7 people like it
Test 1 Review 2
1
An asset that is generally accepted as payment for goods and services or repayment of debt
Bond
Financial Instrument
Equities
Money
2
Money used in exchange for goods & services
Store of Value
Unit of account
Means of payment
3
Money used to quote prices
Store of Value
Unit of Account
Means of Payment
4
Used to move purchasing power into the future
Means of payment
Unit of account
Store of Value
5
Objects with intrinsic value
Fiat Money
Commodity Money
Checks
6
Value comes from government decree (or fiat)
Commodity Money
Checks
Fiat Money
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
8
Electronic message to your bank to transfer funds
immediately, like a check
Checking Card
Credit Card
Debit Card
9
Deferred payment
Issuer makes payment for you
You have to pay it back
Credit Card
Debit Card
Check Card
10
Which of the following is happening to the future of money?
Means of payment: disappearing
Store of value: disappearing
All of the above
Unit of account: likely to remain
11
The rate at which the general price level is increasing over time
Inflation Rate
Inflation
Deflation Rate
Deflation
12
The measure of the inflation process
Inflation Rate
Deflation
Deflation Rate
Inflation
13
A measure of the ease an asset can be turned into a means of payment (Money).
Inflation
Liquidity
Deflation
14
Narrowest definition
Only most liquid assets
M2
M1
M3
15
Broader definition Includes assets not used as means of payment.
M2
M3
M1
16
When inflation is ____, money growth helps
forecast inflation.
Invisible
High
Low
17
When inflation is ____, the relationship between it and money growth is not as close.
Low
High
Invisible
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
Inflation
GD
CPI
19
GDP or Personal Consumption Expenditure
Deflator
Chain-Weight Index
CPI
20
Half way between fixed weight and a Deflator.
CPI
Deflator
Chain Weight Index
21
Institution stands between lender and borrower.
Portfolio Finance
Indirect Finance
Direct Finance
22
Borrowers sell securities directly to lenders in the financial markets
Indirect Finance
Direct Finance
Portfolio Finance
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
Assets
Liabilities
Financial Instrument
24
Uses of Financial Instruments:
Means of Payment-Purchase goods and services
Store of Value-Transfer purchasing power into the future
Transfer of Risk-Transfer risk from one person to another
All of the above
25
Overcome the costs of complexity, makes them easier to understand
Standardization
Easy
Communicate Information
26
Summarize essential information about issuer. Eliminate expense of collecting information
Easy
Standardization
Communicate Information
27
Used to transfer resources
Examples: stocks and bonds
Overlying Financial Instruments
Derivative Financial Instruments
Underlying Financial Instruments
28
Value derived from underlying instruments
Examples: Futures and options
Underlying Financial Instruments
Overlying Financial Instruments
Derivative Financial Instruments
29
True/false: The size, timing, likelihood payment is made, and conditions under which payment is made all affect the value of financial instruments
N/A
False
True
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?
Both are the same
Neither are valuable
A
B
31
Examples of stores of values for Financial Instruments:
Bonds
Bank Loans
Home Mortgages
All of the above
Stocks
32
Financial Instruments used to transfer risk
Futures contracts
Options
All of the above
Insurance companies
33
Places where financial instruments
are bought and sold.
Financial Markets
Financial Institutions
Financial Instruments
34
Roles of Financial Markets include:
All of the above
Liquidity-Ensures owners can buy and sell financial instruments cheaply
Information-Pool and communication information about issuers of financial instruments.
Risk Sharing-Provide individuals a place to buy and sell risk.
35
Buy and Sell Newly Issued Securities
Secondary Financial Market
Tertiary Financial Market
Primary Financial Market
36
Trade Existing Securities
Tertiary Financial Market
Secondary Financial Market
Primary Financial Market
37
Physical location where trading takes place
Electronic Communication Network
Centralized Exchange
Over The Counter Market
38
Networks of dealers connected electronically
Centralized Exchange
Over The Counter Market
Electronic Communication Network
39
Electronic networks where buyers and sellers interact directly.
Over The Counter Network
Centralized Exchange
Electronic Communication Network
40
Financial claims are bought and sold for immediate
cash payment
Derivative Markets
Debt and Equity Markets
Futures Markets
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
42
Well functioning markets have:
All of the above
Low Transaction Costs
Protect Investors
Communicate Accurate Information
43
Financial Institutions:
Reduce transactions cost by specializing in the issuance of standardized securities
Reduce information costs of screening and monitoring borrowers
All of the above
Issue short term liabilities and purchase long‐term loans.
44
Assets for a Financial Institution
Bonds, Stocks, Loans, Real Estate
Deposits, Insurance Policies
Savings, Options, Securities
45
Take deposits and make loans
Finance Companies
Depository Institutions
Security Firms
Insurance Companies
Pension Funds
46
Accept premiums, pay out based on events
Insurance Companies
Pension Funds
Government Sponsored Enterprises
Security Firms
Finance Companies
47
Invest contributions, provide payments
to retirees
Insurance Companies
Pension Funds
Government sponsored enterprises
Security Firms
Finance Companies
48
Proved access to financial markets
Pension Funds
Security Firms
Insurance Companies
Finance Companies
Government Sponsored Enterprises
49
Raise funds in financial markets, make loans
Government Sponsored Enterprises
Security Firms
Pension Funds
Financial Companies
50
Raise funds in financial markets, make loans,
provide guarantees.
Pension Funds
Government Sponsored Enterprises
Security Firms
Finance Companies
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