Money and Banking Test 1 Review 2

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50 Questions - Developed by:
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Test 1 Review 2

  • 1
    An asset that is generally accepted as payment for goods and services or repayment of debt
  • 2
    Money used in exchange for goods & services
  • 3
    Money used to quote prices

  • 4
    Used to move purchasing power into the future
  • 5
    Objects with intrinsic value
  • 6
    Value comes from government decree (or fiat)

  • 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.
  • 8
    Electronic message to your bank to transfer funds
    immediately, like a check
  • 9
    Deferred payment
    – Issuer makes payment for you
    – You have to pay it back
  • 10
    Which of the following is happening to the future of money?

  • 11
    The rate at which the general price level is increasing over time
  • 12
    The measure of the inflation process
  • 13
    A measure of the ease an asset can be turned into a means of payment (Money).
  • 14
    Narrowest definition
    Only most liquid assets
  • 15
    Broader definition Includes assets not used as means of payment.
  • 16
    When inflation is ____, money growth helps
    forecast inflation.

  • 17
    When inflation is ____, the relationship between it and money growth is not as close.
  • 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
  • 19
    GDP or Personal Consumption Expenditure
  • 20
    Half way between fixed weight and a Deflator.

  • 21
    Institution stands between lender and borrower.
  • 22
    Borrowers sell securities directly to lenders in the financial markets
  • 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
  • 24
    Uses of Financial Instruments:
  • 25
    Overcome the costs of complexity, makes them easier to understand
  • 26
    Summarize essential information about issuer. Eliminate expense of collecting information

  • 27
    Used to transfer resources
    Examples: stocks and bonds
  • 28
    Value derived from underlying instruments
    Examples: Futures and options
  • 29
    True/false: The size, timing, likelihood payment is made, and conditions under which payment is made all affect the value of financial instruments
  • 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?

  • 31
    Examples of stores of values for Financial Instruments:
  • 32
    Financial Instruments used to transfer risk
  • 33
    Places where financial instruments
    are bought and sold.
  • 34
    Roles of Financial Markets include:
  • 35
    Buy and Sell Newly Issued Securities
  • 36
    Trade Existing Securities
  • 37
    Physical location where trading takes place
  • 38
    Networks of dealers connected electronically
  • 39
    Electronic networks where buyers and sellers interact directly.
  • 40
    Financial claims are bought and sold for immediate
    cash payment
  • 41
    Financial claims based on underlying instruments are bought and sold for payment at a future date
  • 42
    Well functioning markets have:
  • 43
    Financial Institutions:
  • 44
    Assets for a Financial Institution
  • 45
    Take deposits and make loans
  • 46
    Accept premiums, pay out based on events
  • 47
    Invest contributions, provide payments
    to retirees
  • 48
    Proved access to financial markets
  • 49
    Raise funds in financial markets, make loans
  • 50
    Raise funds in financial markets, make loans,
    provide guarantees.

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