Exam 1: An Overview of Financial Markets and Institutions

Every asset is someone else's liability, but not every liability is someone else's asset.

When a stock is listed on an exchange, members may trade it on the floor of the exchange.

Money market instruments are a form of short-term debt.

The money market provides short-term liquidity; the capital market finances long-term corporate growth.

A surplus spending unit (SSU) must hold a claim until its scheduled maturity.

Investment bankers help deficit spending units (DSUs) bring new primary security issues to market.

Finance companies take small consumer deposits and make large consumer loans.

Federal funds are the funds provided by the Federal Government for domestic corporations for long-term growth.

Liabilities of financial intermediaries often include commercial paper.

Most banks are considered systemically risky under the 2010 Dodd Frank bill.

Money markets have a greater variety of investors than borrowers.

In the modern financial system, there must be an equal number of DSUs and surplus spending units (SSUs) in a period.

The money market is a dealer market, not an exchange, and has no specific location.

Sales finance companies specialize in mortgage lending.

Dealers bring buyer and seller together; brokers make a market.

Commercial banks often lend to businesses in direct financial markets.

Without a financial sector, real investment must be financed internally by the deficit spending unit.

Every financial claim appears on two balance sheets.

Primary markets were created to offer liquidity and ways for investors to alter the risk of their portfolios.

Private placements are the simplest form of direct finance.