Exam 1: Understanding the Financial System and Its Impact on the Economy and Markets

One of the financial markets listed below is not part of the nation's capital market. Which one is not?

Federal funds are temporary cash surpluses held by the federal government.

Trading in securities previously issued takes place in the:

The purchase of financial claims is a guaranteed form of future income.

A short-term IOU issued by a large well-established corporation is known as commercial paper.

The financial services area where protection is provided against loss due to unfavorable movements in market prices or interest rates is known as agency services.

Perfect liquidity is a trait held by the following:

The financial services area where protection is provided from loss of income or property in the event of death, disability, negligence or other adverse developments is known as hedging services.

The function of the financial system that consists of providing a channel through which the government can promote the goals of high employment and low inflation is called the:

According to your text, a key trend in the financial system is:

Current savings represents a flow of funds.

A(n) _____ market exists if the market is fully competitive and the same information is available to all participants.

One of the most important contributions of the financial markets is to make possible the exchange of current income for future income.

The largest market for a single security in the world is the Treasury bill market.

What concept, institution or instrument is described by each of the phrases or sentences listed below? a. Expenditures on capital goods or raw materials. b. Current earnings retained in a business. c. Funds left over out of current income after deducting current consumption expenditures. d. An institutional mechanism for trading goods and services. e. Collection of markets, individuals, institutions, laws and regulations through which financial services are produced and delivered.

A high proportion of young adults and newly formed families in a nation's population will generate a high level of national savings compared to countries with older populations because younger adults have greater need to build up savings for the future.

In the financial marketplace, secondary markets provide:

Current investment for households includes purchases of household durables by individuals and families.

Interest payments on debt are a tax-deductible expense for households, but not for businesses.

Commercial banks and retail stores, but not credit unions, may issue plastic credit cards.