Question 1

The circular flow of funds includes which of the following:

Accepted Answer

A)  Consumer units 
B)  Households 
C)  Government 
D)  All of the above 
E)  None of the above 
A)  Consumer units 
B)  Households 
C)  Government 
D)  All of the above 
E)  None of the above

Question 2

The fact that professional investors operate daily in the financial marketplace, watching for profitable opportunities arising from unusually attractive prices and interest rates on selected financial instruments and adjusting their portfolios accordingly is often referred to as the force of profit maximization.

Accepted Answer

A) True 
 B)False

Question 3

Trading in financial instruments now spans the globe.

Accepted Answer

A) True 
 B)False

Question 4

A market in which competition among buyers and sellers sets the terms of trade is a:

Accepted Answer

A)  Primary market 
B)  Forward market 
C)  Efficient market 
D)  Perfect market 
E)  None of the above 
A)  Primary market 
B)  Forward market 
C)  Efficient market 
D)  Perfect market 
E)  None of the above

Question 5

Speculative purchases of securities and commodities are generally financed by loans from the money market.

Accepted Answer

A) True 
 B)False

Question 6

The financial system operates to bring planned savings into balance with planned financial investment in stocks and bonds.

Accepted Answer

A) True 
 B)False

Question 7

The financial system and financial markets are responsible for providing which of the following services?

Accepted Answer

A)  Credit services 
B)  Payment services 
C)  Liquidity 
D)  Facilitating the flow of savings 
E)  All of the above 
A)  Credit services 
B)  Payment services 
C)  Liquidity 
D)  Facilitating the flow of savings 
E)  All of the above

Question 8

Financial instruments traded in the capital market have original maturities of greater than one year.

Accepted Answer

A) True 
 B)False

Question 9

An example of a futures market transaction is to borrow money through a new mortgage.

Accepted Answer

A) True 
 B)False

Question 10

A bank certificate of deposit is a ______ market instrument. Commercial paper is a ______ market instrument.

Accepted Answer

A)  Money, capital 
B)  Money, futures 
C)  Capital, capital 
D)  Futures, capital 
E)  Money, money 
A)  Money, capital 
B)  Money, futures 
C)  Capital, capital 
D)  Futures, capital 
E)  Money, money

Question 11

The terms open market and negotiated market are often used interchangeably to mean the same thing.

Accepted Answer

A) True 
 B)False

Question 12

When a purchaser is issued a bill online and can make payments online, this is referred to as:

Accepted Answer

A)  Stored value cards 
B)  Contactless payment devices 
C)  Electronic bill presentment 
D)  ATM card 
E)  Credit card 
A)  Stored value cards 
B)  Contactless payment devices 
C)  Electronic bill presentment 
D)  ATM card 
E)  Credit card

Question 13

Money is the only perfectly liquid asset in the financial system.

Accepted Answer

A) True 
 B)False

Question 14

The financial markets offer businesses, consumers and governments protection against health, property and income risk.

Accepted Answer

A) True 
 B)False

Question 15

According to your text, the basic commodity being traded in all the financial markets is:

Accepted Answer

A)  Securities 
B)  Capital 
C)  Forward markets 
D)  Credit 
E)  None of the above 
A)  Securities 
B)  Capital 
C)  Forward markets 
D)  Credit 
E)  None of the above

Question 16

The ______ is designed to finance long-term investments, making possible the construction of factories, office buildings, highways, bridges, schools, homes and apartments.

Accepted Answer

A)  Money market 
B)  Capital market 
C)  Secondary market 
D)  Negotiated market 
E)  Primary market 
A)  Money market 
B)  Capital market 
C)  Secondary market 
D)  Negotiated market 
E)  Primary market

Question 17

Arbitrage occurs when:

Accepted Answer

A)  A new security is issued 
B)  A company is in need of funds 
C)  A large institution faces default 
D)  Interest rates in a sector of the financial market rise relative to other sectors 
E)  None of the above 
A)  A new security is issued 
B)  A company is in need of funds 
C)  A large institution faces default 
D)  Interest rates in a sector of the financial market rise relative to other sectors 
E)  None of the above

Question 18

The world's standard of living increases if production increases while raising productivity.

Accepted Answer

A) True 
 B)False

Question 19

Investment by governments includes the construction of new public facilities.

Accepted Answer

A) True 
 B)False

Question 20

Business determines what and how many goods and services will be produced.

Accepted Answer

A) True 
 B)False

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

The circular flow of funds includes which of the following:

Trading in financial instruments now spans the globe.

A market in which competition among buyers and sellers sets the terms of trade is a:

Speculative purchases of securities and commodities are generally financed by loans from the money market.

The financial system operates to bring planned savings into balance with planned financial investment in stocks and bonds.

The financial system and financial markets are responsible for providing which of the following services?

Financial instruments traded in the capital market have original maturities of greater than one year.

An example of a futures market transaction is to borrow money through a new mortgage.

A bank certificate of deposit is a ______ market instrument. Commercial paper is a ______ market instrument.

The terms open market and negotiated market are often used interchangeably to mean the same thing.

When a purchaser is issued a bill online and can make payments online, this is referred to as:

Money is the only perfectly liquid asset in the financial system.

The financial markets offer businesses, consumers and governments protection against health, property and income risk.

According to your text, the basic commodity being traded in all the financial markets is:

The ______ is designed to finance long-term investments, making possible the construction of factories, office buildings, highways, bridges, schools, homes and apartments.

Arbitrage occurs when:

The world's standard of living increases if production increases while raising productivity.

Investment by governments includes the construction of new public facilities.

Business determines what and how many goods and services will be produced.

Financial Systems, Monetary Units, and the Role of Money in the Economy

Financial Indices, Market Information, and Economic Data

The Financial Crisis and Its Impact on the Mortgage Market and Economy

Understanding Interest Rates, Savings, and the Wealth Effect

Financial Concepts and Interest Rates

Effects of Inflation and Yield Curves on Stock Prices and Investments

Understanding Risk and Market Factors in Financial Securities

Exploring Financial Markets and Hedging Strategies

Factors Affecting the Volume of CDs

Exploring the Reserve Accounting System, Money Markets, and Financial Instruments

Exploring Central Banks and Their Impact on the Economy and Financial System

Central Banking and Monetary Policy: Exploring Tools and Strategies

Banking and Financial Services: Regulations, Operations, and Trends

Comparative Analysis of Financial Institutions and Their Operations

Exploring Various Aspects of Pension Funds, Finance Companies, and Insurance Industry

The Impact of Deregulation and Regulation on Financial Institutions and Banking Industry in the United States

Treasury Auctions, Public Debt, and Government Borrowing: Exploring the Us Treasury System

Corporate Bond Pricing, Market Development, and Financing Strategies

The Truth About Regulation Fd and Stock Holdings: Debunking Common Myths in the Financial Market

Flexible Savings Account Options

Mortgage Market and Mortgage Instruments

International Financial Transactions and Balance of Payments

International Banking and Financial Regulations

Exploring the Complexities of Financial Services and Regulation

Filters

A bank certificate of deposit is a market instrument. Commercial paper is a market instrument.