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Terms in this set (12)
1) Channeling funds from individuals with surplus funds to those desiring funds when the saver
does not purchase the borrowerʹs security is known as
C) financial intermediation.
2) A financial crisis is
A) not possible in the modern financial environment.
B) a major disruption in the financial markets.
C) a feature of developing economies only.
D) typically followed by an economic boom.
Chapter 1 Why Study Money, Banking, and Financial Markets? 7
3) Banks are important to the study of money and the economy because they
A) channel funds from investors to savers.
B) have been a source of rapid financial innovation.
C) are the only important financial institution in the U.S. economy.
D) create inflation.
4) Financial intermediaries
A) provide a channel for linking those who want to save with those who want to invest.
B) produce nothing of value and are therefore a drain on societyʹs resources.
C) can hurt the performance of the economy.
D) hold very little of the average Americanʹs wealth.
5) Banks, savings and loan associations, mutual savings banks, and credit unions
A) are no longer important players in financial intermediation.
B) since deregulation now provide services only to small depositors.
C) have been adept at innovating in response to changes in the regulatory environment.
D) produce nothing of value and are therefore a drain on societyʹs resources.
6) Financial institutions search for ________ has resulted in many financial innovations.
A) higher profits
D) higher risk
7) Banks and other financial institutions engage in financial intermediation, which
A) can hurt the performance of the economy.
B) can benefit economic performance.
C) has no effect on economic performance.
D) involves borrowing from investors and lending to savers.
8) Financial institutions that accept deposits and make loans are called ________.
C) over-the-counter markets
D) finance companies
9) The financial intermediaries that the average person interacts with most frequently are
B) over-the-counter markets
C) finance companies
10) Which of the following is not a financial institution?
A) a life insurance company
B) a pension fund
C) a credit union
D) a business college
11) The delivery of financial services electronically is called ________.
12) What crucial role do financial intermediaries perform in an economy?
Financial intermediaries borrow funds from people who have saved and make loans to
other individuals and businesses and thus improve the efficiency of the economy.
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