1. The exchange of goods and services is made more efficient by:
A. barters.
B. money.
C. governments.
D. some combination of government transfer and barter.
2. The term ‘medium of exchange' for money refers to its use as:
A. coinage.
B. currency.
C. something that is widely accepted as payment for goods and services.
D. any standard of value that prices can be expressed in.
3. The role of money as a store of value refers to:
A. the value of money falling only when the money supply falls.
B. the value of money falling only when the money supply increases.
C. the fact that money allows worth to be stored readily.
D. the fact that money never loses its value compared with other assets.
4. Money increases economic growth by assisting transfers from:
A. consumers to investors.
B. savers to borrowers.
C. businesses to consumers.
D. borrowers to investors.
5. Financial markets have developed to facilitate the exchange of money between savers and
borrowers. Which of the following is NOT a function of money?
A. A store of value
B. A medium of exchange for settling economic transactions
C. A claim to future cash flows
D. Short-term protection against inflation
6. Buyers of financial claims lend their excess funds because they:
A. expect to borrow extra funds in the future.
B. want surplus funds in the future.
C. want to invest in the future.
D. want to increase their costs relative to their incomes.
7. Sellers of financial claims promise to pay back borrowed funds:
A. by borrowing extra funds in the future.
B. based on their expectation of having surplus funds in the future.
C. by selling other assets.
D. by reducing their costs relative to their incomes.
8. A savings-surplus unit is an entity:
A. that needs to borrow funds from a surplus unit.
B. which has an income that exceeds its spending.
C. whose spending exceeds its income.
D. called a company.
9. The process of facilitating the flow of funds between borrowers and lenders performed by the
financial system:
A. is hindered by the problem of ‘double coincidence of wants'.
B. greatly reduces the probability of inflation.
C. increases the rate of economic growth of a country.
D. occurs only through financial intermediaries.
10. Both real and financial assets have four principal attributes that are significant factors in the
investment decision process. These are:
i. liquidity
ii. capital gain
iii. risk
iv. return or yield
v. time pattern of future cash flows
vi. price and cash flow volatility
A. i, ii, iii, iv
B. i, iii, iv, v
C. i, iii, iv, vi
D. ii, iii, iv, v
11. Which of the following is NOT associated with characteristics of shares?
A. Part ownership of a company
B. Capital gains
C. A fixed interest payment
D. Dividends
12. A financial institution that obtains most of its funds from deposits is a/an:
A. investment bank.
B. unit trust.
13. Institutions that specialise in off-balance-sheet advisory services are called:
A. depository financial institutions.
B. contractual institutions.
C. finance companies.
D. investment banks.
14. A financial intermediary that receives premium payments which are used to purchase assets
to cover future possible payments is a:
A. building society.
B. credit union.
C. savings bank.
D. life insurance office.
15. Financial institutions whose liabilities specify that, in return for the payment of periodic
funds to the institution, the institution will make payments in the future (if and when a specified
event occurs) are:
A. money market corporations.
B. unit trusts.
C. contractual savings institutions.
D. depository financial institutions.
16. Financial institutions that raise the majority of their funds by selling securities in the money
markets are:
A. commercial banks.
B. building societies.
C. finance companies.
D. life insurance offices.
17. Financial institutions that are formed under a trust deed and attract funds by inviting the
public to buy units are:
A. finance companies
B. building societies.
C. unit trusts.
D. life insurance offices.
18. Which of the following is NOT a term associated with shares?
A. Residual
B. Ownership
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