1 - Security definition

Which of the following describes the difference between an asset and a security?

An asset is anything of value owned by an individual or firm, and a security is a financial asset that is tradeable on the secondary market.

An asset is something of value that is owned and a security is a debt that needs to be paid back.

Both are something that is of value owned by an individual or firm, but an asset is liquid and a security is not liquid.

An asset is a physical item of value such as a building while a security is a financial item of value.

An asset is anything of value owned by an individual or firm. A security is type of asset that is tradeable on financial markets.

1 - Security definition

Which of the following is a financial security?

A security is a financial asset that can be traded in secondary markets. Stocks are partial ownerships of firms that can be traded on secondary markets.

1 - Security definition

What does securitization mean?

The process of making an individual for firm more secure.

The process of obtaining insurance for an individual or firm.

The process of converting a non-tradeable asset, such as a business loan, to a tradeable financial asset that can be sold on secondary financial markets.

The process of selling an asset.

Securitization is the process of converting an asset to a security. A security is type of asset that is tradeable on financial markets.

2 - Financial intermediary function

What is one function that financial intermediaries have in the economy?

Channel funds from savers to borrowers with productive uses for the funds.

Pay interest to borrowers to encourage spending and investment.

Print money when the Federal Reserve increases the money supply.

Be an intermediary between banks and individuals.

Financial intermediaries, such as banks, collect money from individuals and firms that deposit saving and loan them out to other individuals and firms that have a use for the funds and ability to repay the loans.

2 - Financial intermediary function

What is one function that financial intermediaries have in the economy?

Provide loans to individuals and businesses.

Implement monetary policy as directed by the Federal Reserve.

Convert assets to money supply.

Purchase physical assets such as houses and cars for individuals that cannot afford them.

Financial intermediaries collect money from individuals and firms that deposit saving and loan them out to other individuals and firms that have a use for the funds and ability to repay the loans.

3 - Primary vs Secondary

What is the definition of a primary market?

Financial market in which stocks, bonds, and other securities are sold for the first time

The primary place where financial traders sell stocks, bonds, and other financial assets

Any financial market where investors buy and sell existing securities

The place where people buy physical assets such as buildings and houses.

A primary market is a financial market in which stocks, bonds, and other securities are sold for the first time. A secondary market is where financial investors buy and sell existing securities that have already been sold on primary markets.

3 - Primary vs Secondary

What is the definition of a secondary market?

Any financial market where investors buy and sell existing securities

A financial market where loans are sold after the borrowers have defaulted

The place where individuals get loans if they cannot get loans from a bank.

The market that occurs after normal business hours.

A primary market is a financial market in which stocks, bonds, and other securities are sold for the first time. A secondary market is where financial investors buy and sell existing securities that have already been sold on primary markets.

3 - Primary vs Secondary

An initial public offering (IPO) of stock in a firm would be sold on what type of market?

Secondary market

Insurance market

An inital public offering is the first time a firm sells stock in the company. This is sold in a primary market. A primary market is a financial market securities are sold for the first time. A secondary market is where financial investors buy and sell existing securities that have already been sold on primary markets.

4 - Central bank definition

Which of the following is the central bank of the United States?

Securities and exchange commission

Federal Deposit and Insurance Corporation

The Federal Reserve is the central bank of the United States. A central bank is a governing body that manages the supply of money in the economy in order to achieve macroeconomic goals.

4 - Central bank definition

Which of the following is the definition of a central bank?

A central bank is a governing body that manages the supply of money in the economy in order to achieve macroeconomic goals.

A central bank enforces securities laws in order to protect financial investors.

A central bank is the largest bank in an economy that is too big to fail.

A central bank is an intermediary between businesses and investors to buy and sell stocks, bonds, and other financial securities.

The Federal Reserve is the central bank of the United States. A central bank is a governing body that manages the supply of money in the economy in order to achieve macroeconomic goals.

4 - Central bank definition

Which of the following institutions is a governing body that manages the supply of money in the economy in order to achieve macroeconomic goals.

New York Stock Exchange

The Federal Reserve is the central bank of the United States. A central bank is a governing body that manages the supply of money in the economy in order to achieve macroeconomic goals.

Which of the following assets is the *most* liquid?

30-Day U.S. Treasury bill

Municipal swimming pool

Liquidity is the ease in which an asset can be converted for money. U.S. Treasury bills are highly traded financial securities and can quickly be converted to money. A municipal swimming pools would be pretty hard to sell quickly.

Which of the following assets is the *least* liquid?

30-Day U.S. Treasury bill

Municipal swimming pool

Liquidity is the ease in which an asset can be converted for money. U.S. Treasury bills are highly traded financial securities and can quickly be converted to money. Municipal swimming pools would be much harder to sell quickly than all the others.

What is the definition of liquidity

The ease in which a financial asset can be exchanged for money

The level of risk associated with a financial security

How easily a financial security can melt

The degree to which an investment portfolio is diversified

Liquidity is the ease in which an asset can be converted for money.

6 - Fiat vs Commodity money

What is the definition of commodity money?

An item used as a medium of exchange that has value indepenent of its use for money

A currency that is sold on commodity markets

Any currency that can be traded for commodities

A medium of exchange that does not have an inherent value.

A commodity money is an item used as a medium of exchange that has value indepenent of its use for money. Fiat money is a medium of exchange that does not an inherent value outside its use as money.

6 - Fiat vs Commodity money

What is the definition of fiat money?

A medium of exchange that does not an inherent value outside its use as money

An item used as a medium of exchange that has value indepenent of its use for money

A secondary currency that is not the main currency of a country

A virtual currency such as bitcoin

A commodity money is an item used as a medium of exchange that has value indepenent of its use for money. Fiat money is a medium of exchange that does not an inherent value outside its use as money.

6 - Fiat vs Commodity money

What is a medium of exchange that does not have an inherent value outside its use to facilitate exchange of goods, services, and fianancial assets.

Commodity money

A commodity money is an item used as a medium of exchange that has value indepenent of its use for money. Fiat money is a medium of exchange that does not an inherent value outside its use as money.

7 - M1 money supply

Which of the following is included in the M1 money supply?

Balances in checking accounts at commercial banks

Balances in time deposits, such as Certificates of Deposits (CDs)

M1 money supply includes currency and demand deposits including deposits in checking and savings accounts

7 - M1 money supply

Which of the following is *not* included in the M1 money supply?

Savings account balances

Checking account balances

Physical currency such as coins and paper bills

Balances in time deposits, such as Certificates of Deposits (CDs)

M1 money supply includes currency and demand deposits including deposits in checking and savings accounts.

7 - M1 money supply

What measure of money supply includes currency and demand deposits including deposits in checking and savings accounts?

M1 Money Supply

M2 Money Supply

M3 Money Supply

M4 Money Supply

M1 money supply includes currency and demand deposits including deposits in checking and savings accounts.

8 - M2 money supply

Which of the following is included in the M2 money supply, but *not* M1 money supply?

Balances in time deposits, such as Certificates of Deposits (CDs)

Savings account deposits

Physical currency such as coins and paper bills

M2 contains everything in M1 plus time deposits such as Certificates of Deposits (CDs).

8 - M2 money supply

Which of the following is *not* included in the M2 money supply?

Savings account balances

Checking account balances

Virtual currencies such as bitcoin

Balances in time deposits, such as Certificates of Deposits (CDs)

M1 money supply includes currency and demand deposits including deposits in checking and savings accounts. M2 contains everything in M1 plus time deposits such as Certificates of Deposits (CDs).

8 - M2 money supply

What distinguishes M1 money supply from M2 money supply

M1 money can be used as an immediate means of payment and M2 can be converted to a means of payment.

M1 money supply includes all of M2 plus other items

M2 money supply includes stocks and bonds and M1 does not

Nothing. They are the same thing.

M1 money supply includes currency and demand deposits including deposits in checking and savings accounts. M2 contains everything in M1 plus time deposits such as Certificates of Deposits (CDs).

Which of the following must be true for a currency to be legal tender?

The government accepts the currency for taxes and payments paid to the government

Individuals and businesses are obligated to accept the currency for all debts, public and private.

The government backs the currency with something of value, such as silver or gold.

The currency must serve as a store of value.

Legal tender implies that the government recognizes, but does not require, the currency to be generally acceptable for all payments. The government also accepts the currency for taxes and payments paid to the government.

Which of the following is true for a currency to be legal tender?

The government recognizes, but does not necessarily require, that the currency to be generally acceptable between individuals, businesses, and government organizations, for all payments.

The currency is a fiat currency

The currency can serve as a unit of account

The currency cannot be a digital currency, such as Bitcoin.

Legal tender implies that the government recognizes, but does not require, the currency to be generally acceptable for all payments. The government also accepts the currency for taxes and payments paid to the government. There are two countries in the world that recognize Bitcoin as a legal tender.

10 - Money function

What function does money serve that is not well served by bartering for goods and services?

Money provides a unit of account, a way of measuring unique values and prices for each good or service.

Money increases transaction costs that can make banks and financial intermediaries profitable.

Only money can be legally used to trade goods and services between people.

Money can be used for borrowing, but bartering with goods and services cannot.

Money is unique in that it provides a common unit of account, a way of measuring unique values and prices for each good or service.

10 - Money function

What function does money serve that is not well served by bartering for goods and services?

Money reduces transaction costs for exchange, reducing the burden of cost and time to find sellers that are also interested in buying or goods or services.

Money can be used for legal trading, where bartering is typically not legal.

Money can be used for securitization, making items of value tradeable.

Money increases in value, but goods bartered between traders does not.

Money reduces transaction costs for exchange, reducing the burden of cost and time to find sellers that are also interested in buying or goods or services.