Question 1 (1 point)

The four elements of a financial system are (1) institutionsincluding banks and non-financial entities like households, 2)financial products, (3) venues where financial products can beexchanged and (4) ___________.

Question 2 (1 point)

For the past 65 years, the U.S. financial system has beencharacterized by,

Question 2 options:

a)	Households that are surplus units, a government that is asurplus unit, businesses that are deficit units and a foreignsector is a surplus units.

b)	Households that are deficit units, the government that is adeficit unit, businesses that are deficit units and the foreignsector that is a very large surplus unit.

c)	Households that are surplus units, businesses that are surplusunits, the government that is a deficit unit, and the foreignsector that is a surplus unit.

d)	Households that are surplus units, businesses that are surplusunits, the government that is a deficit unit and the foreign sectorthat is a surplus unit.

e)	Households that are surplus units, the government that is adeficit unit, businesses that are deficit units, and the foreignsector which has been a surplus unit.

Question 3 (1 point)

The best way to describe the financial system is enumerate theways

Question 3 options:

a)	households save money.

b)	money flows from surplus units to deficit units throughintermediaries and direct markets.

c)	money flows from deficit units to surplus units throughintermediaries and direct markets.

d)	corporations gather funds.

e)	households and firms and firms are interconnectedfinancially.

Question 4 (1 point)

Intermediaries play the most significant role in moving fundsfrom deficit units to surplus units except  whenthe deficit units,

Question 4 options:

	are large and report their financial condition publicly.
	are less transparent and there is a benefit to hard-to-gatherinformation,
	are more opaque so that non-public information is more importantfor risk assessment.
	are small so the relative costs of gathering information aboutthem are relatively large,
	are complex and analytical skills are required for understandingthe deficit unit.

Question 5 (1 point)

The more opaque a claim,

Question 5 options:

A)	The more likely it will be trading in an exchange as opposed tothe OTC.

B)	The more liquid it will be.

C)	The greater the amount of information that is available aboutit.

D)	The more likely that it will be trading in the direct market asopposed to the indirect market.

E)	The greater the chance that it will be held by an intermediaryas opposed to a surplus unit.

Question 6 (1 point)

As money moves through the financial system there is acounter-flow that moves in the opposite direction. The best way todecribe the counter flow is,

Question 6 options:

A)	The flow of claims.

B)	The flow of stocks.

C)	The flow of credit instruments.

D)	The flow of bonds.

Question 7 (1 point)

Intermediaries

Question 7 options:

A)	Make markets by providing a venue where securities can beexchanged for money.

B)	Include banks, insurance companies and securities exchanges likethe New York Stock exchange.

C)	Write claims against themselves so they can buy claims on otherentities.

D)	Make markets by stating a price at which they will purchase asecurities and a price at which they will sell it.

E)	Are a venue where the highest bidder and the person with thelowest ask have the first opportunity to transact business.

Question 8 (1 point)

The more transparent a claim,

Question 8 options:

A)	The greater the risk associated with owning it.

B)	The more likely it will be purchased by an intermediary asopposed directly by an investor.

C)	The more likely it will be held by a private equity firm or aventure capital firm.

D)	The more likely there will be an illiquid market for it.

E)	The more likely it will be traded in the direct markets.

Question 9 (1 point)

A small bio-engineering company specializes in using stem cellsto build neurological interfaces with advanced prostheses. This isa small company and there are few people who understand itsbusiness. The owners of the firm would like to raise capital inorder to undertake genetically altered stem cell research. Thecompany is most likely to raise capital. . .

Question 9 options:

A)	by issuing shares or bonds on one of the exchanges.

B)	by issuing shares or bonds in one of the over-the-countermarkets.

C)	by borrowing from a depository institution.

D)	by borrowing from a contractual intermediary

E)	by borrowing from or raising equity capital from an investmentintermediary.

F)	by borrowing from or raising equity capital from a privateequity intermediary, venture capital firm, or angel capitalfirm.

Question 10 (1 point)

Of all the intermediaries below, the one that generates the mostliquid claims is

Question 10 options:

A)	A Commercial Bank.

B)	Life Insurance Company.

C)	Mutual Fund.

D)	Hedge fund.

E)	Special Investment Vehicles.

Question 11 (1 point)

When a money market mutual fund and a finance company combine toplay the role of a depository intermediary,

Question 11 options:

A)	The claim on the mutual fund is called 'equity' and is held bythe finance company.

B)	The claim on the finance company is called 'commercial paper'and is held by the household.

C)	The claim on the household is called 'equity' and is held bythe money market mutual fund.

D)	The claim on the borrower is called a 'loan' and is held by themoney market mutual fund.

E)	The claim on the finance company is called 'commercial paper'and is held by the money market mutual fund.

Question 12 (1 point)

The claim on money market funds is usually held by financecompanies and other companies that need short term financing.

Question 12 options:

A)

True

B)

False

Question 13 (1 point)

Holding claims on money market funds are one way that householdscan earn interest and preserve liquidity.

Question 13 options:

A)

True

B)

False