Student: 1. Investing in financial instruments in today's economy: A. is an activity practiced only by the wealthy B. involves costly transactions. C. requires a relatively large sum of money to invest (more than $100,000). D. is made easier by the use of mutual funds. 2. Which of the following is an example of a financial market? A. A local coffeehouse where people regularly buy and sell financial instruments. B. A bank that only accepts deposits and issues loans. C. An electronic network used for buying and selling textbooks. D. A central bank used for raising taxes and borrowing on behalf of the government 3. The amount of information an individual would seek before making a decision: A. is about the same across all individuals. B. varies directly with the importance of the decision. C. is the same across all decisions but varies across individuals. D. depends on how much time it will take to get the information regardless of the decision. 4. Mutual funds have: A. been created for very wealthy individuals with a lot of money to invest. B. increased the risks associated with constructing a portfolio. C. reduced the costs associated with gathering information on stocks and bonds. D. increased the transactions costs associated with participating in financial markets. 5. Central banks can improve the welfare of a society by doing all of the following except: A. serving the interests of government rather than the public at large B. helping to promote economic growth. C. focusing on keeping the overall level of prices stable. D. helping to reduce the volatility of business cycles