Question 1

The study of economics is most concerned with which of the following?
A)What gets produced, how it gets produced and who gets what
B)How to make a lot of money
C)Why stock prices fluctuate
D)What determines who owns the capital in society

Accepted Answer

Economics is the social science that studies how individuals, businesses, governments, and societies make decisions about how to allocate scarce resources to satisfy their unlimited wants and needs. This involves analyzing and understanding what goods and services are produced, how they are produced, and how they are distributed among members of society.

Question 2

The study of economics is least concerned with which of the following?
A)What gets produced, how it gets produced and who gets what
B)How to allocate scarce resources
C)Why stock and bond prices fluctuate
D)What determines the overall health of individual households

Accepted Answer

Economics primarily focuses on the production, distribution, and consumption of goods and services, resource allocation, and market dynamics, rather than the specific health of individual households.

Question 3

Microeconomics is most concerned with which of the following?
A)The Federal Reserve System
B)The overall price level
C)The individual decision making processes of business firms and households
D)Business cycles and unemployment

Accepted Answer

Microeconomics is concerned with studying the individual decision-making processes of businesses and households regarding the allocation of limited resources. It analyzes how these decisions affect supply and demand and the prices of goods and services in specific markets.

Question 4

Macroeconomics is most concerned with which of the following?
A)Consumer decision making
B)The level of economic activity in the aggregate economy
C)International Business Machines
D)The individual decision making processes of business firms

Accepted Answer

Macroeconomics is concerned with the overall performance of the economy, including measures such as Gross Domestic Product (GDP), inflation, employment, and aggregate demand and supply. It looks at economic activity at a national or global level, rather than individual decision making.

Question 5

The best definition of finance is that it is concerned primarily with
A)game theoretic microeconomic behavior
B)the rules of the game
C)the study of the financial or monetary aspects of the production, spending, borrowing, and lending decisions of an economy.
D)the way the "invisible hand" allocates resources in a command economy

Accepted Answer

Finance is primarily concerned with the study of financial or monetary aspects related to production, spending, borrowing, and lending decisions of an economy. It deals with how individuals, businesses, and governments allocate resources over time and therefore play a crucial role in the economy. Options A, B, and D are not accurate definitions of finance.

Question 6

What do financial regulators do?
A)promote competition and efficiency in the system
B)preserve safety and soundness
C)establish wage and price controls
D)both a and b

Accepted Answer

Financial regulators promote competition and efficiency in the system while also preserving safety and soundness. They do not establish wage and price controls.

Question 7

The removing or phasing out of regulations is referred to as
A)irregularity
B)deflation
C)deregulation
D)reregulation

Accepted Answer

Deregulation refers to the removing or phasing out of regulations.

Question 8

Which of the following is true of money?
A)it must only and always be issued by a central bank
B)it is something that is acceptable in payment
C)government must authorize its use
D)it must be a physical commodity

Accepted Answer

Money is generally defined as something that is widely accepted in payment for goods and services, making choice B the correct answer. Money can be issued by a central bank or other authorities, but it is not a requirement for it to be considered money. Government authorization may be necessary for the establishment of a legal system for using money, but it is not a requirement for something to be considered money. Finally, money does not have to be a physical commodity, as electronic forms of money, such as credit cards or digital currencies, can be widely accepted as payment.

Question 9

Which of the following is not a depository institution?
A)Insurance companies
B)Mutual savings banks
C)Savings and loan associations
D)Commercial banks

Accepted Answer

Depository institutions are financial institutions that accept deposits from customers and hold them in accounts such as checking accounts, savings accounts, and certificates of deposit. Insurance companies, while also providing financial services, do not typically accept and hold deposits from customers. Therefore, insurance companies are not classified as depository institutions.

Question 10

Which of the following is a depository institution?
A)Insurance companies
B)Finance Companies
C)Pension Plans
D)Commercial banks

Accepted Answer

Commercial banks are depository institutions where customers can deposit and withdraw their money, obtain loans, and access other financial services. Insurance companies, finance companies, and pension plans are not depository institutions.

Question 11

Saving is
A)income not spent on consumption.
B)income spent on investment goods and financial assets.
C)income invested in financial assets only.
D)None of the above.

Accepted Answer

Saving is income not spent on consumption, meaning it is income that is set aside for future use or investment. Option B is incomplete because it only mentions investment goods and financial assets, but does not include the possibility of saving without investing. Option C is too narrow in its definition of saving as only investing in financial assets.

Question 12

Consumption is
A)income not saved.
B)income spent on investment goods and financial assets.
C)income invested in financial assets only.
D)None of the above.

Accepted Answer

Consumption refers to the portion of income that is spent on goods and services for current use and is not saved. Option B refers to investment spending and option C refers to only investing in financial assets, which is not equivalent to consumption. Therefore, the correct choice is A.

Question 13

A net lender is which of the following?
A)A person or firm that spends less than the income received on consumption or investment
B)A unit of measure used by the Federal Reserve
C)Someone who gets a loan on the internet
D)Persons or firms that spend more than the income they receive

Accepted Answer

A net lender is a person or firm that spends less than the income received on consumption or investment, meaning they have money left over to lend out to others.

Question 14

If you spend more on your consumption or investment goods than the amount of your current income then you are called a
A)loanshark
B)investment expenditure
C)net borrower
D)uninformed consumer

Accepted Answer

If you spend more on your consumption or investment goods than the amount of your current income, it means you are borrowing money to finance your purchases. Therefore, C is the correct answer as it denotes a "net borrower." The other options (A, B, and D) do not accurately describe someone who spends more than their income.

Question 15

If you spend less on your consumption or investment goods than your current income allows, then you are called a
A)loanshark
B)investment expenditure
C)net borrower
D)net lender

Accepted Answer

If you spend less on your consumption or investment goods than your current income allows, you are saving rather than borrowing. This means you are a net lender.

Question 16

Financial markets are defined as situations where
A)net borrowers can lend their funds directly to net lenders.
B)net lenders can lend their funds directly to net borrowers.
C)net borrowers can lend their funds indirectly to net lenders.
D)contestable markets exist.

Accepted Answer

Financial markets facilitate the transfer of funds between net lenders (those who have surplus funds to lend) and net borrowers (those who need funds). Therefore, net lenders can lend their funds directly to net borrowers in financial markets. Option B accurately describes this relationship. Options A and C are incorrect because in financial markets, net borrowers and net lenders do not lend funds to each other directly or indirectly. Option D is also incorrect as it does not align with the definition of financial markets.

Question 17

Purchasing bonds for the expansion of a software firm would be considered
A)direct finance.
B)indirect finance.
C)bond refunding.
D)bond discounting.

Accepted Answer

Purchasing bonds directly from a software firm would be an example of direct finance, where funds are raised directly from investors rather than through a financial intermediary. Indirect finance involves raising funds through a financial intermediary, such as a bank or mutual fund. Bond refunding involves redeeming existing bonds with new bonds, typically at a lower interest rate. Bond discounting involves selling bonds at a lower price than their face value, typically due to a lack of demand for the bonds.

Question 18

Which of the following would not be considered a financial intermediary?
A)Benson's Credit Union
B)Palmyra State Bank
C)Whitewater Savings and Loan
D)a large stock brokerage firm

Accepted Answer

A financial intermediary is a financial institution that acts as a middleman between savers and borrowers, channeling funds from savers to borrowers. Stock brokerage firms do not typically perform this function and therefore are not considered financial intermediaries.

Question 19

Which of the following would be considered a financial intermediary?
A)Benson's Credit Union
B)Palmyra State Bank
C)Whitewater Savings and Loan
D)All of the above are financial intermediaries

Accepted Answer

All of the above options are financial intermediaries as they act as middlemen between savers and borrowers by accepting deposits from savers and using those funds to make loans to borrowers.

Question 20

Financial intermediaries serve as go betweens to link net lenders and net borrowers. Here the linkage between saver and borrower is one of
A)direct finance
B)indirect finance
C)refinance
D)compensatory finance

Accepted Answer

Financial intermediaries facilitate indirect finance, where they receive funds from savers and then lend them out to borrowers. This is in contrast to direct finance, where savers lend their funds directly to borrowers without an intermediary. Refinance and compensatory finance are not accurate descriptions of the role of financial intermediaries in linking net lenders and borrowers.

Quiz 1: Introduction and Overview

The study of economics is most concerned with which of the following?

The study of economics is least concerned with which of the following?

Microeconomics is most concerned with which of the following?

Macroeconomics is most concerned with which of the following?

The best definition of finance is that it is concerned primarily with

What do financial regulators do?

The removing or phasing out of regulations is referred to as

Which of the following is true of money?

Which of the following is not a depository institution?

Which of the following is a depository institution?

Saving is

Consumption is

A net lender is which of the following?

If you spend more on your consumption or investment goods than the amount of your current income then you are called a

If you spend less on your consumption or investment goods than your current income allows, then you are called a

Financial markets are defined as situations where

Purchasing bonds for the expansion of a software firm would be considered

Which of the following would not be considered a financial intermediary?

Which of the following would be considered a financial intermediary?

Financial intermediaries serve as go betweens to link net lenders and net borrowers. Here the linkage between saver and borrower is one of