Finance-Money Chapter 1

Arrange the order of the birth of money:

1. Checks, 2. CBDC, 3. Commodity money, 4. Fiat Money, 5. e-Money

• a. 3 - 1 - 2 - 5 - 4 

• b. 3 - 4 - 1 - 5 – 2

• c. 3 - 5 - 1 - 2 – 4

• d. 3 - 2 - 1 - 5 - 4

1.  In which of the following transactions does money perform the function of exchange?

• a. Transfer money via bank account

• b. Buy at the supermarket

• c. Withdraw money from ATMs

• d. All 3 answers above

Financial markets are markets in which funds are transferred

from those who have … funds to those who have a ….

• a. Excess; Shortage

• b. Shortage; Excess

• c. Buyer; Seller

• d. Seller; Buyer

Which of the following can be described as direct finance?

• a. You take out a mortgage from your local bank. 

• b. You borrow $2500 from a friend. 

• c. You buy shares of common stock in the secondary market.

• d. You buy shares in a mutual fund.

1. Financial systems can be classified into:

• a. Bank-based financial system and insured financial system

• b. Market-based financial system and non-market-based financial system

• c. Market-based financial system and bank-based financial system

• d. Legal financial system and illegal financial system

Typically, borrowers have superior information relative to lenders about

the potential returns and risks associated with an investment project.

The difference in information is called

• a. moral selection 

• b. risk sharing 

• c. asymmetric information 

• d. adverse hazard

The problem created by asymmetric information before the transaction occurs is called ________, while the problem created after the transaction occurs is called ________.

• a. adverse selection; moral hazard

• b. moral hazard; adverse selection

• c. costly state verification;

  free-riding 

• d. free-riding; costly state verification

 Which of the following is a depository institution?

• a. a life insurance company

• b. a credit union

• c. a pension fund 

• d. a investment bank