14 Questions
What is the primary function of money in an economy?
To serve as a medium of exchange
Which institution is primarily responsible for creating money in the United States?
Federal Reserve System
What is the consequence of having too little money in an economy?
Constrained economic growth
What is the purpose of a check in a financial transaction?
To transfer money to another party
What is the advantage of using electronic funds transfers?
They can be made at automated teller machines (ATMs)
Why do individuals and businesses prefer to hold money in depository institutions?
To reduce risk
What is the primary function of financial institutions in terms of savings?
To accumulate or gather individual savings
What is the consequence of having too much money in an economy?
Increased prices of goods and services
What is one of the primary reasons people place small cash amounts into depository institutions?
For safekeeping
Who can avail loans from financial institutions?
Businesses, consumers, and governmental units
What distinguishes some financial institutions from others based on the type of loans they make?
Some make all types of loans, while others specialize
In what markets are new financial instruments and securities created and sold?
Primary securities market
What is a function of financial institutions mentioned in the text?
Lending and investing
What method do financial institutions use to attract deposits?
Advertising campaigns and promotional activities
Understand the concept of money and its significance in the economy, including its purchasing power and role as a medium of exchange.
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