11 Questions
What type of financial institution offers banking and other financial services as a cooperative to its members?
Building society
Which financial institution type is owned and operated by its members?
Credit union
What is a loan that is borrowed with an asset pledged as collateral called?
Secured loan
Which financial institution provides services like checking and savings accounts, loans, and credit cards to its members?
Credit union
What type of bank typically focuses on activities like underwriting new debt and equity securities, providing advisory services, and facilitating mergers and acquisitions?
Investment bank
What is the primary function of an economic institution?
To provide intermediary services for financial transactions
Which of the following is NOT a type of economic institution mentioned in the text?
Regulatory institutions
What is the primary characteristic of credit as described in the text?
It is an agreement to receive something of value now and repay later
What is the primary purpose of insurance as described in the text?
To provide financial protection against losses
Which of the following statements about thrifts is TRUE according to the text?
Thrifts specialize in offering savings accounts and home mortgages
What is the primary function of a bank as described in the text?
To receive deposits and make loans
Study Notes
Types of Banks
- Retail banks, commercial banks, internet banks, and investment banks are different types of banks.
- Building societies operate as cooperatives, offering banking and financial services, especially mortgage lending, to their members.
- Credit unions are owned and operated by their members, providing financial services like checking and savings accounts, loans, and credit cards.
Loans
- A loan is a sum of money borrowed with interest, which can be secured or unsecured.
- Loans can be used for various purposes, such as buying a car, paying for education, or starting a business.
Economic Institutions
- There are three major types of economic institutions: depository institutions, contractual institutions, and investment institutions.
- Economic institutions act as intermediaries for financial transactions.
Credit and Insurance
- Credit is a contractual agreement where a borrower receives something of value now and agrees to repay the lender with interest at a later date.
- Credit also refers to an individual's or company's creditworthiness or credit history.
- Insurance is a contract that provides financial protection or reimbursement against losses, with the insurance company pooling clients' risks to make payments more affordable.
Thrifts
- Thrifts are financial institutions that specialize in offering savings accounts and originating home mortgages for consumers.
- Thrifts are also known as Savings and Loan Associations (S&Ls).
- They differ from commercial banks, offering higher yields on savings accounts and limited lending services to businesses.
Bank
- A bank is a licensed financial institution that receives deposits and makes loans.
- Banks may also provide financial services such as wealth management, currency exchange, and safe deposit boxes.
This quiz covers the concepts related to economic institutions such as depository, contractual, and investment institutions, as well as the concept of credit agreements with lenders. Test your understanding of economic structures and credit processes with this quiz.
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