5 Questions
Which function of money encourages specialization in the production of goods and services?
Medium of exchange
According to the liquidity premium theory, what is the key assumption about bonds of different maturities?
They are perfect substitutes
Which monetary asset is likely to be the least liquid?
Funds held as certificate of deposits
Which of the following is NOT a financial intermediary?
A government treasury
What determines the amount of dividends paid to stock owners?
The company's performance
Study Notes
Functions of Money
- The medium of exchange function of money encourages specialization in the production of goods and services.
Liquidity Premium Theory
- The key assumption of the liquidity premium theory is that bonds of different maturities have different yields due to differences in liquidity.
Monetary Assets
- Currency is likely to be the least liquid monetary asset.
Financial Intermediaries
- The following are financial intermediaries: banks, thrifts, life insurance companies, pension funds, and mutual funds.
Dividend Payments
- The amount of dividends paid to stock owners is determined by the board of directors of a corporation.
Test your knowledge of the financial system and money functions with this quiz. Explore the link to study for your final exam and enhance your understanding of money transfer, financial securities, and the role of money in encouraging specialization in production.
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