1.Briefly define each of the five key financial assets. Is every financial asset also a financial security? Is it possible that what a saver would consider a financial asset a borrower would consider a financial liability? 2.What is the difference between direct finance and indirect finance? Which involves financial intermediaries, and which involves financial markets? 3.In 2009, Dole Food Company, which markets fresh fruits and vegetables, moved from being a private company to becoming a public company by conducting an initial public offering (IPO). Were investors who bought stock in this IPO doing so in the primary market or in the secondary market? 4.Briefly explain why the financial system is one of the most highly regulated sectors of the economy. 5.What is the Federal Reserve? Who appoints the members of the Federal Reserve’s Board of Governors? How do the Fed’s current responsi- bilities compare with its responsibilities when it was first created by Congress? 6. Briefly describe the three key services that the financial system provides to savers. 7. What is specialization? How does it improve an economy’s standard of living? 8. What are the costs of a barter system?
9. What are transactions costs? How does using money affect the level of transactions costs in an economy? 10. What makes a dollar bill money? What makes a personal check money? What factors, if changed, would affect your willingness to accept a dollar bill or a check as money? 11. What are the four main functions of money? Describe each function. 12. Is the store-of-value function unique to money? If not, give some other examples of stores of value. Must money be a store of value to serve its func- tion as a medium of exchange? Why or why not? 13. What is commodity money? How does it differ from fiat money? 14. What is a payments system? If there were a decrease in the efficiency of the payments system, what would be the cost to the economy? 15. Why did governments begin issuing...
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