Banks, money, housing, and financial assets

Commercial banks are firms that provide financial services including both short-term financial investment opportunities (interest on savings accounts for example) and long-term loans (mortgages for home purchases).

• True

• False

What is the function of commercial bank?

• To promote monetary stability and a sound financial structure;

• A firm that creates money (bank money) in the form of bank deposits in the process of supplying credit.

• To make and receive payments

• To influence the credit situation to the advantage of the country.

What are the functions of Central Bank?

• Sets the policy interest rate, which applies to banks that borrow base money from each other, and from the central bank. Also the central regulator.

• To act as a banker and financial adviser to the Government;

• To promote monetary stability and a sound financial structure;

• To maximize profits

WHat are the functions of money?

• A unit of account

• A medium of exchange

• A store of value

• Tool for standard of deferred payment.

Which of the following statements about money are correct?

• Money allows purchasing power to be transferred between consumers.

• In economics, money refers to the coins and notes in circulation.

• If I can exchange my apples for your oranges, then apples can be classified as money.

• Banks must exist for money to do its work.

What are the reasons people buy assets?

• Medium of exchange.

• To benefit from owning it

• To be able to sell it later

Corporate bonds are issuedby legal authorities

• True

• False

Which are the CORRECT for stocks?

• A claim on a part of assets of a firm, and hence on its profits.

• Stocks offer no specific promised stream of payments, and the time period over which payments will be made is not fixed.

• Tool for standard of deferred payment.

• Firms expected to generate greater net earnings will have higher valuations = higher share price.

Which of the following statements are correct?

• The net worth of a bank belongs to its employees.

• A bank is insolvent if the value of its liabilities exceeds the value of its assets.

• The more a bank holds in cash and reserves, the higher its profits.

• A loan is secured if it is default-free.