Investment and Financial Intermediaries Quiz

What is the main advantage of free enterprise?

• All of the above

• Contributes to the nation's wealth

• Promotes economic growth

• Allows people to make a profit

What is the definition of investment?

• The act of redirecting resources from being consumed today

• The use of assets to earn income or profit

• All of the above

• Spend money today to earn money in the future

What is a financial system?

• The system that allows the transfer of energy

• The system that allows the transfer of information

• The system that allows the transfer of goods and services

• The system that allows the transfer of money between savers and borrowers

What is a financial intermediary?

• An institution that helps channel information from senders to receivers

• An institution that helps channel goods from producers to consumers

• An institution that helps channel energy from sources to users

• An institution that helps channel funds from savers to borrowers

What is the purpose of diversification?

• To eliminate investments to avoid risk

• To concentrate investments to increase risk

• To spread out investments to reduce risk

• To ignore investments and focus on savings

What is the return on an investment?

• The money an investor receives as dividends from a stock

• The money an investor receives above and beyond the sum of money initially invested

• The money an investor receives as the initial investment amount

• The money an investor receives as interest on a savings account

What is the risk involved in an investment?

• The potential gain of the return on investment

• The potential loss of the return on investment

• The potential gain of the initial investment

• The potential loss of the initial investment

Why are financial intermediaries important to the free enterprise system?

• They provide liquidity to investors

• They share risk among investors

• All of the above

• They provide information to investors

Which of the following is NOT an example of a financial asset?

• Credit card

• Passbooks

• Computer printouts

• Bond certificates

How does investing promote financial growth?

• Mutual funds are increased

• High risk allows more people to gain money

• Low risk allows more people to invest

• Allows more money to be used by more people