02-Australia's Financial System and Economic Environment Quiz

What are the primary functions of a financial system?

• Ensure savings are used for productive purposes

• All of the above

• Provide an effective and certain payments mechanism

• Facilitate the transfer of funds and financial assets between savers and borrowers

What are the four component parts of the financial system?

• Household financial activity, financial markets, financial services industry personnel, regulatory control of the financial services industry

• Government financial activity, financial services providers, financial markets, regulatory control of the financial services industry

• Household financial activity, financial services providers, financial services industry personnel, regulatory control of the financial services industry

• Household financial activity, financial services providers, financial markets, financial services industry personnel

What are the five types of financial activity conducted by households?

• Spending, borrowing, insuring, saving, earning

• Spending, borrowing, insuring, earning, investing

• Spending, lending, insuring, saving, investing

• Spending, borrowing, insuring, saving, investing

What is the purpose of insurance?

• To accumulate funds for future purchases

• To transfer risk from the insured to an insurer

• To provide a source of money for use in emergencies

• To balance risk, liquidity, and returns

What is the main characteristic of long-term savings plans?

• They are used to fund larger purchases such as education and travel

• They are non-cancellable by the policy issuer

• They rely heavily on superannuation

• They are normally for a period of less than three years

What are the two financial benefits of any investment?

• Liquidity and risk management

• Savings and capital preservation

• Spending and borrowing

• Income and capital growth

What are the short-term investment needs typically used for?

• To accumulate a certain sum of money within a relatively short period of time

• To accumulate funds for retirement

• To maximise the growth of a single investment over a period of less than three years

• To fund larger purchases such as education and travel

What is the most effective period for investing?

• Medium periods where the investor has time to ride out the volatility in financial markets

• Short periods where the market is less volatile

• Long periods where compound interest can work its magic

• Any period as long as the investor is disciplined

What are the investments that cater for medium-term investment needs?

• Shares, managed investments, property

• Superannuation, investment property, managed investments

• Shares, investment property, superannuation

• Savings accounts, term deposits, cash management trusts

What is the main characteristic of long-term investment needs?

• They are most effective over long periods where compound interest can work its magic

• They are used to fund larger purchases such as education and travel

• They are typically for a period of less than three years

• They rely heavily on superannuation