Chapter 10 Financial Markets Review

What is the vital function of financial markets?

• They regulate interest rates for loans.
• They provide insurance for investments.
• They create job opportunities for the unemployed.
• They transfer funds from savers to borrowers.

Who are two depository Institutions?

• Commercial banks

• Credit Unions

• Investment banks

• Securities brokers

Which is the most common type of depository institution?

• Credit unions
• Investment banks
• Savings and loan associations
• Commercial banks

What is the major focus of Savings and Loan associations?

• Accepting deposits and using them to make mortgage loans.
• Offering checking accounts with high interest rates.
• Providing personal loans without collateral.
• Investing in stocks and bonds.

What are three examples of nondepository Financial Institutions?

• Institutional investors

• Securities brokers

• Commercial Banks

• Investment banks

Who are the two of the largest institutional investors?

• BlackRock

• Vanguard Group

• Charles Schwab

• Robinhood

What did the Federal Reserve Act of 1913 create and what was its purpose?

• The Federal Reserve System (The Fed) to serve as the central bank in the United States.
• The Federal Reserve Act of 1913 established the Federal Trade Commission.
• The Federal Reserve Act of 1913 created the Securities and Exchange Commission.
• The Federal Reserve Act of 1913 abolished the gold standard.

What did the Banking Act of 1933 (Glass-Steagall Act) establish?

• It established the SEC to regulate stock markets.
• It created the Federal Reserve System.
• It abolished all bank regulations.
• It established the FDIC, which ensures depositors when a bank fails.

What did the Securities Exchange Act of 1934 create and what was its purpose?

• The Securities Exchange Act of 1934 abolished the SEC to reduce market oversight.
• The Securities Exchange Act of 1934 created the Federal Reserve to manage interest rates.
• The Securities Exchange Act of 1934 established the Commodity Futures Trading Commission (CFTC) for agricultural markets.
• The Securities Exchange Act of 1934 created the Securities and Exchange Commission (SEC) to oversee the securities market.

What is insider trading?

• The practice of using inside information to profit unfairly from trading in a company’s securities.
• The act of buying and selling securities without any inside knowledge.

• A method of investing in stocks without any prior knowledge.
• The legal practice of trading based on public information.