Financial System Quiz

What is one of the six parts of the financial system?

• Personal budgeting

• Credit scoring

• Financial instruments

• Corporate strategy

Which of the following is a core principle of money and banking?

• Prices are always fixed

• Information is irrelevant

• Time has value

• Inflation improves welfare

What role do central banks play in the financial system?

• They manage private bank profitability

• They regulate international trade

• They stabilize the economy and monitor financial institutions

• They issue credit ratings

According to the core principles, why must risk be compensated?

• To ensure asset liquidity

• To attract lenders and investors

• To equalize income

• To increase regulation

A stable economy improves welfare because:

• It increases taxes

• It reduces government spending

• It reduces uncertainty and improves decision-making

• It lowers wages

Which of the following is NOT a function of money?

• Store of value

• Unit of account

• Medium of exchange

• Risk transfer

What is the main disadvantage of using barter instead of money?

• Too much currency in circulation

• Price inflation

• Requires a double coincidence of wants

• Government intervention

Which payment method initiates a series of transactions instead of being final?

• Cash

• Debit card

• Check

• E-money

Which of the following best describes a fiat currency?

• Backed by gold reserves

• Has intrinsic value

• Has value by government decree

• Issued by private banks

The liquidity of an asset refers to:

• Its riskiness

• Its ability to be converted into a means of payment

• Its inflation-adjusted return

• Its tax treatment