Understanding the Financial System Quiz

What is the primary role of financial institutions?

• To provide insurance services

• To mobilize savings and allocate them efficiently

• To regulate the stock market

• To create financial instruments

Which of the following is an example of a financial market?

• Mutual funds

• Stock and bond markets

• Insurance companies

• Banks

What do financial instruments represent?

• Loans

• Insurance policies

• Claims on future cash flows

• Savings accounts

Which entity connects savers and borrowers indirectly?

• Banks

• Financial markets

• Financial intermediaries

• Regulatory bodies

What is the function of regulatory bodies in a financial system?

• To provide loans

• To manage risks

• To ensure transparency and protection for stakeholders

• To create financial instruments

What is the fundamental medium of exchange in a financial system?

• Bonds

• Money and credit

• Stocks

• Insurance

How does a financial system facilitate fund transfer?

• By creating new financial instruments

• By transferring funds from surplus to deficit sectors

• By regulating interest rates

• By ensuring liquidity in markets

What is one of the key functions of a financial system related to savings?

• Promoting resource allocation

• Facilitating capital transfer

• Encouraging the accumulation of savings

• Encouraging spending

Which of the following is a tool for managing financial risks?

• Savings accounts

• Bonds

• Derivatives

• Stocks

What does liquidity in a financial system ensure?

• High interest rates

• Seamless payment transactions

• Increased savings

• Reduced borrowing