Unit 2: CFA 3 (Standard 3)

What is the primary function of the financial system in an economy?

• To print money for the government

• To channel funds from savers to investors

• To set interest rates for all banks

• To collect taxes from citizens

Tags

GA.SS.12.SSEPF3

Which of the following best describes an investor in the context of the financial system?

• Someone who spends all their income

• Someone who borrows funds to start or expand a business

• Someone who only saves money in a piggy bank

• Someone who works at a bank

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GA.SS.12.SSEPF3

Which financial instrument is commonly used by savers to lend money to investors?

• Bonds

• Coupons

• Receipts

• Invoices

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GA.SS.12.SSEPF3

How do banks help channel funds from savers to investors?

• By storing money in vaults

• By lending deposited funds to borrowers

• By printing new currency

• By selling groceries

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GA.SS.12.SSEPF3

Which of the following scenarios best illustrates the flow of funds from savers to investors?

• A person buys groceries from a store

• A bank uses customer deposits to provide a loan to a business

• A company pays its employees

• A government collects taxes

Tags

GA.SS.12.SSEPF3

Why do investors need funds from savers in the financial system?

• To pay taxes

• To finance new projects or expand businesses

• To store money safely

• To avoid paying interest

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GA.SS.12.SSEPF3

A company wants to build a new factory but lacks the necessary funds. Which part of the financial system would most likely help the company obtain the needed capital?

• The postal service

• The stock market

• The local grocery store

• The transportation department

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GA.SS.12.SSEPF3

Which of the following best explains why interest rates are important in the process of channeling funds from savers to investors?

• They determine the color of currency

• They provide an incentive for savers to deposit money and for investors to borrow funds

• They are set by grocery stores

• They are only used for international trade

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GA.SS.12.SSEPF3

Analyze the potential impact on the economy if the financial system fails to channel funds efficiently from savers to investors.

• Economic growth may slow down due to lack of investment

• All savers will become wealthy

• The government will collect more taxes

• There will be no effect on businesses

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GA.SS.12.SSEPF3

Suppose interest rates rise significantly. Predict how this change might influence the behavior of savers and investors in the financial system.

• Savers may be more likely to save, while investors may borrow less due to higher costs

• Both savers and investors will ignore interest rates

• Investors will borrow more money

• Savers will withdraw all their funds

Tags

GA.SS.12.SSEPF3