Exam 2: Financial Systems, Monetary Units, and the Role of Money in the Economy

Which of the following statements about financial assets is usually not true?

Society as a whole is better off by the mere creation of financial assets and liabilities.

In describing the entire financial system, the total of all financial liabilities outstanding should equal the sum of all financial assets held.

The importance of financial intermediaries as well as their growth has been reduced in recent years by

Suppose the GDP deflator index has a base period of 100 in 1990 and by the year 2001 the deflator had an index value of 139. What was the percentage increase in this nation's price level? Suppose the deflator, instead, had dropped to 89.6 by 2001. What change in the national price level occurred?

The smallest measure of the U.S. money supply that includes large ($100,000 +) size time deposits is known as:

An increased quantity of real assets leads to:

Please explain the difference between a bank-dominated financial system and a security-dominated financial system. Why is this distinction between types of financial systems an important one?

Direct finance is the technique when borrower and lender meet each other and exchange funds for financial assets

The fact that money always has a constant price in terms of itself (i.e., a dollar always exchanges for a dollar) refers to money's role as a:

The financial system may be thought of as the mechanism through which loanable funds reach borrowers.

It is necessary for a monetary unit to have an intrinsic value as a commodity to be accepted as a medium of exchange.

In a given time period, if expenditures exceed income, then it will be necessary to

Disintermediation may reverse itself, with funds flowing back into the perceived safer instruments of financial intermediaries, a process called re-intermediation.

The essential role of financial markets is to convert savings into investments.

For the entire financial system, the total of all financial assets held must equal

Countries that are developing market-dominated financial systems include

The monetary unit, which is used for the in country currency, in China is the yen.

A marketable corporate note would be a negotiable debt instrument.

A new form of disintermediation in recent years has involved some banks and savings and loans selling off their capital by purchasing large quantities of new loans in an attempt to bolster their revenues, according to the text.