1. A firm that is on the verge of bankruptcy may be able to issue bonds, but?
a) no one will buy them.
b) they will have to offer a higher interest rate to do so.
c) they will have to pay the same interest rate as other firms.
d) it will cause them to enter bankruptcy.

2. A bank requiring a higher interest rate on an automobile loan than on a home mortgage loan is demonstrating the core principle that says?
a) “Time has value.”
b) “Markets determine prices and allocate resources.”
c) “Risk requires compensation.”
d) “Information is the basis for decisions.”

3. Direct exchange of goods against goods is called?
a) Charter
b) Money
c) Barter
d) None of these

4. Which bank is called lender of last resort?
a) Commercial bank
b) Agricultural bank
c) Industrial bank
d) Central bank

5. For which function, money is accepted as unit of account?
a) Measure of value
b) Medium of exchange
c) Standard of deferred payment
d) Store of value

6. The purpose of central banks is?
a) to ensure the stability of the financial system.
b) to control the availability of money and credit to ensure low inflation, high growth, and the stability of the financial system.
c) only to ensure that the economy sees high growth.
d) only to control the availability of money and to ensure low inflation.

7. Money?
a) only consists of paper currency.
b) is used only to pay for purchases.
c) was once primarily gold and silver coins but has evolved to electronic funds transfers.
d) can only be obtained from a teller at a bank.

7. The New York Stock Exchange is a(n)?
a) financial instrument.
b) financial market.
c) central bank.
d) regulatory agency.

8. Banks?
a) evolved from vaults storing valuables to places where an assortment of financial products can be purchased.
b) are financial markets.
c) provide only savings accounts and checkable deposits.
d) make only mortgage loans.

9. Which type of deposits gives highest rate of interest?
a) Current deposit
b) Fixed deposit
c) Recurring deposit
d) None of these

10. Which of the following are the six parts of the financial system?
a) Financial instruments, credit cards, financial instruments, regulatory agencies, central banks, Federal Reserve System
b) Financial instruments, money, financial instruments, the Security and Exchange Commission, central banks, Federal Reserve System
c) Money, financial instruments, financial markets, financial institutions, regulatory agencies, central banks, Federal Reserve System
d) Money, financial instruments, financial markets, banks, regulatory agencies, central banks, Federal Reserve System