Question: Which of the following are the six parts of the financial system?

Answer: Money, financial instruments, financial markets, financial institutions, regulatory agencies, central banks, Federal Reserve System

Question: The purpose of central banks is:

Answer: to control the availability of money and credit to ensure low inflation, high growth, and the stability of the financial system.

Question: Banks:

Answer: evolved from vaults storing valuables to places where an assortment of financial products can be purchased.

Question: Which of the following statements best describes the Federal Reserve?

Answer: The Federal Reserve is the central bank of the United States.

Question: A bank requiring a higher interest rate on an automobile loan than on a home mortgage loan is demonstrating the core principle that says:

Answer: Risk requires compensation

Question: The following is an example of the core principle “Information is the basis for decisions”:

Answer: Lenders require credit scores on individuals who want to take out loans.

Question: The central organizing mechanism of the U.S. economy is:

Answer: the federal reserve

Question: Markets are sources of information because they:

Answer: signal what is valuable and what is not by determining prices and allocating resources.

Question: Which of the following statements is true when thinking about the core principle “Stability improves welfare”

Answer: Government intervention is needed to reduce some risks which improves stability.

Question: Cash only sales at a store:

Answer: increase the uncertainty of selling.