Q.1. Define Money?

An officially-issued legal tender generally consisting of currency and coin, kno

wn as Fait money.
Money has three functions in the economy:
Medium of exchange
Unit of account
Store of value
Q.2. Explain the functions of a financial system.
Financial institutions serve as intermediaries by channeling the savings of indi
viduals, business, and governments into loans and investments.
The primary suppliers of funds to financial institutions are individuals;
The primary demanders of funds are firms and governments
Q.3. Categorize the main types of financial institutions.
The major financial institutions are the:
commercial banks and other savings institutions,
mutual funds,
securities firms,
insurance companies,
and pension funds.
Q.4. How the bank act as an intermediaries between the savers(surplus unit) and
borrowers(deficit unit).
Individuals deposit funds at commercial banks, which use the deposited funds to
provide commercial loans to firms and personal loans to individuals, and purchas
e debt securities issued by firms or government agencies.
Commercial banks act as intermediaries by consolidating small deposits of indivi
duals into large loans for firms,
Q.1. A ______ is the largest financial intermediary handling individual savings.
It receives premium payments that are placed in loans or investments to accumul
ate funds to cover future benefits.
A.
B.
C.
D.

Life insurance company

Commercial bank
Savings bank
Credit union

Answer A
Q.2. Most businesses raise money by selling their securities in
A.
B.
C.
D.

a
a
a
a

direct placement.
stock exchange.
public offering.
private placement

Answer C
Q.3. Which of the following is not a service provided by financial institutions?
A.
B.
C.
D.

Buying the businesses of customers

Investing customers savings in stocks and bonds
Paying savers interest on deposited funds
Lending money to customers

Answer A