CSULB - FIN 300: Ch. 2 questions with answers graded A+

CSULB - FIN 300: Ch. 2Financial System - correct answer Network of savers, investors, and financial institutions working together to transfer savings for investment uses. Purpose of Financial System - correct answer To bring together individuals, businesses, and government entities (surplus economic units and deficit economic units) that generate and spend funds. Financial intermediaries facilitate the flow of funds in the market. Funds - correct answer Assets in the form of money. They are exchanged for securities in the financial markets. Securities - correct answer Documents that represent the right to receive funds in the future. Surplus Economic Units - correct answer Generates more money than it spends, and thus has excess money to save or invest. Households are the most common because they often delay consumption. Deficit Economic Units - correct answer Spends more money than it generates and must therefore balance its money receipts with money expenditures by obtaining money from surplus units. Business or firms are the most common because they often need funds for their operations. Financial Markets - correct answer Markets where financial securities, such as stocks and bonds, are bought and sold. Examples are: 1) Money Market 2) Capital Market Money Market - correct answer A segment of the financial market in which financial instruments with high liquidity (treasury bills, certificates of deposits, commercial paper, and bankers' acceptance) and very short maturities (30 days - 1 year) are traded.