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1. Most financial decisions involve two related elements:
a.
advice and consent.
b.
investment and taxes.
c.
time and risk.
d.
saving and consumption.
2. The field of finance primarily studies
a.
how society manages its scarce resources.
b.
the implications of time and risk for allocating resources over time.
c.
firms’ decisions concerning how much to produce and what price to charge.
d.
how society can reduce market risk.
3. The financial system
a.
involves bank accounts, mortgages, stock prices, and many other items.
b.
involves decisions and actions undertaken by people at a point in time that affect their lives in the future.
c.
coordinates the economy’s saving and investment.
d.
All of the above are correct.
4. Which of the following statements best describes the economist’s view of finance and the financial system?
a.
The financial system is very important to the functioning of the economy, and the tools of finance are often
helpful to us as individuals when we find ourselves making certain decisions.
b.
The financial system, while interesting, is not very important to the functioning of the economy; however, the
tools of finance are often helpful to us as individuals when we find ourselves making certain decisions.
c.
The financial system is very important to the functioning of the economy; however, the tools of finance are not
particularly helpful to us as individuals since we seldom make decisions for which those tools are useful.
d.
The field of finance is intimately concerned with the financial system and the tools of finance, and financial
economists see great importance in them; however, the “mainstream” economist sees little value in studying
financial markets or the tools of finance.
