individuals to make decisions about their bodies. The ethical questions surrounding abortion, for
example, involve complex issues of personal autonomy, the right to life, and the role of the state in
regulating healthcare.The legal landscape surrounding reproductive rights continues to evolve, with
significant differences between countries, and even within different states or provinces within
countries. Legal challenges often arise when laws conflict with public health evidence or when access
to services is restricted in ways that disproportionately affect vulnerable groups.#### 13.3
**LGBTQ+ Rights and Discrimination**The rights of LGBTQ+ individuals remain a significant
social justice issue, with ethical dilemmas related to
Test Bank For
Hunt & Terry 8th Edition (Revised Multiple Choice Format)
Chapter 1: Overview of the financial system
TRUE/FALSE
1. Australia went through a process of increasing regulations on the financial system in the
1980s.
ANS: F
Deregulation in the 1980s removed many regulations on banks and financial markets and
contributed to greater efficiency in the flow of funds.
PTS: 1 DIF: Easy REF: Introduction
2. A financial crisis can be triggered when people lose ‘trust’ or confidence that their
financial dealings will be honoured.
ANS: T
This makes people reluctant to supply funds.
PTS: 1 DIF: Moderate REF: Introduction
3. According to Merton (1995), financial systems perform three functions. These are the
settlement function, the flow of funds function and the risk-transfer function.
ANS: F
Merton also includes overcoming information asymmetry, resolving incentive problems and
promoting the pooling of funds as functions of the financial system.
PTS: 1 DIF: Easy REF: 1.1 Financial functions
4. Transactions are settled by the exchange of money from the buyer to the seller.
ANS: T
Money includes cash and a variety of electronic payment methods.
, PTS: 1 DIF: Moderate REF: 1.1.1 The settlement function
5. The term ‘flow of funds’ refers to the exchange of value required to settle commercial
transactions.
ANS: F
The flow of funds is the allocation of finance from surplus to deficit units.
PTS: 1 DIF: Moderate REF: 1.1.2 The flow of funds function
6. The flow of funds is arranged directly when funds are deposited with banks, and
indirectly when funds are invested in securities.
ANS: F
The flow of funds through banks is referred to as indirect financing since the funds are lent to
banks, which in turn lend to deficit units. Direct financing occurs when funds are supplied
directly to deficit units through the sale of securities.
PTS: 1 DIF: Easy REF: 1.1.2 The flow of funds function
individuals to make decisions about their bodies. The ethical questions surrounding abortion, for
example, involve complex issues of personal autonomy, the right to life, and the role of the state in
regulating healthcare.The legal landscape surrounding reproductive rights continues to evolve, with
significant differences between countries, and even within different states or provinces within
countries. Legal challenges often arise when laws conflict with public health evidence or when access
to services is restricted in ways that disproportionately affect vulnerable groups.#### 13.3
**LGBTQ+ Rights and Discrimination**The rights of LGBTQ+ individuals remain a significant
social justice issue, with ethical dilemmas related to
7. Fiduciary duty is the requirement that finance professionals follow moral principles that guide
virtuous and responsible behaviour.
ANS: F
Fiduciary duty is the legal requirement that financial institutions act in the interests of their
customers.
PTS: 1 DIF: Easy REF: 1.1.4(a) Impediments to mutually-beneficial
decisions
8. Derivative contracts can be used to both increase and decrease exposure to risk.
ANS: T
We concentrate on their use in risk-reduction (‘hedging’) but derivatives can also be used for
investment/speculative purposes.
PTS: 1 DIF: Moderate REF: 1.1.3 The risk-transfer function
9. The risk that the value of bonds falls because of an unexpected increase in interest rates is
known as default risk.
, ANS: F
The chance of loss as a result of an unexpected change in a market variable (an interest rate,
exchange rate or the value of market traded asset) is market risk. Default risk is the chance of
loss resulting from a financial obligation not being met.
PTS: 1 DIF: Moderate REF: 1.1.3 The risk-transfer function
10. Information asymmetry arises where a contract distorts incentives to behave appropriately.
ANS: F
Information asymmetry arises where one party to a potential contract is better informed than
the other party.
PTS: 1 DIF: Moderate REF: 1.1.4(a) Impediments to mutually-beneficial
decisions
individuals to make decisions about their bodies. The ethical questions surrounding abortion, for
example, involve complex issues of personal autonomy, the right to life, and the role of the state in
regulating healthcare.The legal landscape surrounding reproductive rights continues to evolve, with
significant differences between countries, and even within different states or provinces within
countries. Legal challenges often arise when laws conflict with public health evidence or when access
to services is restricted in ways that disproportionately affect vulnerable groups.#### 13.3
**LGBTQ+ Rights and Discrimination**The rights of LGBTQ+ individuals remain a significant
social justice issue, with ethical dilemmas related to
11. Moral hazard problems arise in the financial system because people are fundamentally
dishonest.
ANS: F
Moral hazard refers to arrangements that create an incentive for one party to a transaction to
act in his or her own interests at the expense of the other party to whom they may owe a duty
of care.
PTS: 1 DIF: Difficult REF: 1.1.4(a) Impediments to mutually-beneficial
decisions
12. The Dodd-Frank Act was introduced to strengthen the oversight of the Australian banking
system, following the GFC.
ANS: F
The Dodd-Frank Act was introduced in the US.
PTS: 1 DIF: Easy REF: 1.1.5 Financial-system stability
13. Firms and the government are the largest sources of finance in the Australian financial system.
ANS: F
Savings by households are the largest source of finance. These funds are supplied as bank
deposits and as investments in financial assets (mostly through superannuation schemes).
PTS: 1 DIF: Difficult REF: 1.2 Fundamental finance concepts
example, involve complex issues of personal autonomy, the right to life, and the role of the state in
regulating healthcare.The legal landscape surrounding reproductive rights continues to evolve, with
significant differences between countries, and even within different states or provinces within
countries. Legal challenges often arise when laws conflict with public health evidence or when access
to services is restricted in ways that disproportionately affect vulnerable groups.#### 13.3
**LGBTQ+ Rights and Discrimination**The rights of LGBTQ+ individuals remain a significant
social justice issue, with ethical dilemmas related to
Test Bank For
Hunt & Terry 8th Edition (Revised Multiple Choice Format)
Chapter 1: Overview of the financial system
TRUE/FALSE
1. Australia went through a process of increasing regulations on the financial system in the
1980s.
ANS: F
Deregulation in the 1980s removed many regulations on banks and financial markets and
contributed to greater efficiency in the flow of funds.
PTS: 1 DIF: Easy REF: Introduction
2. A financial crisis can be triggered when people lose ‘trust’ or confidence that their
financial dealings will be honoured.
ANS: T
This makes people reluctant to supply funds.
PTS: 1 DIF: Moderate REF: Introduction
3. According to Merton (1995), financial systems perform three functions. These are the
settlement function, the flow of funds function and the risk-transfer function.
ANS: F
Merton also includes overcoming information asymmetry, resolving incentive problems and
promoting the pooling of funds as functions of the financial system.
PTS: 1 DIF: Easy REF: 1.1 Financial functions
4. Transactions are settled by the exchange of money from the buyer to the seller.
ANS: T
Money includes cash and a variety of electronic payment methods.
, PTS: 1 DIF: Moderate REF: 1.1.1 The settlement function
5. The term ‘flow of funds’ refers to the exchange of value required to settle commercial
transactions.
ANS: F
The flow of funds is the allocation of finance from surplus to deficit units.
PTS: 1 DIF: Moderate REF: 1.1.2 The flow of funds function
6. The flow of funds is arranged directly when funds are deposited with banks, and
indirectly when funds are invested in securities.
ANS: F
The flow of funds through banks is referred to as indirect financing since the funds are lent to
banks, which in turn lend to deficit units. Direct financing occurs when funds are supplied
directly to deficit units through the sale of securities.
PTS: 1 DIF: Easy REF: 1.1.2 The flow of funds function
individuals to make decisions about their bodies. The ethical questions surrounding abortion, for
example, involve complex issues of personal autonomy, the right to life, and the role of the state in
regulating healthcare.The legal landscape surrounding reproductive rights continues to evolve, with
significant differences between countries, and even within different states or provinces within
countries. Legal challenges often arise when laws conflict with public health evidence or when access
to services is restricted in ways that disproportionately affect vulnerable groups.#### 13.3
**LGBTQ+ Rights and Discrimination**The rights of LGBTQ+ individuals remain a significant
social justice issue, with ethical dilemmas related to
7. Fiduciary duty is the requirement that finance professionals follow moral principles that guide
virtuous and responsible behaviour.
ANS: F
Fiduciary duty is the legal requirement that financial institutions act in the interests of their
customers.
PTS: 1 DIF: Easy REF: 1.1.4(a) Impediments to mutually-beneficial
decisions
8. Derivative contracts can be used to both increase and decrease exposure to risk.
ANS: T
We concentrate on their use in risk-reduction (‘hedging’) but derivatives can also be used for
investment/speculative purposes.
PTS: 1 DIF: Moderate REF: 1.1.3 The risk-transfer function
9. The risk that the value of bonds falls because of an unexpected increase in interest rates is
known as default risk.
, ANS: F
The chance of loss as a result of an unexpected change in a market variable (an interest rate,
exchange rate or the value of market traded asset) is market risk. Default risk is the chance of
loss resulting from a financial obligation not being met.
PTS: 1 DIF: Moderate REF: 1.1.3 The risk-transfer function
10. Information asymmetry arises where a contract distorts incentives to behave appropriately.
ANS: F
Information asymmetry arises where one party to a potential contract is better informed than
the other party.
PTS: 1 DIF: Moderate REF: 1.1.4(a) Impediments to mutually-beneficial
decisions
individuals to make decisions about their bodies. The ethical questions surrounding abortion, for
example, involve complex issues of personal autonomy, the right to life, and the role of the state in
regulating healthcare.The legal landscape surrounding reproductive rights continues to evolve, with
significant differences between countries, and even within different states or provinces within
countries. Legal challenges often arise when laws conflict with public health evidence or when access
to services is restricted in ways that disproportionately affect vulnerable groups.#### 13.3
**LGBTQ+ Rights and Discrimination**The rights of LGBTQ+ individuals remain a significant
social justice issue, with ethical dilemmas related to
11. Moral hazard problems arise in the financial system because people are fundamentally
dishonest.
ANS: F
Moral hazard refers to arrangements that create an incentive for one party to a transaction to
act in his or her own interests at the expense of the other party to whom they may owe a duty
of care.
PTS: 1 DIF: Difficult REF: 1.1.4(a) Impediments to mutually-beneficial
decisions
12. The Dodd-Frank Act was introduced to strengthen the oversight of the Australian banking
system, following the GFC.
ANS: F
The Dodd-Frank Act was introduced in the US.
PTS: 1 DIF: Easy REF: 1.1.5 Financial-system stability
13. Firms and the government are the largest sources of finance in the Australian financial system.
ANS: F
Savings by households are the largest source of finance. These funds are supplied as bank
deposits and as investments in financial assets (mostly through superannuation schemes).
PTS: 1 DIF: Difficult REF: 1.2 Fundamental finance concepts
