1. Real assets are created by:

A. Government intervention.

B. Borrowing and lending.

C. Real economic activity, such as the construction of a house.

D. The agreement by individuals to exchange financial assets for financial liabilities.

2. Which of the following statements about the financial and real sectors is true?

A. For every financial asset there is a real asset.

B. For every real asset there is a financial asset.

C. For every financial transaction there is a real transaction.

D. For every real transaction there is a financial transaction.

3. without a financial sector

A. borrowing and lending would not occur.

B. borrowing and lending would be much more difficult.

C. saving and investment would increase.

D. economic activity would continue as before.

4. If the financial sector causes more to flow into spending than is saved, most likely:

A. the supply of real assets will exceed the demand for real assets.

B. there will be too many real assets produced.

C. the economy will experience inflation.

D. the economy will experience recession.

5. Flows that do not enter the spending stream enter the financial sector in the form of:

A. Saving.

B. Investment.

C. Real assets.

D. Expenditures.

6. The funds acquired from the sale of a financial asset:

A. Cannot re-enter the spending stream.

B. May re-enter the spending stream as a financial liability.

C. May re-enter the spending stream as a financial asset.

D. May re-enter the spending stream as consumption and borrowing.