chapter 2

1) Distinguish between direct financing and indirect financing.

2) Distinguish between primary markets and secondary markets.

3) Distinguish between money markets and capital markets.

4) Why is it so important for an economy to have fully developed financial markets?

5) Why are financial intermediaries so important to an economy?

6) Describe how over-the-counter markets work.

7) What are adverse selection and moral hazard?

8) Why can a financial intermediary's risk-sharing activities be described as asset transformation?

9) Discuss the differences between depository institutions, contractual savings institutions, and investment intermediaries.

10) What are some of the differences between an organized exchange and an over-the-counter market?