WorksheetsFinancial Economics
Total questions: 75
Worksheet time: 39mins
As all the other prices are determine in different markets, the equilibrium rate of interest is also determined by the forces of supply and demand in the financial markets.
True
False
The equilibrium rate of interest is determined by:
Demand and Supply of Funds
Savings & Investment
Supply and Demand of Money
The loanable funds theory of interest rate determination makes certain important modifications in the classical theory.
True
False
Refers to the expenditure for the purchase of making of new capital goods including inventories.
Investments
Hoarding
Dissaving
Bank Money
Liquidity also known as _________________.
how particular asset converted to cash
price you pat to borrow money
something containing economic value
asset or store of value
Precautionary demand of holding monet depends upon the degree of _____________.
uncertainty/unforseen situation
asset or store of value
day to day transaction
price you pat to borrow money
The rate of interest at which speculative demand for money become perfectly elastic is called ____________.
Liquidity Trap
Liquidity Trap Interest Rate
Liquidity Trap Rate
Liquidity Trap Interest
Relationship between interest rate and speculative demand for money is called ______________.
Liquidity Preference Curve
Liquidity Trap
Liquidity
Liquidity Trap Interest Rate
The provision of small-scale loans to the poor for example by credit unions
Microfinancing
Micro-credit
Micro-savings
Micro-insurance
Remittance management
What is the key term for when a country or NGO donates resources to another country to help it develop.
Quotas
Fairtrade
Aid
Tariffs
What is the key term for small scale financial support from banks to help the poor to set up small scale businesses?
Aid
Debt relief
Tariffs
Microfinance
What does BRICs stand for?
Belgium Russia India China South Africa
Brazil Russia Iceland China South Africa
Brazil Russia India China South Africa
Brazil Russia Indonesia China South Africa
Reach and Sustainability are the primary goals of microfinance.
True
False
The slope of the demand for loanable funds curve represents the
positive relation between the real interest rate and investment
negative relation between the real interest rate and investment
positive relation between the real interest rate and saving
negative relation between the real interest rate and saving
Other things the same, a higher interest rate induces people to
save more, so the supply of loanable funds slopes upward
save less, so the supply of loanable funds slopes downward
invest more, so the supply of loanable funds slopes upward
invest less, so the supply of loanable funds slopes downward
If the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied
there is a surplus and the interest rate is above the equilibrium level
there is a surplus and the interest rate is below the equilibrium level
there is a shortage and the interest rate is above the equilibrium level
there is a shortage and the interest rate is below the equilibrium level
The real interest rate is the
interest rate corrected for inflation
interest rate as usually reported by banks
difference between the interest rate charged by banks on the loans they make and the interest rate paid by banks to their depositors
difference between the average dividend yield on stocks and the average interest rate on bonds
If the government institutes policies that diminish incentives to save, then in the loanable funds market
the demand for loanable funds shifts rightward
the demand for loanable funds shifts leftward
the supply of loanable funds shifts rightward
the supply of loanable funds shifts leftward
Precautionary demand of holding monet depends upon the degree of _____________.
uncertainty/unforseen situation
asset or store of value
day to day transaction
price you pat to borrow money
What factor is being described as below?
If there is a high rate of inflation predicted, consumers will begin to withdraw their money from the banks to liquefy their assets and spend it on goods and services before prices rise
=> Decrease the number of loanable funds
Deficit spending
Household savings
Expectations for the Future
A financial intermediary is a middleperson between
buyers and sellers.
husbands and wives.
borrowers and lenders.
labour unions and firms.
If government spending exceeds tax collections,
there is a budget deficit.
public saving is positive.
there is a budget surplus.
private saving is positive.
If UK citizens become less concerned with the future and save less at each real interest rate,
real interest rates rise and investment falls.
real interest rates rise and investment rises.
real interest rates fall and investment rises
real interest rates fall and investment falls.
Which graph has the real interest rate on the y axis?
AD/AS Model
Money Market
Loanable Funds
Phillips Curve
Identify this graph
Money Market
PPC
Foreign Exchange Market
Loanable Funds Market
What is a Central Bank?
a national bank that provides financial and banking services for its country's government
financial institution which performs the functions of accepting deposits from the public and making loans and investments
A central bank is a financial institution that is responsible for overseeing the monetary system and policy of a nation
Who own the Central Bank
the Prime Minister
Government
Private Business Owner
Opposition Leader
Acting as a Government's bank means
All the government departments have an account at the Central Bank
All the members of parliament have an account at the Central Bank
Prime Minister has an account tat Central Bank
None of the Above
Banks control the money supply by
restricting the amount of money in circulation
lending
borrowing
printing more money
The Central Bank can print money whenever they want.
TRUE
FALSE
What are the two key functions of a central bank?
1. To maintain financial stability
2. To maintain macroeconomic stability
1. To maintain financial stability
2. To maintain microeconomic stability
1. To maintain global stability
2. To maintain macroeconomic stability
1. To meet all objectives of the country
2. To maintain macroeconomic stability
To maintain financial stability a central bank may have to provide emergency funds, though at a price, to protect depositors and in extreme cases to prevent a systemic crisis in the financial system.
What the term used to describe this?
Lender of first resort
Lender of penultimate resort
Lender of last resort
Lender of past resort
Quantitative Easing: Increasing the money supply and using these electronically created funds to buy government bonds or other securities.
Done by Central Bank
Done by commercial Bank
Done by Investment bank
None of the above
Quantitative easing is a form of
Expansionary fiscal policy
Expansionary monetary policy
Contractionary monetary policy
Contractionary fiscal policy
QE is usually used .........– when base interest rates cannot be cut any further.
Liquidity trap
Financial crisis
Recession
Boom
The aim of quantitative easing is to increase economic activity by
By selling bonds
By encouraging bank lending, investment and therefore help improve the rate of economic growth.
By decreasing the interest rate
By reducing tax rate
The aim of quantitative easing is to:
Increase bank lending leading to higher investment. This should stimulate economic growth
Decrease bank lending leading to higher investment. This should stimulate economic growth
Increase bank lending leading to higher investment. This should decrease Unemployment rate
Decrease bank lending leading to higher investment. This should stimulate more employment
Quantitative easing is also seen as a solution to deflation. Quantitative easing can help increase inflation closer to the
government’s inflation target of 6%.
government’s inflation target of 5%.
government’s inflation target of 2%.
government’s inflation target of 7%.
A central bank pursues a policy of quantitative easing by purchasing government securities.What is likely to happen to interest rates and aggregate expenditure?
Interest rates will fall and aggregate expenditure fall
Interest rates will fall and aggregate expenditure rise
Interest rates will rise and aggregate expenditure fall
Interest rates will risel and aggregate expenditure rise
How many countries are a part of the World Bank?
169 member countries
189 member countries
32 member countries
43 member countries
What is the IMF?
International Monetary Fund
Intelligent Monkey Foundation
International Military Foundation
three-country trade agreement negotiated by the governments of Canada, Mexico, and the United States
The UN
NAFTA
NATO
IMF
Which of the following is not a function of money?
Medium of exchange
Store of value
Decoration
Unit of account
The ability to express the value of goods and services in different amounts of a currency is money's function as...
a medium of exchange
a unit of account
a store of value
The ability to produce value and then acquire goods and services at a later date is money's function as...
a medium of exchange
a unit of account
a store of value
Bitcoin may not be considered good money because it is not
commonly accepted
portable
limited in supply
difficult to forge
Banknotes are made from linen weaves or polymers to make them
durable
hard to counterfeit
divisible
commonly accepted
If banks, on average, hold 25% of their deposits in reserve, what is the size of the money multiplier?
(a)
Which of these assets are the most liquid?
Loans to customers
Cash and reserves at the Bank of England
Government and corporate securities
A 'run on the bank' occurs when
Depositors want to withdraw more money than can be paid out
The value of a bank's assets in loans and securities plummet
The Central Bank implements a reserve requirement
Macroprudential regulation focuses not on a single financial institution but on the financial system as whole, and which monitors its impact on the wider economy. Is this statement true or false?
True
False
The amount of banknotes issued by the Bank of England depends largely on the demand for notes from the general public. Is this statement true or false?
True
False
It is common to distinguish three motives for holding money: the transactions motive, the precautionary motive, and the speculative motive. The principal determinant of the size of transaction balances is:
Tastes
National Income
Interest rates
The process by which banks increase the money supply is known as money creation. The amount by which the money supply can increase depends on their liquidity ratio. If the bank decides to hold a lower liquidity ratio the bank multiplier will ____________________.
increase
reduce
stay the same
Currency circulation is part of
M1
M0
M3
The Money Supply is the total_________of money in the economy.
stock
number
amount
figure
___________ is also called narrow money.
M1
M2
M3
M0
Broad money consists of___________plus savings accounts and money market accounts.
M1
M2
M3
M0
______________ refers to how quickly and with what risks an asset can be converted into money.
Validity
Liquidity
Monopoly
Transactions
Gold is no longer used as money in modern societies. One of the reasons is that it is not _____.
Scarce
Durable
Divisible
Portable
What are the Functions of Money
Durable (last long)
Medium of Exchange
Store of Value
Portability (easy to carry)
Unit of Account
