WorksheetsIFE S2 The Economic Role of Finance
Total questions: 10
Worksheet time: 5mins
Which of the following are functions of a financial system?
1. The operation of a payments system
2. Providing the means of portfolio adjustment
3. Helping to reduce unemployment
4. Channelling funds between lenders and borrowers
5. Helping speculators to bet on price movements
2, 3 and 5
1, 2 and 4
2 to 5
1 and 5
Which of the following are deposit-taking institutions (DTIs)?
1. Building societies
2. Insurance companies
3. Investment trust companies
4. Retail banks
5. Pension funds
1 only
2 and 5
1 and 4
1 and 2
Financial markets have the basic function of:
Bringing together people with funds to lend and people who want to borrow
Assuring that the swings in the business cycle are less pronounced
Assuring that governments need never resort to printing money
What is the main benefit of a functioning financial system?
It creates wealth given that large profits are possible on various financial markets.
It helps in the conversion of precious metals to final goods.
It provides an opportunity for individuals to get rich quickly.
It converts liquid funds to the production factor capital.
Every financial market has the following characteristic:
It determines the level of interest rates.
It allows common stock to be traded.
It allows loans to be made.
It channels funds from lenders/savers to borrowers/spenders.
Limited liability implies that...
the number of shares that can be issued is limited.
the number of owners is limited.
owners are not liable with their private wealth for losses of the business.
shareholders can only lose a limited amount of money.
A deficit unit is one for whom:
Saving equals investment
Saving exceeds investment
(consumption + investment) exceeds income
Consumption exceeds income
A surplus unit is one for whom:
Income exceeds consumption
Investment exceeds saving
Investment equals saving
Income exceeds (consumption + Investment)
The Toronto Stock Exchange is an example of:
a financial instrument.
a central bank.
a financial market.
All of the answers are correct.
Which of the following can be described as involving direct finance?
A bank loans money to a corporation
An individual buys shares in a corporation
An individual places money in a notice account
An insurance company purchases shares in a corporation
