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WorksheetsMoney and Interest Rates and The Payment System (Pre-test)
Total questions: 10
Worksheet time: 3mins
The BSP increases the money supply (MS → MS’). Which scenario BEST explains the chain reaction that follows?
A. Interest rates rise → saving decreases → investment falls
B. Interest rates rise → inflation decreases → consumption rises
C. Interest rates fall → saving becomes more attractive → consumption decreases
D. Interest rates fall → borrowing becomes cheaper → investment and consumption rise
2. If the BSP lowers interest rates and people still don’t borrow or spend more, what could be a possible reason?
A. People expect prices to fall later, so they delay spending
B. Saving becomes less attractive, so everyone starts borrowing
C. Investments become automatically more profitable
D. Consumers suddenly prefer using cash instead of banks
According to Keynesian theory, which situation would cause interest rates to rise due to liquidity preference?
A. Households begin saving more because income increased
B. Banks increase their lending capacity
C. People prefer to hold more cash due to economic uncertainty
D. The return on investment projects falls dramatically
4. Interest rates rise sharply in a short period. Which outcome is the MOST likely economic effect?
A. Consumers take more loans because future value increases
B. Businesses expand investment due to higher borrowing costs
C. Consumer spending slows, reducing business profits and employment
D. Savings decrease because interest earnings become unstable
5. A country has perfectly inelastic supply of loanable funds. What happens when demand increases?
A. Interest rate rises because supply cannot adjust
B. Interest rate stays constant because supply cannot change
C. Quantity of loans grows while interest stays stable
D. Borrowing becomes cheaper as supply responds instantly
6. Which situation BEST illustrates why a cashless society is difficult to achieve?
A. People prefer having multiple bank accounts
B. Not all households have access to secure digital infrastructure
C. Printing money is always cheaper than digital payments
D. Checks are always more secure than digital transfers
7. Blockchain improves payment systems mainly because it…
A. Creates a transparent ledger, which is difficult to alter or change
B. Removes all transaction fees and taxes
C. Centralizes control of financial data in one institution
D. Guarantees that cryptocurrency prices will remain stable
3. What is the strongest argument for maintaining checks as a payment method despite their inefficiencies
A. They process faster than digital payments
B. They require no trust between buyers and sellers
C. They provide records of transaction or paper trail useful for documentation and large transactions
D. They are cheaper to verify than electronic payments
9. The BSP aims to improve the payment system’s efficiency. Which reform best achieves this outcome?
A. Increasing processing steps to improve accuracy
B. Requiring all payments to be done through checks
C. Encouraging adoption of automated clearing and digital transfers
D. Reducing collaboration between banks to protect competition
10. If public trust in fiat money suddenly declines, what is the MOST likely effect on the payments system?
A. People will rely more on commodity money or alternative digital currencies
B. The use of fiat money increases due to government support
C. Checks become the fastest form of transaction
D. Electronic payments become impossible to process
