1. The financial system is primarily a means through which a-funds are transferr
ID: 1110238 • Letter: 1
Question
1. The financial system is primarily a means through which
a-funds are transferred from savers to borrowers
b-the government puts into operation its plans for the economy.
c-business companies distribute their products
2*Economists define risk as:
a-the difference between domestic interest rates and foreign interest rates.
b-the possibility that the value of the financial assets are different from what you expected.
c-the ease at which an asset can be exchanged for other assets or other goods and services
3*Economists define liquidity as:
a-the difference between the performance of an asset and the long-term yield of a Treasury bond.
b-the fraction of an investor's portfolio that consists of an asset.
c-the relative ease and speed with which an asset can be exchanged for money.
4*If the foreign interest rate rises
a-the demand for domestic currency drops, causing its depreciation.
b-the demand for domestic currency rises, causing its depreciation.
c-the demand for domestic currency falls, causing its appreciation.
5* If a commercial bank lends all its available funds, it runs the risk of
a-insolvency.
b-illiquidity.
c-not have utilities
6. In addition to the Board of Governors, how many Regional Banks does the Federal Reserve System have?
a-4
b-10
c-12
7. The maximum amount of money that a commercial bank can lend is equal to
a-Total deposits.
b-total reserves.
c-total excess reserves.
8. A transfer of the aggregate demand curve AD
a-to the right is considered expansive and to the left contractive.
b-to the right or to the left is considered contractive.
c-to the right or to the left is considered expansive.
10. The aggregate supply curve represents the level of product that producers want to sell to
a-each level of interest rate.
b-each level of real GDP.
c-each level of price
11.A central bank may be reluctant to see its currency appreciate because
a-the decrease in import prices contributes to inflation.
b-the fall in export prices would be inflationary.
c-the goods of the country become less competitive in the world market
Explanation / Answer
Ans)
1. The financial system is primarily a means through which
a-funds are transferred from savers to borrowers
A financial system is a system where there is a transfer of funds from those who lend to those who need them.
2.
b-the possibility that the value of the financial assets are different from what you expected.
Risk is defined as the possibility of a different value of asset than that percieved.
3.
c-the relative ease and speed with which an asset can be exchanged for money.
Liquidity in very easy terms means the ease with which something can be exchnaged for money.
4
a-the demand for domestic currency drops, causing its depreciation.
If the demand for a currency increases its value increases.
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