Economic Factors and Financial Markets Unit 4

Which market facilitates the trading of stocks and bonds?

Capital market

Money market

Foreign exchange market

Inter-bank market

Which of the following statements about the financial markets is true?

The primary market is where shares are traded amongst investors.

Borrowing money from a bank is an example of direct financing.

All financial transactions must flow through a financial intermediary.

Financial markets provide a mechanism to implement government policy.

Which of the following items could be changed as part of a fiscal policy?

Interest rates

Money supply

Taxes

Foreign exchange

When is market equilibrium reached?

When there are more goods supplied than demanded

When there are more goods demanded than supplied

When the goods demanded are the same as the goods supplied

When the demand and supply curves shift

What does Gross Domestic Product measure?

The market value of raw materials produced domestically

The market value of final goods and services produced domestically

The market value of all goods and services sold domestically

The market value of final goods and services sold domestically

Which of the following are characteristics of investment capital?

Scarcity and mobility

Neutrality and fluidity

Liquidity and resilience

Longevity and neutrality

Which of the following statements is an example of monetary policy?

The federal government announces a new surtax for high-income earners.

The Bank of Canada raises interest rates to slow down the economy.

The federal government reduces the GST from 7% to 5%.

The federal government commits to transferring an additional $1 billion to the provinces for health care.

ABC Corporation is attempting to raise $100 million from the financial market. It is offering to issue shares to the public through an Initial Public Offering (IPO). The shares are priced at $25 and investors from all over the world are likely to subscribe to the IPO. In which market is ABC corporation attempting to raise funds?

Foreign exchange market

Primary market

Secondary market

Auction market

Which of the following statements about purchasing power is TRUE?

Purchasing power falls as inflation rises.

Purchasing power falls as inflation falls.

Purchasing power is not related to inflation.

Purchasing power falls during periods of rising real income.

What happens to the supply of the good or service produced when the sale price increases?

Increases

Decreases

Not affected at all

Changes in an unpredictable direction

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Economic Factors and Financial Markets Unit 4

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