Financial Markets and Funds MCQs

1.How does a rise in the equilibrium interest rate affect restrictiveness under other non-price factors?

2.What does it indicate when companies begin to finance their investments using internally generated funds?

The expense of borrowing funds is highThe expense of borrowing funds is lowThe market is in perfect balanceThe market balance is unfavorableNone of the above

3.Loans taken for purchasing vehicles and household appliances fall under which category of goods?

durable goodsnon-durable goodsequilibrium goodsnon-equilibrium goods

4.What term describes the total accumulation of previous budget deficits over time?

overall surplusnational debtforeign debtworld debt

5.Which category do plant and equipment belong to?

Non-current fixed assetsCurrent fixed assetsShort-term working capitalLong-term working capital

6.What occurs in the financial market when the interest rate exceeds the equilibrium borrowing rate for loanable funds?

Availability of short-duration fundsPresence of long-duration fundsAn excess supply of fundsA shortage of funds

7.When the equilibrium interest rate rises, how does the movement along the supply of funds curve manifest?

8.What type of relationship must exist between the supply and demand of funds to ensure there is no shortage of funds?

9.What happens to the cost of borrowing funds when the demand for loans declines?

10.What is the effect on spending if the equilibrium interest rate rises while the supply of funds curve shifts leftward?

a short-term rise in spendinga short-term drop in spendinga long-term increase in spendinga long-term decline in spending

11.What occurs in the financial system when the interest rate falls below the equilibrium borrowing rate for loanable funds?

An excess supply of fundsA shortage of fundsAvailability of short-term fundsAvailability of long-term funds

12.When the risk associated with financial security drops and the supply curve shifts downward and to the right, what effect does this have on the equilibrium interest rate?

13.What is the term for the anticipated interest rate that applies to a security starting at a future date?

forward ratereverse ratefixed term ratearranged rate

14.Which of the following best represents accounts receivable and inventory?

current working capitalnon-current working capitallong-term fixed assetsshort-term fixed assets

15.Which theory explains interest rate equilibrium as the outcome of the interaction between demand and supply in lending markets?

16.When the equilibrium interest rate falls and the supply of funds curve shifts downward and to the right, what is the expected effect on spending in the short run?

spending will rise immediatelyspending will decline shortly afterspending will grow over an extended periodspending will reduce over a prolonged timeframeno change in spending

17.What type of interest is earned without being reinvested?

18.What is the effect on interest rates when investment levels decline in financial markets?

Interest rates riseInterest rates fallFunds become more accessibleFunds become less accessible

19.If the equilibrium interest rate rises while economic conditions worsen, in which direction will the supply curve shift?

20.When the economic situation improves in other countries, what action do local investors typically take?

begin investing in foreign marketsfocus on investments within their own countryexperience a rise in sovereign riskface an escalation in country risk