Q. Aloan:
✅ Correct Answer: (B)
is an asset for the lender and a liability for the borrower.
Financial Markets and Institutions MCQs and Notes
Q. In indirect finance:
✅ Correct Answer: (B)
an institution borrows from the lender and provides funds to the borrower.
Q. The sale of government bonds overseas:
✅ Correct Answer: (D)
causes a smaller increase in interest rates than the sale of bonds to the domestic private sector.
Q. Interest rate expectations have been thought to be an important influence on bond sales because:
✅ Correct Answer: (C)
the bond market is dominated by people interested mainly in capital gains.
Q. If the public debt can be financed without adding to inflation or causing interest rates to rise, it is said to be:
✅ Correct Answer: (D)
sustainable
Q. The public debt of a country is not necessarily a burden on the economy to the extent that:
✅ Correct Answer: (A)
it grows less rapidly than GDP.
Q. Moral hazard caused by regulation can only be removed from financial transactions if:
✅ Correct Answer: (D)
participants in the finance industry do not feel protected by the regulations.
Q. Statutory regulation is likely to create larger compliance costs than self-regulation because:
✅ Correct Answer: (C)
statutory regulators are often over-cautious.
Q. The regulation of the banking industry is of particular importance in modern economies because:
✅ Correct Answer: (D)
banks provide the principal means of payment for the economy.
Q. 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.
✅ Correct Answer: (C)
1, 2 and 4