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web.groovymark@gmail.com
- November 28, 2024
Question 01
What is a depository institution?
a) An institution that invests in stocks and bonds
b) An institution that accepts and pays interest on deposits of money
c) An institution that only provides loans to businesses
d) An institution that issues stocks and bonds
Correct Answer: b) An institution that accepts and pays interest on deposits of money
Explanation: A depository institution is a financial institution that accepts deposits from the public and pays interest on those deposits. It also provides loans
Question 02
What is the primary role of financial institutions?
a) To regulate the stock market
b) To conduct financial transactions such as investments, loans, and deposits
c) To print currency for the economy
d) To determine monetary policy
Correct Answer: b) To conduct financial transactions such as investments, loans, and deposits
Explanation: Financial institutions play a vital role in conducting transactions that facilitate the flow of money through the economy, including investments, loans, and deposits
Question 03
A large corporation is looking to merge with another large corporation. Which financial institution can help them do this?
a) Credit union
b) Central bank
c) Investment bank
d) Retail bank
Correct Answer: c) Investment bank
Explanation: Investment banks specialize in large and complex financial transactions, including mergers, acquisitions, and helping companies raise capital.
Question 04
Which type of financial institution deals mainly with providing for retirement through employers?
a) Central bank
b) Insurance company
c) Pension fund
d) Retail bank
Correct Answer: c) Pension fund
Explanation: Pension funds manage and invest money on behalf of employees to provide them with retirement benefits
Question 05
How do insurance companies pay policyholders when a claim is made?
a) They use returns from stocks and bonds
b) They sell real estate holdings
c) They issue new insurance policies
d) They request government aid
Correct Answer: a) They use returns from stocks and bonds
Explanation: Insurance companies invest the premiums they collect into stocks, bonds, and other investments to earn returns, which they use to pay out claims.
Question 06
Which financial institution ensures that a nation’s economy remains healthy by controlling the amount of money circulating in the economy?
a) Commercial banks
b) Pension funds
c) Central bank
d) Retail banks
Correct Answer: c) Central bank
Explanation: The central bank regulates the economy by controlling the money supply and interest rates to ensure economic stability.
Question 07
What are the three types of economic indicators?
a) Past, Present, and Future
b) Leading, Lagging, and Coincident
c) Real, Nominal, and Tangible
d) Primary, Secondary, and Tertiary
Correct Answer: b) Leading, Lagging, and Coincident
Explanation: Economic indicators are classified as leading, lagging, or coincident based on their relationship to economic changes
Question 08
Unemployment rate is which type of economic indicator?
a) Leading
b) Coincident
c) Lagging
d) Real-time
Correct Answer: c) Lagging
Explanation: The unemployment rate is a lagging indicator because it reflects economic changes after they have occurred.
Question 09
The Federal Reserve sometimes adjusts the interest rate at which commercial banks can borrow from it. What is the purpose of adjusting the interest rate?
a) To increase government revenue
b) To regulate inflation and unemployment
c) To fund social programs
d) To promote exports
Correct Answer: b) To regulate inflation and unemployment
Explanation: The Federal Reserve uses interest rate adjustments to control inflation and manage unemployment levels in the economy.
Question 10
What would an inverted yield curve signal?
a) Economic expansion
b) Economic downturn
c) Stable economic growth
d) Rising inflation
Correct Answer: b) Economic downturn
Explanation: An inverted yield curve indicates that short-term interest rates are higher than long-term rates, which can signal a future economic downturn.
Question 11
In what way are coincident indicators useful?
a) They predict future economic trends
b) They measure past economic performance
c) They provide information about the current state of the economy
d) They estimate future inflation rates
Correct Answer: c) They provide information about the current state of the economy
Explanation: Coincident indicators are analyzed during economic shifts to show the current condition of the economy
Question 12
Which responsibility is a focus of the U.S. Securities and Exchange Commission?
a) Enforcing tax policy
b) Regulating the money supply
c) To protect investors
d) Issuing corporate bonds
Correct Answer: c) To protect investors
Explanation: The U.S. Securities and Exchange Commission (SEC) is responsible for protecting investors by enforcing laws to ensure fair practices in financial markets
Question 13
Which type of financial institution provides individuals and firms access to financial markets?
a) Credit union
b) Central bank
c) Investment institutions
d) Retail bank
Correct Answer: c) Investment institutions
Explanation: Investment institutions facilitate access to financial markets by providing individuals and firms with the opportunity to invest and raise capital
Question 14
Which financial institution includes entities that receive money from institutional investors and wealthy individuals to buy troubled companies to improve them and earn returns by selling them or going public?
a) Pension fund
b) Hedge fund
c) Private equity
d) Retail bank
Correct Answer: c) Private equity
Explanation: Private equity firms invest in underperforming companies, improve their operations, and seek to sell them or take them public for profit.
Question 15
Yield curve is which type of economic indicator?
a) Leading
b) Lagging
c) Coincident
d) Historical
Correct Answer: a) Leading
Explanation: The yield curve is a leading indicator because it often predicts changes in economic activity
Question 16
Which type of error would result in a set repercussion or penalty given by the government?
a) Ethical
b) Legal
c) Financial
d) Social
Correct Answer: b) Legal
Explanation: Legal errors involve violations of laws or regulations, which can result in government-imposed penalties
Question 17
Lucas is a financial advisor working for Bullzai, Inc. He is faced with a dilemma. Bullzai has started changing its practices to increase profit, but this change is not in the best interest of clients. Although legal, Lucas knows the practice is not right. What type of dilemma is Lucas facing?
a) Financial
b) Social
c) Moral
d) Legal
Correct Answer: c) Moral
Explanation: Lucas is facing a moral dilemma, where the actions may be legal but conflict with ethical standards
Question 18
What characterizes an ethical action?
a) It is legal
b) It maximizes profits
c) It is based on accepted standards of conduct
d) It benefits the individual
Correct Answer: c) It is based on accepted standards of conduct
Explanation: Ethical actions are guided by standards that are widely accepted as proper behavior in society
Question 19
Which term reflects a person’s beliefs about right and wrong, good and bad, or just and unjust?
a) Ethical
b) Moral
c) Legal
d) Professional
Correct Answer: b) Moral
Explanation: Morals refer to a person’s beliefs about what is right or wrong, and good or bad.
Question 20
The system of recording, reporting, and summarizing past financial information and transactions is known as what?
a) Auditing
b) Accounting
c) Budgeting
d) Financial planning
Correct Answer: b) Accounting
Explanation: Accounting involves recording, reporting, and summarizing financial transactions for a business or individual.
