This quiz works best with JavaScript enabled. Home > Economics > Financial Economics > Financial Economics – Quiz 2 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Financial Economics Quiz 2 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Relationship between interest rate and speculative demand for money is called ..... A) Liquidity Preference Curve. B) Liquidity Trap. C) Liquidity. D) Liquidity Trap Interest Rate. Show Answer Correct Answer: A) Liquidity Preference Curve. 2. A financial intermediary is a middleperson between A) Buyers and sellers. B) Husbands and wives. C) Borrowers and lenders. D) Labour unions and firms. Show Answer Correct Answer: C) Borrowers and lenders. 3. Quantitative easing is also seen as a solution to deflation. Quantitative easing can help increase inflation closer to the A) Government's inflation target of 6%. B) Government's inflation target of 5%. C) Government's inflation target of 2%. D) Government's inflation target of 7%. Show Answer Correct Answer: C) Government's inflation target of 2%. 4. Which graph has the real interest rate on the y axis? A) AD/AS Model. B) Money Market. C) Loanable Funds. D) Phillips Curve. Show Answer Correct Answer: C) Loanable Funds. 5. As all the other prices are determine in different markets, the equilibrium rate of interest is also determined by the forces of supply and demand in the financial markets. A) True. B) False. Show Answer Correct Answer: A) True. 6. An increase in disposable income would lead to A) An increase in the DLF. B) A decrease in the DLF. C) An increase in the SLF. D) A decrease in the SLF. Show Answer Correct Answer: C) An increase in the SLF. 7. What factor is being described as below? If there is a high rate of inflation predicted, consumers will begin to withdraw their money from the banks to liquefy their assets and spend it on goods and services before prices rise=> Decrease the number of loanable funds A) Deficit spending. B) Household savings. C) Expectations for the Future. D) None of above. Show Answer Correct Answer: C) Expectations for the Future. 8. Shariah arbitrage is a risk-free investment strategy that guarantees high returns A) True. B) False. Show Answer Correct Answer: B) False. 9. What are the key principles of takaful insurance?1. Mutual CooperationII.Certainty (Gharar)Ill. Shariah ComplianceIV. Speculation (Maysir)V.Risk Sharing A) I.II.IlI. B) I, III, IV. C) II, IV, V. D) I.III.V. Show Answer Correct Answer: D) I.III.V. 10. What is Takaful? A) Interest. B) Insurance. C) Tax. D) Loan. Show Answer Correct Answer: B) Insurance. 11. High reserve requirements A) Lower the money supply. B) Increase the money supply. Show Answer Correct Answer: A) Lower the money supply. 12. Financial institutions are less likely to develop new and innovative financial products when there is an increased demand for Sharia-compliant financial products A) True. B) False. Show Answer Correct Answer: B) False. 13. ..... is also called narrow money. A) M1. B) M2. C) M3. D) M0. Show Answer Correct Answer: A) M1. 14. Liquidity also known as ..... A) How particular asset converted to cash. B) Price you pat to borrow money. C) Something containing economic value. D) Asset or store of value. Show Answer Correct Answer: A) How particular asset converted to cash. 15. If government spending exceeds tax collections, A) There is a budget deficit. B) Public saving is positive. C) There is a budget surplus. D) Private saving is positive. Show Answer Correct Answer: A) There is a budget deficit. 16. What are the two key functions of a central bank? A) 1.To maintain financial stability2.To maintain macroeconomic stability. B) 1.To maintain financial stability2.To maintain microeconomic stability. C) 1.To maintain global stability2.To maintain macroeconomic stability. D) 1.To meet all objectives of the country2.To maintain macroeconomic stability. Show Answer Correct Answer: A) 1.To maintain financial stability2.To maintain macroeconomic stability. 17. Bitcoin may not be considered good money because it is not A) Commonly accepted. B) Portable. C) Limited in supply. D) Difficult to forge. Show Answer Correct Answer: A) Commonly accepted. 18. In takaful insurance, the concept of mutual cooperation plays a central role. Participants come together and pool their resources to provide financial protection and support to one another. They contribute to a common takaful fund based on the principles of solidarity and shared responsibility. This fund is utilized to compensate any participant who suffers a loss or damage A) True. B) False. Show Answer Correct Answer: A) True. 19. The process by which banks increase the money supply is known as money creation. The amount by which the money supply can increase depends on their liquidity ratio. If the bank decides to hold a lower liquidity ratio the bank multiplier will ..... A) Increase. B) Reduce. C) Stay the same. D) None of above. Show Answer Correct Answer: A) Increase. 20. In regulatory arbitrage, a special purpose vehicle may be created by a conventional bank A) True. B) False. Show Answer Correct Answer: A) True. ← PreviousNext →Related QuizzesEconomics QuizzesFinancial Economics Quiz 1Financial Economics Quiz 3Financial Economics Quiz 4 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books