Economics Study Material: Financial Markets, Interest Rates, and Bonds

ECONOMICS 1
ECONOMICS
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ECONOMICS 2
Well-functioning financial markets promote
 A. inflation.
 B. deflation.
 C. unemployment.
 D. growth.
The answer is D (growth).
A key factor in producing high economic growth is
 A. eliminating foreign trade.
 B. well-functioning financial markets.
 C. high-interest rates.
 D. stock market volatility.
The answer is B (well-functioning financial markets).
High-interest rates might ________ purchasing a house or car but at the same time, high-
interest rates might ________ saving.
 A. discourage; encourage

ECONOMICS 3
 B. discourage; discourage
 C. encourage; encourage
 D. encourage; discourage
Answer is A (discourage; encourage).
It is true that inflation is a
 A. continuous increase in the money supply.
 B. continuous fall in prices.
 C. decline in interest rates.
 D. continually rising price level.
The answer is D (continually rising price level).
A breakdown of financial markets can result in
 A. financial stability.
 B. rapid economic growth.
 C. political instability.

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 D. stable prices.
The answer is C (political instability).
When I purchase ________, I own a portion of a firm and have the right to vote on issues
important to the firm and to elect its directors.
 A. bonds
 B. bills
 C. notes
 D. stock
The answer is D (stock).
Ranking assets from most liquid to least liquid, the correct order is
 A. savings bonds; house; currency.
 B. currency; savings bonds; house.
 C. currency; house; savings bonds.
 D. house; savings bonds; currency.
The answer is B (currency; savings bonds; house).