#1
What is the law of demand in economics?
As prices increase, demand decreases
ExplanationA fundamental principle stating the inverse relationship between price and demand.
#2
What is a 'bull market' in finance?
A market with increasing stock prices
ExplanationA prolonged period of rising stock prices, indicating investor optimism.
#3
What is the function of a stock exchange in financial markets?
To facilitate the buying and selling of stocks and other securities
ExplanationProvides a platform for companies to raise capital and investors to trade securities.
#4
What is the concept of 'supply chain' in economics?
The process of producing and delivering goods to consumers
ExplanationIt encompasses all the stages involved in bringing a product to market.
#5
Which of the following is a characteristic of a perfectly competitive market?
Price taker behavior
ExplanationFirms in such markets accept market prices as given.
#6
In the foreign exchange market, what does the term 'exchange rate' refer to?
The rate at which one currency can be exchanged for another
ExplanationThe price of one currency in terms of another, determining the value of imports and exports.
#7
What is the role of a central bank in a country's economy?
To regulate and supervise commercial banks
ExplanationEnsures stability through monetary policies, oversight, and regulation.
#8
In the context of financial markets, what does the term 'liquidity' refer to?
The ease with which an asset can be converted to cash
ExplanationA measure of how easily an asset can be bought or sold without causing significant price change.
#9
What is a 'derivative' in financial markets?
A financial contract whose value is derived from an underlying asset
ExplanationDerivatives derive their value from the performance of underlying assets.
#10
What is the significance of the Dow Jones Industrial Average (DJIA) in financial markets?
It measures the average performance of a selected group of stocks
ExplanationIt reflects the overall health of the stock market and investor sentiment.
#11
What is the concept of 'opportunity cost' in economics?
The cost of forgoing the next best alternative when making a decision
ExplanationIt represents the value of the best alternative forgone when a decision is made.
#12
In the context of supply and demand, what does the term 'elasticity' refer to?
The measure of the responsiveness of quantity demanded to a change in price
ExplanationIt indicates how sensitive consumers are to changes in price.
#13
What is the Efficient Market Hypothesis (EMH) in finance?
The idea that all available information is reflected in asset prices
ExplanationIt suggests that prices reflect all available information, making it impossible to outperform the market.
#14
What is the role of a market maker in financial markets?
To facilitate the buying and selling of financial instruments
ExplanationThey provide liquidity by standing ready to buy or sell securities.
#15
In the context of foreign exchange, what is the role of a 'pip'?
A small price movement in a currency pair
ExplanationIt represents the smallest price change in the exchange rate of a currency pair.
#16
What is the purpose of a futures contract in financial markets?
To buy or sell an asset at a future date for a predetermined price
ExplanationThey allow parties to lock in prices for future transactions, reducing uncertainty.
#17
In financial markets, what does the term 'arbitrage' refer to?
The simultaneous buying and selling of an asset to profit from price discrepancies
ExplanationProfiting from price differences of the same asset in different markets.
#18
What is the role of the Securities and Exchange Commission (SEC) in financial markets?
To ensure fair and transparent operation of securities markets
ExplanationRegulates securities markets to protect investors and maintain fair practices.