R02 Financial investment and market trends: free practice questions
5 free questions on Financial investment and market trends, part of learning outcome 2 (The macro-economic environment). Pick an answer to check it, or open the answer to see why each option is right or wrong.
Question 1 of 5
Why does the secondary market for shares matter to the primary market?
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The answer is B: Investors would be reluctant to buy new issues they couldn't sell
Trading in the secondary market doesn't affect companies' finances, but without it investors would be reluctant to subscribe to new issues, as they couldn't easily sell them.
Why the other options are wrong
A
Secondary trades don't affect the issuer's finances.
C
Prices aren't set by the FCA.
D
Tax rates are set by the Government, not by share trading.
Question 2 of 5
What is the 'electoral cycle' in economics?
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The answer is B: Booms before elections, then cooling just after a new government starts
Governments have tried to create booms before elections and cool an overheated economy early in a new term. Independent central banks have curtailed this, but fiscal tools such as tax cuts remain.
Why the other options are wrong
A
Rates are set by the independent MPC.
C
Targets aren't reset each election.
D
That isn't the pattern described.
Question 3 of 5
Why must investors watch international developments more closely than in the past?
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The answer is C: Markets are more integrated and move more in step
As economies and markets have become more integrated, equity markets in particular are more correlated, so international developments matter more when allocating assets.
Why the other options are wrong
A
Exchange rates still float.
B
They have major effects.
D
UK markets remain open.
Question 4 of 5
What typically drives a financial bubble?
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The answer is A: Buying because prices are expected to keep rising
Bubbles form when investors lose sight of fundamental values and buy simply because they expect prices to keep rising, often around a genuine breakthrough. Crashes come when they sell expecting falls, or are forced sellers.
Why the other options are wrong
B
Bubbles happen when investors lose sight of fundamentals.
C
Bubbles are more often linked to cheap money.
D
Forced selling is associated with crashes.
Question 5 of 5
Why has the ageing of the UK population made politicians more resolute about combating inflation?
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The answer is D: Older savers want to protect the value of their savings
As the baby boomers build up savings, they've become determined that unanticipated inflation won't wipe out their value, and growing numbers of elderly dependants share that concern.
Why the other options are wrong
A
The issue is the value of savings.
B
That isn't the reason given.
C
Inflation erodes savings at any age.
Practise all 13 Financial investment and market trends questions
These are 5 of the 13 questions on this topic in R0 Exam Prep, and the full R02 bank covers every learning outcome. Practise free, track your weak areas and sit timed mocks.
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