Benefits of Capital Markets - SS1 Economics Past Questions & Answers - page 1

1

What is the primary purpose of capital markets?

A

 By providing investment advice

 

B

By diversifying their portfolio

C

By offering insurance against market volatility

 

D

By offering guaranteed returns on investment

CORRECT OPTION: b
2

Which of the following is a benefit of capital markets for businesses?

A

Limited access to funding sources

 

B

Difficulty in raising long-term capital

C

Increased competition from investors

D

 Opportunities for growth and expansion

 

CORRECT OPTION: d
3

What is the role of capital markets in promoting economic growth?

A

 Restricting investment in new businesses

B

Discouraging the adoption of new technologies

C

Facilitating investment in new businesses and technologies

 

D

Encouraging short-term investments

CORRECT OPTION: c
4

How do capital markets help investors manage risk?

A

 By providing investment advice

B

By diversifying their portfolio

 

C

By offering insurance against market volatility

D

By offering guaranteed returns on investment

 

CORRECT OPTION: b
5

Explain how capital markets can help to channel savings into productive investments.

Capital markets facilitate the transfer of funds from investors to borrowers, which helps to channel savings into productive investments. These funds can then be used by producers and investors to develop new technologies and innovations from once-saved funds.

 

6

Mention 3 benefits of the capital market.

  1. Capital markets provide opportunities for investors to diversify their portfolios and manage risk.
  2. Capital markets promote economic growth by facilitating investment in new businesses and technologies.
  3. Capital markets enhance the liquidity of financial assets, making it easier for investors to buy and sell securities.

 

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