Free CSC Volume 1 Questions and Answers — Questions and Answers
Question 1: When secondary market stock trading occurs...
- the issuing company is buying shares from an investor
- an investor is buying shares from the issuing company
- trading in stocks does not take place on the secondary market
- an investor is buying shares from another investor (Correct answer)
Correct answer: an investor is buying shares from another investor
In secondary market stock trading, investors buy and sell shares among themselves. The issuing company is not directly involved in these transactions. So, the answer is: "an investor is buying shares from another investor."
Question 2: Nearly all debentures and bonds are offered for sale through
- dealer markets (Correct answer)
- auction markets
- Bonds are sold through auction markets. Debentures are sold through dealer markets
- Bonds are sold through dealer markets. Debentures are sold through auction markets
Correct answer: dealer markets
Nearly all debentures and bonds are offered for sale through
Question 3: Eligible deposits at each member institution are insured by CDIC up to ____ per deposit.
- $1,000,000
- $50,000
- $100,000 (Correct answer)
- $150,000
Correct answer: $100,000
Eligible deposits at each member institution are insured by the CDIC (Canada Deposit Insurance Corporation) up to $100,000 per deposit. This insurance helps protect depositors' funds in the event that a member institution fails.
Question 4: What happens if the Canadian government's revenue is insufficient to cover its expenses?
- The Government runs a deficit and it must borrow money (Correct answer)
- The Government runs a deficit and it must spend money
- The Government runs a surplus and it must cut spending
- The Government runs a surplus and it must raise taxes
Correct answer: The Government runs a deficit and it must borrow money
When the Canadian government's revenue is insufficient to cover its expenses, it runs a deficit, meaning it spends more money than it collects in revenue. To finance this deficit, the government typically borrows money by issuing bonds and other debt securities. So, the answer is: "The Government runs a deficit and it must borrow money."
Question 5: "Inflation is stable.... corporate profits are rising and new business start-ups outnumber bankruptcies" ... which stage of the business cycle is described?
- trough
- peak
- expansion (Correct answer)
- contraction
Correct answer: expansion
The description provided, with stable inflation, rising corporate profits, and a higher number of new business start-ups compared to bankruptcies, indicates an expansionary phase of the business cycle. During an expansion, economic activity is generally increasing, leading to growth in various sectors of the economy. So, the answer is indeed "expansion."
Question 6: The total value of goods and services generated in a nation in a given year is referred to as...
- Gross National Product
- Net National Product
- Net Domestic Product
- Gross Domestic Product (Correct answer)
Correct answer: Gross Domestic Product
The total value of goods and services generated within a nation's borders in a given year is referred to as Gross Domestic Product (GDP). So, the answer is "Gross Domestic Product."
Question 7: The Bank of Canada performs all of the following primary duties, with the exception of...
- to act as the government's fiscal agent
- to prepare balanced federal budgets (Correct answer)
- to conduct monetary policy
- to issue and remove bank notes
Correct answer: to prepare balanced federal budgets
The Bank of Canada performs several primary duties, including acting as the government's fiscal agent, conducting monetary policy, and issuing and removing bank notes. However, preparing balanced federal budgets is not one of its responsibilities. The responsibility for preparing budgets lies with the government's finance ministry or treasury department. So, the answer is indeed "to prepare balanced federal budgets."
Question 8: Within a range of ____ basis points is where the overnight rate is found.
- 200
- 100
- 75
- 50 (Correct answer)
Correct answer: 50
The overnight rate, which is the interest rate at which major financial institutions borrow and lend one-day (overnight) funds among themselves, typically fluctuates within a range of 50 basis points (0.50 percentage points). So, the answer is indeed "50."
Question 9: Recessions are commonly defined as at least...
- the same as the Statistics Canada definition: The depth, duration and diffusing of the decline in business activity
- two declining quarters of nominal GDP
- Two declining quarters of real GDP (Correct answer)
- four declining quarters of real GDP
Correct answer: Two declining quarters of real GDP
Recessions are commonly defined as at least two consecutive quarters of declining real GDP (Gross Domestic Product). This measure helps economists and policymakers gauge the direction and strength of economic activity over time. So, the answer is indeed "Two declining quarters of real GDP."
Question 10: The Federal Reserve board in the US is increasing interest rates. The US government should... in order for Fiscal Policy to be in line with this action.
- reduce tariffs on Chinese imports
- cut income taxes
- spend more on higher education
- spend less on the military and Medicare (Correct answer)
Correct answer: spend less on the military and Medicare
When the Federal Reserve increases interest rates to tighten monetary policy, it aims to slow down economic activity to control inflation. In this scenario, to align fiscal policy with the Federal Reserve's action, the government could implement contractionary fiscal measures. Among the options provided, "spend less on the military and Medicare" aligns with contractionary fiscal policy because reducing government spending in these areas would decrease overall government expenditure, which can help offset the stimulatory effects of lower interest rates. Therefore, the answer "spend less on the military and Medicare" is correct.
Question 11: When a bond's yield surpasses its coupon rate...
- the investor is making money
- it is trading at a premium
- it is trading at a discount (Correct answer)
- the investor is losing money
Correct answer: it is trading at a discount
When a bond's yield surpasses its coupon rate, it means that the bond is offering a higher yield to investors compared to the interest payments (coupon) it provides. This situation typically arises when market interest rates have increased since the bond was issued, causing its price to fall. Bonds trading at a discount have a yield higher than their coupon rate. So, the correct answer is "it is trading at a discount."
Free CSC Volume 1 Questions and Answers
When secondary market stock trading occurs...