QUESTION 11

Which of flollowing is about Crowding-Out Effect?

		Puts upward pressure on interest rates by shifting demand for loanable funds outward.
		Given a certain amount of loanable funds supplied to the market, excessive government demand for funds tends to crowd out the private demand for funds.
		When the Fed reduces (increases) the money supply, it reduces (increases) the supply of loanable funds, putting upward (downward) pressure on interest rates.
		Puts upward pressure on interest rates by shifting supply of funds inward and demand for funds outward.

QUESTION 12

Which is not correct?

		Risk management is way that financial institutions and other firms can use derivative securities to adjust the risk of their existing investments in securities.
		Speculation allows an investor to speculate on movements in the value of the underlying assets without having to purchase those assets in derivative investment.
		Mortgage-backed securities are long-term debt obligations created to finance the purchase of real estate.
		Derivative Securities are financial contracts whose values are derived from the values of underlying assets