Questions and Answers
What primarily drives the movement of capital across borders and localities?
What is a significant consequence of deficient capital investment in an economy?
Which of the following statements best describes the behavior of individuals as investors?
What is the primary source of capital within an economy?
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What can incentivize individuals to increase their spending on investments?
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What aspect of capital makes it difficult to retain in regions with unfavorable conditions?
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Which of the following best describes the impact of sufficient capital supply in manufacturing?
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What characteristic is NOT typically associated with capital investment behavior?
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What primary reason drives governments to issue securities?
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What role do Crown corporations play in government securities?
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How do financial instruments facilitate interactions between capital suppliers and users?
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What characteristic makes securities advantageous in a sophisticated economy?
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In capital transactions, who are considered the capital suppliers?
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What is a key outcome of using financial instruments in capital markets?
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Why might a government undertake large capital projects?
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What aspect of financial instruments might limit their trading options?
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Which of the following is NOT a function of securities in capital markets?
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What motivates capital suppliers to participate in purchasing securities?
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What is primarily consulted by an investor's dealer when buying or selling an unlisted security?
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What is one of the key characteristics of OTC derivatives?
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In Ontario, what system is used to report trades of unlisted securities?
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How do alternative trading systems (ATS) operate in the Canadian financial markets?
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Which type of market is primarily dominated by large international financial institutions in the context of derivatives?
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What role did traditional stock exchanges play before the emergence of alternative trading systems?
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What does the presence of a dealer in OTC transactions primarily indicate?
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What is a notable characteristic of the OTC derivatives market's operation time?
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What is the primary function of a stock exchange?
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Which of the following statements about investment dealers in Canada is true?
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What primarily distinguishes alternative trading systems from traditional exchanges?
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Which of the following types of trading is NOT typically found on Canadian stock exchanges?
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What characteristic defines a liquid market?
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Which exchange specifically lists the equities of emerging companies in Canada?
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Which of the following exchanges operates exclusively for agricultural futures and options in Canada?
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What type of securities does the TSX Venture Exchange primarily list?
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Which exchange in Canada is known for trading financial and equity futures and options?
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What is a characteristic of a narrow price spread in a market?
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Which of the following instruments is NOT typically traded on stock exchanges in Canada?
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What is the main role of the Natural Gas Exchange in Canada?
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Which of the following statements correctly differentiates an ATS from a traditional exchange in Canada?
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What is a primary characteristic of the fixed-income electronic trading system CanDeal?
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Which of the following is a function that ATSs in Canada are explicitly prohibited from performing compared to traditional exchanges?
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Which statement best describes the relationship between ATSs and traditional exchanges?
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Which of the following is NOT listed as an equity ATS currently operating in Canada?
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Study Notes
Investment Opportunities
- Capital is in high demand globally due to its scarcity and mobility; it moves in anticipation of changing conditions like taxation and regulations.
- Capital seeks the highest risk-adjusted returns, influencing where it is allocated.
- Deficient capital investment can lead to industrial slowdown, increased unemployment, and declining living standards.
Labour Force Characteristics
- Skilled and productive segments of the labour force are crucial for economic growth and capital utilization.
Suppliers of Capital
- Capital primarily comes from savings, which occur when revenue exceeds expenditures.
- Individuals save to postpone consumption, with increased spending motivated by incentives such as tax breaks.
- Governments issue securities to cover deficits or fund large projects, often borrowing when expenditures exceed revenues.
Financial Instruments
- Securities represent legally binding agreements defining rights and obligations between capital suppliers and users.
- These instruments facilitate capital distribution in sophisticated economies, offering standard features for ease of trading.
- Numerous types of securities cater to the varied needs of investors and issuers.
Stock Exchanges
- A stock exchange facilitates trading of various securities, determining prices based on supply and demand.
- Main Canadian exchanges include:
- Toronto Stock Exchange (TSX): trades equities, income trusts, and ETFs.
- TSX Venture Exchange: focuses on smaller companies' equities.
- Montréal Exchange: specializes in financial and equity futures and options.
- Canadian Securities Exchange: lists emerging companies’ equities.
- Other exchanges handle specific markets such as natural gas and agricultural futures.
Market Characteristics
- A liquid market exhibits frequent trades, narrow bid-ask price spreads, and small price fluctuations.
- OTC (Over-the-Counter) derivatives market operates 24/7, dominated by large financial institutions, allowing for complex and customized products.
Alternative Trading Systems (ATS)
- ATSs are electronic platforms for automated matching and execution of trades, providing competition to traditional exchanges.
- They can trade securities listed on traditional exchanges and must be registered as investment dealers.
- Established ATSs in Canada include Chi-X, Bloomberg Tradebook Canada, and others.
Fixed-Income Trading Systems
- Most bond and money market securities are sold through dealer markets.
- Notable fixed-income electronic trading systems include:
- CanDeal: a collaboration among major bank investment dealers, offers access to government securities.
- CBID: operates both retail and institutional fixed-income marketplaces.
Reporting Requirements
- In Ontario, unlisted security trades must be reported, ensuring transparency in the market.
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Description
This quiz explores key concepts related to investment opportunities, the characteristics of the labor force critical for economic growth, and the suppliers of capital. It also delves into the role of securities and financial instruments in the capital market. Test your understanding of how these elements interact and influence economic conditions.
