Chapter 1 (part 2)

Question 1

Why is Capital needed?

5 points

Answer 1

1. For New factories and equipment
2. Expand output capability
3. Improve productivity
4. Increase competitiveness
5. Make innovations

Question 2

What happens if there is inadequate Capital investment?

Name 4

Answer 2

1. Insufficient output
2. declining productivity
3. rising unemployment
4. decreased competitiveness
   lower living standards.

Question 3

What is the only source of Capital?

Answer 3

Savings

Question 4

What are 3 sources of investment Capital?

Answer 4

1. Retail investors
2. Institutional Investors (Mutual funds, Pension funds)
3. Foreign Investors

Question 5

What are the 3 users of Capital?

Answer 5

1. Individuals
2. Businesses
3. Governments

Question 6

What are 3 ways an Individual can borrow capital?

Answer 6

1. Personal loans
2. Mortgage loans
3. Charge accounts

Question 7

What are 3 ways Business can acquire capital?

Answer 7

1. Profits (internally)
2. Borrowing from financial intermediaries
3. Issuing Short-term money market paper, medium/long term debt, preffered and common shares.

Question 8

What are the 4 ways the Federal government raises capital?

Answer 8

1. Treasury bills (T-bills)
2. marketable bonds
3. Canadian savings bonds
4. Canadian premium bonds

Question 9

What are the 3 ways the Provincial government raises capital?

Answer 9

1. Issuing bonds to the federal government
2. Borrowing from the Canadian pension plan
3. short term treasury bills

Question 10

How does the municipal government acquire capital?

Answer 10

Issuing Instalment debentures (serial debentures)