A Bank Lending Depositors' Money to a Local Business and a Pension

question 16

Multiple Choice

A bank lending depositors' money to a local business and a pension fund investing contributions in shares of a company are similar financial activities in that

• A)both involve the use of financial markets.
• B)both involve funds being channeled from savers to borrowers through financial intermediaries.
• C)both involve a reduction in the overall level of liquidity in the financial system.
• D)both involve in an increase in the overall level of risk in the financial system.

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Definitions:

Correlation Coefficient

An index assessing the power of association between a pair of variables.

Dependent Variable

A dependent variable is the outcome or response that researchers are interested in explaining or predicting, changing in response to manipulation of the independent variable.

Independent Variable

The variable in an experimental or observational study that is manipulated or categorized to observe its effect on the dependent variable.

Covariance Value

A measure indicating the extent to which two random variables change together, where a positive value implies direct correlation, and a negative value an inverse correlation.