Lesson M5.2.1

M5.2.1 Financial sector, savings, investment and microfinance in development Quiz: OCR Economics, Unit 10

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson M5.2.1, Financial sector, savings, investment and microfinance in development: 20 multiple choice questions for the OCR Economics (H460), Unit 10: The financial sector, written with Revision Ninja.

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The 20 questions

  1. What term describes the shortfall in domestic savings needed to fund essential capital investment?

    • Trade deficit
    • Fiscal deficit
    • Foreign exchange gap
    • Savings gap

  2. Which organisation pioneered modern microcredit by offering small collateral-free loans to low-income borrowers?

    • Grameen Bank
    • World Bank
    • International Monetary Fund
    • African Development Bank

  3. A farmer in Kenya uses a mobile money app to save and pay suppliers. What is this process called?

    • Debt relief
    • Microinsurance
    • Capital flight
    • Mobile banking

  4. What occurs when assets or money rapidly flow out of a country due to economic instability?

    • Financial inclusion
    • Microfinance
    • Debt forgiveness
    • Capital flight

  5. If a developing nation's savings ratio is 12% and its capital-output ratio is 4, what is its growth rate?

    • 16%
    • 3%
    • 8%
    • 48%

  6. What constraint arises when a country lacks sufficient export earnings to buy foreign capital goods?

    • Liquidity trap
    • Savings gap
    • Foreign exchange gap
    • Budget deficit

  7. A local group of entrepreneurs pools monthly cash contributions to lend to members in turn. What is this?

    • Investment bank
    • Sovereign wealth fund
    • ROSCA
    • Central bank

  8. What key role does the financial sector play by matching individuals with spare funds to borrowers?

    • Financial disintermediation
    • Debt restructuring
    • Capital flight
    • Financial intermediation

  9. Which market failure occurs when lenders cannot distinguish between high-risk and low-risk microfinance borrowers?

    • Negative externality
    • Free-rider problem
    • Adverse selection
    • Moral hazard

  10. A migrant worker in London sends money back to family in Ghana. What is this financial transfer called?

    • Microcredit
    • Remittance
    • Portfolio investment
    • Foreign direct investment

  11. What term describes ensuring that poor households have access to affordable, formal financial services?

    • Moral hazard
    • Financial deepening
    • Financial inclusion
    • Capital flight

  12. A borrower takes a microloan for seeds but spends it on gambling. Which economic concept does this show?

    • Capital flight
    • Moral hazard
    • Savings gap
    • Adverse selection

  13. What type of insurance product provides low-income households with affordable coverage against specific small-scale risks?

    • Microinsurance
    • Sovereign debt
    • Commercial insurance
    • Reinsurance

  14. According to the Harrod-Domar model, which two factors directly determine a country's rate of economic growth?

    • Inflation and interest
    • Imports and exports
    • Savings and capital-output
    • Taxes and spending

  15. A foreign company builds a manufacturing plant in Vietnam. What type of financial inflow is this?

    • Portfolio investment
    • Foreign direct investment
    • Remittance
    • Microcredit loan

  16. What initiative provides debt relief to the world's most heavily indebted poor countries?

    • Marshall Plan
    • IMF Bailout Plan
    • Washington Consensus
    • HIPC Initiative

  17. What happens to interest rates when high government borrowing in a developing country absorbs available bank loanable funds?

    • They rise
    • They fall
    • They stay zero
    • They turn negative

  18. Why might microfinance institutions charge higher nominal interest rates than traditional commercial banks?

    • Government price controls
    • High administration costs
    • Low borrower risk
    • Zero operational expenses

  19. What type of financial flow involves buying foreign shares or bonds without acquiring direct managerial control?

    • Foreign direct investment
    • Portfolio investment
    • Capital flight
    • Microcredit

  20. Which financial measure represents the difference between a bank's lending interest rate and its deposit interest rate?

    • Reserve requirement
    • Liquidity coverage
    • Capital ratio
    • Interest rate spread

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