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AP Macroeconomics Practice Quiz: Financial Assets

Written by AP Content Team, Verified for 2026 AP Exams, Last updated: May 2026

Test your understanding with short quizzes. This quiz has 11 questions to check your progress.

Question 1 of 11

Which of the following best describes the attribute of 'liquidity' for a financial asset?

All Questions (11)

Which of the following best describes the attribute of 'liquidity' for a financial asset?

A) The potential profit or loss earned from holding the asset over time.

B) The ease with which the asset can be converted into cash.

C) The level of uncertainty and potential for financial loss associated with the asset.

D) The fixed interest payment associated with an asset like a bond.

Correct Answer: B

The provided content defines liquidity as one of the principal attributes of a financial asset. Based on economic principles, liquidity refers to how easily and quickly an asset can be converted into a medium of exchange, like cash, without significant loss of value.

What is the opportunity cost of an individual choosing to hold money in cash rather than investing in bonds?

A) The increased risk associated with the bonds.

B) The price paid for the bonds.

C) The interest that could have been earned from holding the bonds.

D) The higher liquidity of cash compared to bonds.

Correct Answer: C

The provided text explicitly states, 'The opportunity cost of holding money is the interest that could have been earned from holding other financial assets such as bonds.' By holding cash, one forgoes the potential interest payments from a bond.

If the central bank takes actions that cause market interest rates to rise, what is the most likely impact on the price of a previously issued bond with a lower fixed interest rate?

A) The price of the previously issued bond will increase.

B) The price of the previously issued bond will decrease.

C) The price of the previously issued bond will not change.

D) The previously issued bond will be recalled by the issuer.

Correct Answer: B

The content states that 'The price of previously issued bonds and interest rates on bonds are inversely related.' Therefore, if new bonds are offering higher interest rates, existing bonds with lower rates become less attractive, causing their market price to decrease.

According to the provided text, which of the following are considered the most liquid forms of money?

A) Stocks and bonds

B) Bonds and demand deposits

C) Cash and stocks

D) Cash and demand deposits

Correct Answer: D

The text directly states, 'The most liquid forms of money are cash and demand deposits.'

Suppose you purchased a government bond last year. This year, overall interest rates in the economy have fallen. If you decide to sell your bond now, what is the likely outcome?

A) You will have to sell it for less than you paid because new bonds are more attractive.

B) You will be able to sell it for more than you paid because its fixed interest rate is now more attractive.

C) You will sell it for the exact same price you paid, as the face value is fixed.

D) The bond cannot be sold until its maturity date.

Correct Answer: B

The relationship between bond prices and interest rates is inverse. Since interest rates have fallen, your previously issued bond with its higher fixed interest rate is now more valuable compared to newly issued bonds. Therefore, its market price will have increased.

Which statement accurately describes the relationship explained in the text between bond prices and interest rates?

A) They have a direct relationship; when interest rates rise, the price of previously issued bonds rises.

B) They have an inverse relationship; when interest rates rise, the price of previously issued bonds falls.

C) There is no stable relationship between the price of previously issued bonds and interest rates.

D) The relationship is positive for corporate bonds but negative for government bonds.

Correct Answer: B

The content explicitly states, 'The price of previously issued bonds and interest rates on bonds are inversely related.' This means that as one goes up, the other goes down.

If the rate of return on financial assets such as bonds increases significantly, what will happen to the opportunity cost of holding money in a non-interest-bearing checking account?

A) It will decrease because holding money becomes less risky.

B) It will remain unchanged because the value of money is constant.

C) It will increase because a greater amount of potential interest is being forgone.

D) It will become zero because no one will hold money anymore.

Correct Answer: C

The opportunity cost of holding money is the interest forgone. If the interest (rate of return) on alternative assets like bonds goes up, the amount of potential earnings you are giving up by holding cash also goes up. Therefore, the opportunity cost increases.

All of the following are listed in the text as principal attributes of financial assets EXCEPT:

A) Liquidity

B) Rate of return

C) Historical performance

D) Risk

Correct Answer: C

The provided content explicitly defines 'liquidity, rate of return, and risk' as the principal attributes associated with financial assets. Historical performance is not mentioned in this list.

A person decides to move their savings from a stock portfolio to a government-insured savings account. This action suggests a preference for:

A) Higher rate of return and higher risk.

B) Lower liquidity and higher rate of return.

C) Higher liquidity and lower risk.

D) Equity ownership over interest-bearing assets.

Correct Answer: C

Stocks (equity) generally have higher risk and potential for a higher rate of return than a savings account (similar to holding money). Moving funds to a savings account, which is a very liquid and low-risk asset, indicates a preference for liquidity and safety over the potential for higher returns.

Which of the following financial assets is explicitly identified in the text as an 'interest-bearing asset' that people can hold instead of money?

A) Stocks

B) Cash

C) Demand deposits

D) Bonds

Correct Answer: D

The text states that other financial assets people can hold include 'bonds (interest-bearing assets) and stocks (equity).'

An asset that represents ownership in a corporation and is mentioned as an alternative to holding money is known as:

A) A bond

B) A stock

C) A demand deposit

D) Cash

Correct Answer: B

The provided content identifies 'stocks (equity)' as a financial asset people can hold. Equity represents ownership in a corporation.