Question 1
Which one of the following is a role of financial markets?
Answer: C.
What this practice covers
Real past-paper questions, the answer key from the mark scheme, and the explanation that goes with it. Each one is marked the moment you pick, the correct option is shown whether or not you found it, and the full explanation opens either way. No account needed to answer them.
These questions are drawn from past Edexcel A-Level papers. You answer, you find out immediately whether you were right, and you get the reasoning for the correct option and for each distractor. Wrong answers go to a mistakes locker so you can come back to exactly those.
Practice is free. You need an account only so your progress and your mistakes are still there next time.
Keep going multiple-choice questions →
What examiners see students get wrong here
These are the errors that cost marks on the financial sector, taken from our own topic notes. Read them before you practise and you will recognise the traps in the questions.
- Listing fewer than the six functions of financial markets, or omitting forward markets and hedging, which are the ones most often forgotten.
- Confusing adverse selection (before the transaction) with moral hazard (after it).
- Saying the central bank sets the inflation target, the government sets it, the Bank meets it.
- Confusing monetary policy (Bank Rate, QE) with macroprudential regulation (capital ratios, LTV limits).
- Treating "too big to fail" as a description rather than a moral hazard problem.
- Ignoring the externality framing, bank failure imposes costs on third parties, which is why this is market failure rather than just bad luck.
- Presenting regulation as costless, ignoring reduced lending capacity and regulatory capture.
Revise it first
If any of the above is unfamiliar, work through the notes before practising: The Financial Sector revision notes.