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Islamic Economics & Finance - From Theory to Practice

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Questions - 75 Time - 90 mins Passing Score - 80%
contact5169
Quiz by contact5169, updated more than 1 year ago
contact5169
Created by contact5169 over 8 years ago
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Resource summary

Question 1

Question
The dichotomy of the capitalism lies in the misplacement of ‘man’ and ‘money’.
Answer
  • True
  • False

Question 2

Question
Islam’s main concern is the materialistic world surrounding human beings.
Answer
  • True
  • False

Question 3

Question
Social sciences mainly deal with the inner elements of human beings and slightly about material environment.
Answer
  • True
  • False

Question 4

Question
What we expect from ‘MAQASID AL-SHARIAH’ (OBJECTIVES OF ISLAMIC LAW) are for our own pleasure.
Answer
  • True
  • False

Question 5

Question
Co-operation in Islam is pivotal because of fruits of collective wisdom goes beyond that of individuals separately.
Answer
  • True
  • False

Question 6

Question
From Islamic perspective, ‘labor’ the same as ‘effort’ and we can use them interchangeably.
Answer
  • True
  • False

Question 7

Question
Conventional Banking relies on the potentialities of debt but Islamic Banking on the limited capacity of Musharakah (equity financing).
Answer
  • True
  • False

Question 8

Question
‘the character of incentive systems’ is one of the axes to compare economic systems?
Answer
  • True
  • False

Question 9

Question
Islamic economic system has three pillars consisting of justice as the ultimate goal, co-operation, and efficiency
Answer
  • True
  • False

Question 10

Question
In capitalistic economic system goal does not justify means.
Answer
  • True
  • False

Question 11

Question
Suppose there are 13 commodities in a primitive society, there are 78 different exchange rates.
Answer
  • True
  • False

Question 12

Question
In a society we have six commodities: K, L, M, N, R, and Q. Commodity K has been chosen as the medium of exchange. The exchange rate between M and R is: (M)/(R) ÷ (K)/(R)
Answer
  • True
  • False

Question 13

Question
There are many authorities who are delegated to brand the medium of exchange (ME) on behalf of their constituencies.
Answer
  • True
  • False

Question 14

Question
As soon as ssfish plays its role as the medium of exchange it does vanish from economic system and can be consumed.
Answer
  • True
  • False

Question 15

Question
In current economic system, it is not possible for the Central Bank (CB) to increase the nominal value of a paper money by ten times unless incurring prohibitively high cost.
Answer
  • True
  • False

Question 16

Question
Any additional cost of increasing the nominal value of a paper money by ten times is called the Marginal Cost (MC) of money.
Answer
  • True
  • False

Question 17

Question
Since in every purchase of goods and services money is needed to play the function of the medium of exchange then such demands for money is called ‘transactions demand for money’.
Answer
  • True
  • False

Question 18

Question
Of the three types of the demand for money John Maynard Keynes talks about, the speculative demand for money will no longer exist in Islamic Economic System.
Answer
  • True
  • False

Question 19

Question
The doctrine of vice-gerency indicates that wealth is an end in itself and utmost effort can be put to collect as much as we can.
Answer
  • True
  • False

Question 20

Question
The choice of the type of ‘money’ used in primitive societies reflects narrow-mindedness of the people who comprised the tribe.
Answer
  • True
  • False

Question 21

Question
The labor time spent on each good determines the exchange rate.
Answer
  • True
  • False

Question 22

Question
The relative labor time determines the exchange rate: labor time to grow two pounds rice /labor time to catch one fish.
Answer
  • True
  • False

Question 23

Question
It is possible to put any chosen medium of exchange in the same row as other commodities that can be taken out from the market (detained) after the prices have been paid.
Answer
  • True
  • False

Question 24

Question
The velocity of the medium of exchange which is the number of times it circulates and changes hands during a time period is normally greater than unity.
Answer
  • True
  • False

Question 25

Question
If M stands for money and C for commodity then medium of exchange takes on the form: M—C—M.
Answer
  • True
  • False

Question 26

Question
If one of the traders withholds ssfisf (sealed-salted fish) in order to get more ssfish by lending it; its effect is to increase the pace of everyday transactions and the society is better-off.
Answer
  • True
  • False

Question 27

Question
If money is detained from being circulated the result would be the emergence of ‘money whirlpool’.
Answer
  • True
  • False

Question 28

Question
Money whirlpool exemplifies the origin of ‘interest rate’ production within which money is exchanged for money.
Answer
  • True
  • False

Question 29

Question
Economics is composed of two inter-related parts; one is ‘normative’ and the other one is ‘positive’. Normative part talks about ‘what ought to be’ and the positive part has to do with ‘what is’.
Answer
  • True
  • False

Question 30

Question
In capitalistic economies ‘interest’ plays central role but in Islamic economics it has strictly been forbidden. Saying ‘yes’ or ‘no’ to interest comes from within the realm of normative (or ideological) part of any economic system.
Answer
  • True
  • False

Question 31

Question
In making an economic system the normative part, logically, sets the red lines and the positive part plays within the red lines.
Answer
  • True
  • False

Question 32

Question
The properties of interest (Riba) do not include time period.
Answer
  • True
  • False

Question 33

Question
Bond issued by firms and/or governments is an instrument to borrow money and any money paid over and above its par value is ‘interest’ (Riba).
Answer
  • True
  • False

Question 34

Question
Stock is different from bond in some ways and enjoys different properties and different consequences. Bond is a type of ‘debt’ to the issuer but stock issuer adds it to his/her capital.
Answer
  • True
  • False

Question 35

Question
Any part of the profit paid to the stock holder cannot be considered cost but any money paid over and above the principal of loan as interest is considered ‘cost’.
Answer
  • True
  • False

Question 36

Question
Friedman Rule says: “Zero nominal rates of interest are necessary for efficient resource allocation”.
Answer
  • True
  • False

Question 37

Question
In Aristotle’s time, philosophers were concerned with matters such as “just price” and usury. The fact that these concepts are enjoying something of a revival today might well be a pointer to the serious harm that has been inflicted on many societies.
Answer
  • True
  • False

Question 38

Question
Interest is a necessary and unavoidable aspect of every economic system, as a common string to tie all economic activities together and without which the system collapses.
Answer
  • True
  • False

Question 39

Question
In capitalistic economic system all borrowed money on interest would go for investment activities where ‘investment’ has to do with hiring more labor.
Answer
  • True
  • False

Question 40

Question
According to the classical theory the rate of interest is determined by the intersection of the demand for and supply of ‘money’. Thus, an equilibrium rate of interest is determined at a point at which the demand for ‘money’ equals its supply.
Answer
  • True
  • False

Question 41

Question
John Maynard Keynes (1883-1946) is a firm critic of the classical theory of the rate of interest.
Answer
  • True
  • False

Question 42

Question
Money whirlpool (MW) is useful for every country in order to exchange money for money.
Answer
  • True
  • False

Question 43

Question
Positive time preference (TP>0) means that a basket of commodities tomorrow is preferred to the same basket consumed today. Negative TP (TP<0) means the opposite.
Answer
  • True
  • False

Question 44

Question
Based on the Prof. Schumpeter’s suggestion of an Evenly Rotating Economy (ERE) the rate of time preference with the suggested age profile of this economy we reach a community with zero rate of time preference which implies that the rate of interest shall be zero.
Answer
  • True
  • False

Question 45

Question
It is not necessary that every financial system shall have self-correcting and self-adjusting mechanisms. Any deviations from the right path can be corrected by manipulating the relevant factors.
Answer
  • True
  • False

Question 46

Question
In capitalistic economies there are two external sources to increase the level of corporations’ assets in addition to internal sources.
Answer
  • True
  • False

Question 47

Question
Stockholders assume the financial risk of investing in a corporation. They have all rights to vote. Bond-holders do not own the company to which they have lent neither do they accept any risk. They do not have the right to vote. Finally, they in fact transfer the risk to the borrower.
Answer
  • True
  • False

Question 48

Question
All the money earned from bonds issued by a corporation goes for investment projects and enhance employment.
Answer
  • True
  • False

Question 49

Question
In capitalistic finance theory those who are in risky markets can be classified either as risk lover, risk averse or risk neutral; all three groups can be found in behaviors in the stock markets.
Answer
  • True
  • False

Question 50

Question
Greed, non-satiation, and piety go hand in hand in a zero-sum game of capitalism which mean to legally put your hands on someone else’s wealth.
Answer
  • True
  • False

Question 51

Question
Muslims believe that the Divine Rules are perfect and thus unchanging and created with man’s well-being in mind. As a result in our studies the Divine Rules are given the veto power, on the understanding that man-made rules cannot compete with them.
Answer
  • True
  • False

Question 52

Question
In capitalistic economic system ‘capital’ means: financial assets, the factories, machinery and equipment, and so on. It does refer to its legal aspect and with explicit relationship with money.
Answer
  • True
  • False

Question 53

Question
In capitalism Money market is ‘loan market’ for up to one year. Capital market is also loan market but for longer than one year. Both markets are fundamentally of ‘loan’ nature. The way money market has been distinguished from capital market is the length of time ‘loan’ is made which is non-scientific.
Answer
  • True
  • False

Question 54

Question
Although money is potential capital but in Islamic Economic System (IES) can neither claim a reward (price) as interest nor is it considered as a factor of production in any economic system.
Answer
  • True
  • False

Question 55

Question
Islamic Finance works with profit, rate of profit, profit sharing, and thus risk sharing but not with debt, interest and risk-transfer.
Answer
  • True
  • False

Question 56

Question
The weaknesses of conventional banking system are loan (debt) and the debtor’s sole responsibility for the outcome the borrowed-money is used for perpetuates itself and leads to greed and greed, in turn, leads to higher risks (of default) and thus highly probable bankruptcy.
Answer
  • True
  • False

Question 57

Question
Money whirlpool resulting from speculative activities does not allow saving (S) in the economy to equal investment (I). The equality between the two variables (S = I) guarantees full employment.
Answer
  • True
  • False

Question 58

Question
In Islamic Finance we concentrate on the banking facilities channel as well as on the balance sheet channel but more emphasis is on the structure of the balance sheet because of the crucial role Islamic Banks play in granting facilities having Wakalah on behalf of the depositors.
Answer
  • True
  • False

Question 59

Question
Some great Western economists have emphasized the importance of financing frictions and inherent instability of the conventional financial system.
Answer
  • True
  • False

Question 60

Question
Debt which is the backbone of the interest-bearing conventional banking system has come with some severe drawbacks such as adverse shock that wipes out large fraction of the levered borrower’s net worth, limiting his/her risk bearing capacity in the future; both are the effects of the limited capacity of borrowed money.
Answer
  • True
  • False

Question 61

Question
There are three elements that can be attributed to the origin of volatility in financial intermediaries. They are interest rate expectations, artificial risk, and demand volatility unaccounted for. Last element is justifiable in almost all economic systems but not the first two.
Answer
  • True
  • False

Question 62

Question
Volatility in financial markets has primarily to do more with ‘loan’ (debt) than with Profit & Loss Sharing (PLS). Domino effect will become active whenever new debts, which usually carries higher interest, are used to pay off earlier loans at different maturities.
Answer
  • True
  • False

Question 63

Question
In conventional banking system the rational investor who is a borrower anticipates that the entrepreneur may lie.
Answer
  • True
  • False

Question 64

Question
Money is an accounting concept and capital a legal concept.
Answer
  • True
  • False

Question 65

Question
The structure and the entries of the two financing systems (capitalism and Islamic) are totally different with two different outcomes without frictions in macroeconomic policies.
Answer
  • True
  • False

Question 66

Question
“Too many chiefs, not enough Indians" refers to the misleading idea that money (as medium of exchange) can itself be another commodity which stands side by side with other commodities.
Answer
  • True
  • False

Question 67

Question
Capitalism has taken it for granted that Riba-based financial system is a sound and viable system, in a way. While this system has, in itself, become part of the problem!
Answer
  • True
  • False

Question 68

Question
Muslims believe that the Divine Rules are perfect and thus unchanging and created with man’s well-being in mind. As a result in our studies the Divine Rules are given the veto power, on the understanding that man-made rules cannot compete with them.
Answer
  • True
  • False

Question 69

Question
The followings are part of the negatives of capitalistic economic system: (a) Equity (justice), a second-hand argument with no guarantee of success, (b) Conflict between efficiency and equity, (c) Endorsement of all kinds of risks, artificial or else, 3 (d) Scarcity of capital arising from positive nominal interest rates on money and the resulting speculative activities, (e) Unemployment as a result of scarcity of capital, (f) Satiation checked via social considerations.
Answer
  • True
  • False

Question 70

Question
In capitalistic economic system ‘capital’ means: financial assets, the factories, machinery and equipment, and so on. It does refer to its legal aspect and with explicit relationship with money.
Answer
  • True
  • False

Question 71

Question
Love, empathy, altruism, cooperation, sacrifice, mutual concern, forgiveness, gratitude, virtue, benevolence and honesty are as much a part of human heritage as hatred, self-interest, apathy, revenge, vice, dishonesty and fraud.
Answer
  • True
  • False

Question 72

Question
Forbidden Riba (interest) means that we should put all our efforts in setting the rate of interest equal zero; that is, to manipulated demand for and supply of money so that they intersect at the point where rate of interest becomes zero.
Answer
  • True
  • False

Question 73

Question
Debt has limited capacity in contrast with Musharakah whose potentiality can grow limitless.
Answer
  • True
  • False

Question 74

Question
“Whether or not ideology can be eliminated from the world of thought in the social sciences, it is certainly indispensable in the world of action in social life”.
Answer
  • True
  • False

Question 75

Question
There is no reason to believe that whatever man earns and accumulates over his life time should be used for his salvation that please Allah (swt). His own well-being comes first.
Answer
  • True
  • False
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