Economics Quiz

Which of the following would be an example of disinflation?

• The inflation rate decreasing from 5% to 2%

• Prices dropping significantly across the economy

• Wages increasing faster than the cost of living

• A rapid increase in the money supply

Human capital refers to:

• The physical machinery used in production

• The skills, knowledge, and experience possessed by workers

• The amount of money a company has invested in stocks

• The total value of land and natural resources in an economy

In the Circular Flow Model, households provide which of the following to businesses?

• Taxes

• Goods and services

• Factors of production

• Government spending

What does the Consumer Price Index (CPI) measure?

• The amount of money banks lend to businesses

• The average change over time in the prices paid by consumers for a market basket of goods and services

• The income levels of households in an economy

• The amount of taxes collected by the government

National income is the total amount of money earned by:

• The government from taxes

• Individuals and businesses within a country

• Households in the private sector

• Foreign investors in the domestic market

The efficacy of fiscal policy refers to:

• How effectively a country’s central bank controls interest rates

• The impact of government spending and taxation on economic growth and stability

• The ability of households to manage their budgets

• The speed at which banks process loans

The Federal Reserve System is responsible for:

• Setting income tax rates

• Controlling the money supply, setting the federal funds rate, and regulating banks

• Managing government spending and taxation policies

• Determining wage rates for workers

If the Federal Reserve raises interest rates, what is the likely impact on borrowing and spending?

• Borrowing increases and spending rises

• Borrowing decreases and spending slows

• Businesses expand and hire more workers

• Inflation immediately rises

Inflation occurs when:

• The overall price level in an economy decreases

• The purchasing power of money increases

• There is a sustained rise in the general price level of goods and services

• The supply of goods exceeds demand

Deflation is most harmful to:

• People with fixed incomes

• Lenders, because loans become less valuable over time

• Businesses and borrowers, as debts become more expensive

• Savers, since their money loses value over time