Economics 1
Understanding Economics Quiz
Test your knowledge of economic concepts and principles with this comprehensive quiz! Perfect for students, educators, and anyone interested in economics, this quiz will challenge your understanding of demand, supply, interest rates, and more.
Join us to explore key topics that define the world of economics:
- Price mechanisms
- Market dynamics
- Financial literacy
- Monetary policy
What happens to prices when consumers become more poor?
Price goes up
Price goes down
Neither
It depends
If an item is "trendy" and a status symbol what happens to the price?
The price goes up
The price goes down
What happens to an items price when there are more suppliers to sell the product?
Price goes up
Price goes down
What shifts the demand curve? Check all that apply.
Consumer income
Population
Consumer Preferences
Prices & availability of related goods
None of the above, this is the supply curve.
What shifts the supply curve? Check all the apply
Size of the industry
Technological progress
Price of inputs
Prices related to outputs
What happens to the demand for iPhone when the price of cell phone service rises dramatically? Which direction is the shift on the demand curve?
To the right
To the left
Economics is the study of what?
Choices
Need
Income
Rates
Which of the following statements best reflects the first rule of economics?
Economic progress occurs when lines cross paths.
Important things happen when lines intersect.
Lines crossing have no relevance to economic outcomes.
The intersection of lines has minimal impact on the economy.
What is a price ceiling?
A government-imposed limit on the maximum price that can be charged for a particular good or service.
The price level set by the market equilibrium.
The highest price that consumers are willing to pay for a product.
The minimum price that producers are willing to accept for a product.
What is a potential consequence of price ceilings on the economy? Check all that apply.
Increased consumer purchasing power and affordability of goods.
Black markets & Crime
A shortage of the product or service due to the artificially low price.
Enhanced competition among producers leading to improved quality.
What is a floor price?
The maximum price that can be charged for a particular good or service.
The price level set by the market equilibrium.
The price determined by supply and demand dynamics in the market.
A government-imposed limit on the minimum price that can be paid for a product.
What is a potential outcome when a floor price is implemented?
Increased profitability for producers and suppliers.
Expansion of consumer choices and affordability.
Excess supply and surplus of the product.
Market equilibrium and price stability.
What is the concept of opportunity cost?
The benefit gained from choosing the best alternative option.
The total cost of producing a good or service.
The financial cost incurred when making a purchase.
The cost of giving up the next best alternative when making a decision.
What does "optimal" mean in economics?
Obtaining the desired goal at the least cost.
The highest possible level of economic output.
Obtaining the desired goal at the least cost.
The situation where prices are at their lowest level for consumers.
What does it mean for a product or service to be inelastic in economics?
The demand for the product is highly responsive to changes in price.
The demand for the product is unaffected by changes in price.
The supply of the product is highly responsive to changes in price.
The supply of the product is unaffected by changes in price.
What does it mean for a product to be elastic in economics?
The demand for the product is highly responsive to changes in price.
The demand for the product is unaffected by changes in price.
The supply of the product is highly responsive to changes in price.
The supply of the product is unaffected by changes in price.
Which of the following products would you expect the demand to be elastic??
Mortgage loan refinance rates.
ATM fees
NSF Fees
None of the above
What does an interest rate represent in economics? Select all that apply.
The Price a borrower pays for not waiting.
The income a lender receives for waiting.
None of the above
What equation would you use to determine your future balance considering interest rates?
Subtract the interest rate from the current balance.
Add the interest rate to the current balance.
Divide the interest rate by the current balance.
Multiply the interest rate by the current balance.
If you have $100 at an annual interest rate of 4% for 3 years, how much would you have after 3 years?
112.48
116.48
104.48
104
How much would you need to invest if you want to have $100 after 2 years, assuming an interest rate of 4%?
92
92.46
90
96.15
When interest rates are more than future money is less.
True
False
When interest rates are low than future money is worth more.
True
False
Is the following statement true or false? Normal rate = Inflation + Real rate
True
False
Is the following statement true or false? Normal rate - Inflation = Real rate
True
False
What are the two components of risk?
The likelihood of a negative event occurring and the potential gains if it happens.
The probability of a negative event happening and the potential losses associated with it.
The probability of a positive outcome and the financial investment required.
The chances of a favorable outcome and the potential rewards involved.
Is the following statement true or false? ($1000)(1+.03)^4 = ($1000)(1.03)(1.03)(1.03)(1.03)
True
False
What is a bond?
A type of security that offers regular dividend payments.
A fixed-income investment representing a promise to pay in the future.
What is monetary policy?
The government's management of fiscal policies to control spending and taxation.
The implementation of trade policies to manage international currency exchange rates.
The actions taken by the central bank to control the money supply, interest rates, and alter the course of the economy.
How does the Open Market Committee contribute to determining the prime rate?
By influencing the federal funds rate, which serves as a benchmark for the prime rate.
By directly setting the prime rate based on economic indicators and market conditions.
Who is responsible for determining the federal funds rate, and how is the Open Market Committee (OMC) formed?
The President of the United States; appointed by the U.S. Treasury Department.
The U.S. Treasury Department; selected through a nomination process by commercial banks.
The Federal Open Market Committee (FOMC); comprised of the Federal Reserve Board of Governors and 5 of the 12 district Federal Reserve Bank presidents.
What is considered the most effective method for curbing inflation in terms of interest rates?
Lowering interest rates to stimulate economic growth and reduce borrowing costs.
Raising interest rates to reduce consumer spending and control inflationary pressures.
What is the likely impact of reducing interest rates on supply, unemployment, bond prices, and cash availability?
Supply increases, unemployment decreases, bond prices increase, and cash availability increases.
Supply decreases, unemployment decreases, bond prices increase, and cash availability increases.
If the economy does not have enough money, what is the likely result?
Decreased economic activity and a recession.
Increased inflation and rising prices.
If the economy has an excessive amount of money, what is the likely result?
Lower interest rates and increased borrowing.
Increased inflation and rising prices.
What is a spread?
The difference between the cost of funds and the return of a portfolio.
The total value of investments held in a portfolio.
The ratio of an investment's risk to its potential return.
The process of diversifying funds across different investment vehicles.
Why would a yield curve potentially invert?
Due to excessive government intervention and fiscal policy changes.
As a result of stable interest rates and market equilibrium.
When short-term interest rates exceed long-term interest rates.
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