#1
What is a basic characteristic of a recession in the business cycle?
An increase in unemployment
ExplanationRecessions are marked by a rise in unemployment rates as economic activity contracts.
#2
Which of the following is an indicator of an economic boom?
Increase in stock prices
ExplanationA surge in stock prices is a key signal of an economic boom, reflecting high investor confidence and economic growth.
#3
Which economic theory suggests that individuals and firms respond to incentives by working harder?
Supply-side economics
ExplanationSupply-side economics asserts that incentivizing individuals and firms leads to increased effort and productivity.
#4
Which of the following statements is true regarding a central bank's role in managing the business cycle?
Central banks regulate the money supply
ExplanationCentral banks influence the economy by regulating the money supply, a key tool in managing the business cycle.
#5
Which of the following is a characteristic of a trough in the business cycle?
Lowest level of economic activity
ExplanationA trough represents the lowest point in the business cycle, indicating the lowest level of economic activity before recovery.
#6
What does the term 'diversification' mean in the context of financial management?
Investing in multiple assets with different risk profiles
ExplanationDiversification involves spreading investments across various assets to mitigate risk by avoiding concentration in a single investment.
#7
What is the goal of financial management for a corporation?
To maximize profit
ExplanationThe primary objective of financial management for a corporation is to maximize profits and shareholder value.
#8
What is a limitation of using the Gross Domestic Product (GDP) as an indicator of economic health?
It doesn't account for the informal economy
ExplanationGDP does not consider the informal economy, leading to an incomplete assessment of overall economic health.
#9
Which of the following is an example of a contractionary fiscal policy?
Increase in taxes
ExplanationContractionary fiscal policy involves raising taxes to reduce consumer spending and control inflationary pressures.