Causes, Impacts, and Responses to Economic Crises Quiz
Test your knowledge on macroeconomics with questions about recession, fiscal policy, central banks, and more.
#1
What is the primary cause of an economic recession?
Decrease in government spending
Increase in consumer spending
Decline in business investment
Rise in exports
#2
Which economic indicator is often considered a precursor to a financial crisis?
Gross Domestic Product (GDP)
Consumer Price Index (CPI)
Stock market volatility
Unemployment rate
#3
In the context of economic crises, what does the term 'bank run' refer to?
A sudden increase in interest rates
A situation where depositors rush to withdraw funds from a bank
A surge in government bond prices
An increase in stock market volatility
#4
During a currency crisis, what is a common government response to stabilize the exchange rate?
Implementing capital controls
Adopting a fixed exchange rate regime
Encouraging speculative trading
Increasing interest rates
#5
What role do credit rating agencies play in economic crises?
They act as regulators overseeing financial markets
They provide independent assessments of the creditworthiness of borrowers
They control interest rates set by central banks
They manage government fiscal policy
#6
During an economic crisis, what is the role of central banks in monetary policy?
Raise interest rates to stimulate borrowing
Lower interest rates to encourage spending
Reduce money supply to control inflation
Sell government bonds to increase liquidity
#7
How can fiscal policy be used as a response to an economic downturn?
Increase government spending and cut taxes
Decrease government spending and raise taxes
Maintain a balanced budget
Implement strict austerity measures
#8
What is the 'Liquidity Trap' in the context of economic crises?
A situation where interest rates are very high
A state where individuals hoard cash, and monetary policy becomes ineffective
A condition where inflation is uncontrollable
A scenario where fiscal policy is highly expansionary
#9
What is the Triffin Dilemma, and how does it relate to economic crises?
A theory suggesting that trade imbalances can lead to a lack of global liquidity
A principle stating that central banks should always pursue a fixed exchange rate
A concept advocating for increased government intervention in the economy
A model predicting the impact of fiscal policy on inflation
#10
How does a debt-deflation spiral contribute to economic downturns?
By encouraging increased borrowing
Through a decrease in the real value of debt
By causing a decline in aggregate demand and a deflationary spiral
By promoting higher consumer spending
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