#1
Which of the following is a characteristic of a recession?
Decline in GDP
ExplanationIndicator of economic downturn marked by reduced economic output.
#2
What is the role of central banks during an economic crisis?
To provide liquidity support
ExplanationSupplying financial institutions with funds to maintain stability.
#3
What is the name for a policy approach where the government intervenes to stabilize the economy during a downturn?
Keynesian economics
ExplanationAdvocates for government intervention to manage economic fluctuations.
#4
What is the term for the situation where investors withdraw funds from financial institutions due to concerns about their solvency?
Bank run
ExplanationPanicked withdrawals leading to bank insolvency.
#5
What is the name for a policy approach where the government reduces its role in the economy and promotes free-market principles?
Neoliberalism
ExplanationFavors deregulation and market-driven economic policies.
#6
During an economic crisis, what is the primary objective of expansionary monetary policy?
To stimulate economic growth
ExplanationBoosting economic activity through increased money supply.
#7
In response to an economic crisis, what is the primary goal of fiscal policy?
To boost aggregate demand
ExplanationIncreasing spending or reducing taxes to stimulate demand and economic growth.
#8
What is the term used to describe a sudden and severe decline in economic activity across multiple sectors lasting for an extended period?
Depression
ExplanationLong-lasting downturn with significant economic contraction.
#9
Which of the following is NOT a common cause of an economic crisis?
Sudden increase in productivity
ExplanationIncreased productivity typically supports economic growth.
#10
What is the primary goal of a contractionary monetary policy during an economic crisis?
To decrease aggregate demand
ExplanationReducing spending and curbing inflationary pressures.
#11
What is the 'Liquidity Trap' in the context of monetary policy?
A situation where monetary policy becomes ineffective
ExplanationWhen interest rates are very low, and savings are high, impeding monetary policy effectiveness.
#12
Which of the following factors can contribute to a currency crisis?
Speculative attacks
ExplanationSpeculators selling off a currency leading to its devaluation.
#13
What is the name for the phenomenon where investors rush to withdraw their deposits from banks, leading to a widespread collapse of financial institutions?
Bank panic
ExplanationMass withdrawal causing a banking system breakdown.
#14
What is the term for the situation where the government takes over troubled financial institutions to prevent their collapse?
Nationalization
ExplanationState ownership of failing financial entities to avert failure.