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Economic Crisis and Government Intervention Quiz

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During an economic crisis, what is the primary goal of government intervention?

Minimize unemployment and stabilize the economy

Explanation

Government aims to minimize job losses and maintain economic stability.

Which factor is NOT a common indicator of an economic crisis?

Sudden increase in consumer spending

Explanation

Rapid rise in consumer spending isn't a typical sign of crisis.

What is the term for a prolonged period of economic decline, often characterized by high unemployment, stagnant wages, and low consumer confidence?

Economic depression

Explanation

Economic depression entails prolonged economic decline and despair.

What is the term for a sudden and severe decline in the value of a currency relative to other currencies?

Currency devaluation

Explanation

Currency devaluation refers to sharp currency value drops.

Which of the following is NOT a typical measure taken by governments during an economic crisis?

Reducing taxes for high-income individuals

Explanation

Governments do not usually cut taxes for the wealthy during crises.

What is quantitative easing (QE) in the context of government intervention during an economic crisis?

Buying government securities to inject money into the economy

Explanation

QE involves purchasing securities to infuse money into the economy.

Which of the following is a potential consequence of excessive government intervention during an economic crisis?

Creating long-term structural problems

Explanation

Over-intervention may lead to enduring structural issues.

What is the 'lender of last resort' role typically performed by central banks during an economic crisis?

Offering emergency liquidity to financial institutions

Explanation

Central banks provide emergency funds to financial institutions.

Which of the following is NOT a measure typically used to gauge the severity of an economic crisis?

Corporate tax rates

Explanation

Corporate tax rates are not primary indicators of crisis severity.

#10

Which economic theory advocates for minimal government intervention during an economic crisis?

Classical economics

Explanation

Classical economics suggests limited government involvement in crises.

#11

What role does fiscal policy play in government intervention during an economic crisis?

Manipulating government spending and taxation

Explanation

Fiscal policy involves adjusting government spending and taxes.

#12

What is the term for the situation where the collapse of one financial institution triggers the collapse of other interconnected institutions, leading to a broader financial meltdown?

Systemic risk

Explanation

Systemic risk involves interconnected collapses triggering a broader crisis.

#13

Which of the following is a characteristic of a liquidity trap?

High interest rates

Explanation

Liquidity traps are marked by persistent high interest rates.

#14

In the context of economic crises, what is 'moral hazard'?

The tendency for individuals to engage in risky behavior when insulated from its consequences

Explanation

Moral hazard refers to risks individuals take when shielded from consequences.

Economic Crisis and Government Intervention Quiz

During an economic crisis, what is the primary goal of government intervention?

Which factor is NOT a common indicator of an economic crisis?

What is the term for a prolonged period of economic decline, often characterized by high unemployment, stagnant wages, and low consumer confidence?

What is the term for a sudden and severe decline in the value of a currency relative to other currencies?

Which of the following is NOT a typical measure taken by governments during an economic crisis?

What is quantitative easing (QE) in the context of government intervention during an economic crisis?

Which of the following is a potential consequence of excessive government intervention during an economic crisis?

What is the 'lender of last resort' role typically performed by central banks during an economic crisis?

Which of the following is NOT a measure typically used to gauge the severity of an economic crisis?

Which economic theory advocates for minimal government intervention during an economic crisis?

What role does fiscal policy play in government intervention during an economic crisis?

What is the term for the situation where the collapse of one financial institution triggers the collapse of other interconnected institutions, leading to a broader financial meltdown?

Which of the following is a characteristic of a liquidity trap?

In the context of economic crises, what is 'moral hazard'?

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