#1
What does the Consumer Price Index (CPI) measure?
Inflation rate
ExplanationTracks changes in the cost of living for consumers.
#2
What is the primary goal of price stability in an economy?
To minimize inflation and deflation
ExplanationPromotes sustainable economic growth and confidence.
#3
Inflation is generally considered harmful to an economy because it:
Reduces the real value of money
ExplanationErodes purchasing power and distorts economic signals.
#4
What does the term 'deflation' refer to in economics?
A sustained decrease in the general price level
ExplanationLeads to falling wages, profits, and asset values.
#5
What is the main purpose of the unemployment rate as an economic indicator?
To measure the percentage of the labor force that is unemployed and actively seeking employment
ExplanationProvides insights into labor market conditions and economic health.
#6
What is the primary function of the Federal Reserve System in the United States?
Conducting monetary policy
ExplanationRegulates the money supply and interest rates to achieve economic goals.
#7
Which of the following is considered a lagging economic indicator?
Corporate profits
ExplanationReflects economic performance after changes have already occurred.
#8
What is the Phillips Curve used to illustrate?
The relationship between inflation and unemployment
ExplanationShows the trade-off between inflation and unemployment rates.
#9
Which of the following is NOT a leading economic indicator?
Industrial production index
ExplanationReacts to economic changes after they occur.
#10
What does the Producer Price Index (PPI) measure?
Changes in wholesale prices
ExplanationReflects the average change in selling prices received by producers.
#11
Which of the following is a measure of income inequality within a population?
Gini coefficient
ExplanationQuantifies the distribution of income among a population.
#12
Which of the following is NOT a component of the Consumer Price Index (CPI)?
Corporate profits
ExplanationCPI measures changes in consumer prices, not corporate profits.
#13
Which of the following is NOT a tool of monetary policy used by central banks to maintain price stability?
Fiscal stimulus
ExplanationFiscal policy involves government spending and taxation.
#14
Which of the following is NOT a component of the M1 money supply?
Savings accounts
ExplanationSavings accounts are part of M2 money supply.
#15
What is the relationship between the unemployment rate and price stability?
Higher unemployment leads to lower inflation
ExplanationLower demand for labor can reduce wage pressures.
#16
What effect does high inflation have on interest rates?
Interest rates increase
ExplanationCentral banks raise rates to curb inflation and stabilize currency.
#17
Which of the following is NOT a tool of fiscal policy used to influence the economy?
Open market operations
ExplanationOpen market operations are a tool of monetary policy.
#18
Which of the following is a potential consequence of high levels of debt in an economy?
Increased risk of default
ExplanationMay lead to credit rating downgrades and financial instability.