Economic Interventions and Market Dynamics Quiz

Fiscal policy involves government manipulation of its spending and taxation to influence the economy.

Monetary policy aims to regulate the money supply to achieve economic stability.

Expansionary fiscal policy aims to boost economic activity by increasing government spending or reducing taxes.

Inflation erodes the value of money over time, reducing what it can buy.

Perfect competition entails numerous buyers and sellers with homogeneous products, facilitating price competition.

Central banks regulate money supply, interest rates, and banking systems to achieve economic objectives.

Market failure occurs when markets do not efficiently allocate resources, leading to inefficiencies and potential welfare loss.

The concept coined by Adam Smith implies self-regulating markets benefit society as if guided by an 'invisible hand.'

Classical economics holds that free markets regulate themselves without government interference.

Supply-side policies focus on increasing production and economic growth by incentivizing investment, often through tax cuts.

Trade protectionism aims to shield domestic industries from foreign competitors through tariffs, quotas, or other barriers.

The Gini coefficient quantifies income or wealth inequality within a population.

Antitrust laws aim to ensure fair competition and prevent the formation of monopolies or oligopolies.

GDP represents the sum of all goods and services produced within a country's borders within a specific time frame.

Central banks buy or sell government securities to control money supply and interest rates.

The Phillips Curve suggests an inverse relationship between inflation and unemployment rates.

Central banks mandate commercial banks to hold a certain proportion of deposits as reserves to control money supply.

Keynesian economics recommends government intervention, particularly through fiscal policy, to address economic fluctuations.

Countries should specialize in producing goods where they have a comparative advantage, meaning they can produce at a lower opportunity cost compared to other countries.