Economic Principles and Financial Systems Quiz

Private individuals and businesses own property and make economic decisions.

Consumer savings are not included in GDP calculations as they are not considered a final good or service.

In a command economy, economic decisions are made by a central authority, typically the government.

Pareto efficiency occurs when resources are allocated in a way that no one can be made better off without making someone else worse off.

Opportunity cost is the value of the next best alternative forgone in order to pursue a certain action.

Central banks are responsible for issuing currency and regulating the money supply.

Austrian economics emphasizes the importance of free markets and minimal government intervention.

Hyperinflation is an extremely high and typically accelerating inflation.

CPI measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

A recession is a significant decline in economic activity spread across the economy, lasting for a prolonged period.

Central banks use interest rates to control the money supply and achieve economic objectives.

Price elasticity of demand measures the responsiveness of quantity demanded to changes in price.

Demand-pull inflation occurs when demand for goods and services exceeds supply, leading to higher prices.

Arbitrage involves buying and selling assets to profit from price differences in different markets.

A trade deficit occurs when a country imports more goods and services than it exports.

Liquidity refers to the ease with which an asset can be converted into cash without affecting its market price.

Exchange rate is the price of one currency in terms of another currency.

A bond is a debt security issued by a borrower to raise capital with a promise to repay the principal along with interest on a specified date.

Money serves as a medium of exchange, unit of account, store of value, and standard of deferred payment, but not as a unit of labor.