Key Economic Principles

What is the opportunity cost in financial planning?

• What was given up in order to have something else

• The cost of saving money

• The cost of borrowing money

• The cost of investing in stocks

What is the consequence of not saving for an emergency fund?

• Increased spending power

• Increased purchasing power

• Decreased sense of security

• No impact on financial plans

What principle states that if the marginal benefits of an action are greater than the marginal costs, the action should be undertaken?

• Opportunity cost principle

• Consequence principle

• Marginal analysis principle

• Scarcity principle

What is the effect of inflation on savings?

• Increases the interest rate on savings

• Increases the purchasing power of savings

• Decreases the purchasing power of savings

• No impact on savings

What is the best way to safeguard against the effects of unemployment on financial goals?

• Reducing spending

• Negotiating wage increases

• Building an emergency fund

• Investing in stocks and bonds

What is the primary way to safeguard against inflation in financial planning?

• Focusing on real interest rates

• Borrowing money at high interest rates

• Saving money in a regular savings account

• Investing in real estate

What is the effect of deflation on economic growth?

• Stabilizes economic growth

• Increases economic growth

• Has no impact on economic growth

• Decreases economic growth

What is the effect of monetary policy on interest rates?

• Monetary policy has no impact on interest rates

• Monetary policy increases interest rates

• Monetary policy decreases interest rates

• Monetary policy stabilizes interest rates

What is the purpose of monetary policy in combating inflation?

• To decrease interest rates

• To increase interest rates

• To discourage borrowing and encourage savings

• To encourage borrowing and discourage savings

What is the effect of unexpected inflation on borrowers?

• Borrowers have no impact on unexpected inflation

• Borrowers benefit from unexpected inflation

• Borrowers are not affected by unexpected inflation

• Borrowers are hurt by unexpected inflation