Economics CAF [6] Review!

Which role do banks primarily play in the economic system?

• Regulating the national economy directly

• Facilitating monetary transactions and providing loans

• Managing healthcare benefits for employees

• Conducting international diplomacy on trade

Answer explanation

Banks primarily play a role in facilitating monetary transactions and providing loans in the economic system.

What is the primary function of commercial banks in a modern economy?

• Setting governmental fiscal policies

• Issuing national currency

• Providing financial services such as deposits and loans

• Overseeing national defense strategies

Answer explanation

The primary function of commercial banks in a modern economy is providing financial services such as deposits and loans.

What economic impact can be expected if there is a decrease in the national savings rate?

• Increased investment in public infrastructure

• Higher interest rates on savings accounts

• Reduced availability of funds for business expansion

• Decreased government borrowing

Answer explanation

A decrease in the national savings rate would lead to reduced availability of funds for business expansion, as there would be less capital available for investment in businesses.

What is likely to happen in an economy when there is a significant increase in savings?

• Increased consumer debt levels

• Lower interest rates on loans

• More funds available for business investments

• Higher immediate consumer spending

Answer explanation

When there is a significant increase in savings, more funds become available for business investments, leading to potential economic growth and development.

What can investors generally expect from high-risk assets?

• Low returns

• High returns

• Stable returns

• No returns

Answer explanation

Investors can generally expect high returns from high-risk assets due to the potential for greater rewards in exchange for taking on more risk.

What is typically expected when investing in assets with low risk?

• High returns

• Moderate returns

• Low returns

• Variable returns

Answer explanation

When investing in assets with low risk, it is typically expected to receive low returns as a trade-off for the security and stability of the investment.

One potential risk from investing in the stock market is the loss of —

Which retirement plan is frequently matched by employer contributions?

• Traditional IRA

• Roth IRA

• 401(k)

• Certificate of Deposit

Answer explanation

Employer contributions are frequently matched with a 401(k) retirement plan, making it the correct choice.

Which of the following is commonly provided as a retirement savings option by employers?

• Stocks

• IRA

• 401(k)

• Savings account

Answer explanation

401(k) is commonly provided as a retirement savings option by employers.

What is a wise first step when trying to budget your income?

• buying luxury items

• seeking professional financial advice

• tracking your spending

Answer explanation

Tracking your spending is a wise first step when trying to budget your income as it helps you understand where your money is going and where you can make adjustments.