Economic Theories and Financial Advice

1. What is the basic principle of supply and demand?

• It determines government policies.

• It sets the price based on the relationship between supply and demand

• It is unrelated to market prices.

• It increases the supply of goods.

1. What does Keynesian economics advocate during an economic downturn?

• Reducing government spending.

• Increasing government spending and decreasing taxes.

• Increasing interest rates.

• Implementing free-market policies.

1. How do classical economists view government intervention?

• As essential for economic stability.

• As beneficial for market efficiency.

• As leading to inefficiencies and market distortions.

• As necessary only during recessions.

1. What is the role of central banks in monetary policy?

• To regulate government spending.

• To manage interest rates and the money supply.

• To control fiscal policies.

• To decrease taxes during economic booms.

1. What is a key strategy for managing investment risk?

• Investing all money in one stock.

• • Avoiding any investments.

• Diversifying the investment portfolio.

• Only investing in real estate.