Economics Quiz

What does the circular flow model illustrate?

• How suppliers make supplies.

• How governments make decisions about PPC’s.

• How households, firms, and governments interact in the economy.

• The likelihood of demand being influenced by pricing changes.

Answer explanation

The circular flow model illustrates the interactions between households, firms, and governments in the economy, showing how they exchange goods, services, and resources, making it the correct choice.

Which of the following is the best definition of a financial exchange?

• Trading one type of currency for another.

• Making an update to the design of a certain type of currency.

• Transferring money between parties in exchange for goods or services.

• A market for the sale of goods.

Answer explanation

A financial exchange primarily involves transferring money between parties in exchange for goods or services, making this the best definition. The other options do not capture the essence of a financial exchange.

Which of the following is NOT included in the equation to calculate simple interest?

• The principal

• The interest rate

• The time

• The desired return on investment

Answer explanation

The desired return on investment is not part of the simple interest formula, which only includes the principal, interest rate, and time. Simple interest is calculated as I = PRT, where I is interest, P is principal, R is rate, and T is time.

What is saving?

• The act of setting aside a portion of one's income or resources for future use.

• The act of allocating money or resources with the expectation of generating a profit or return in the future.

• The act of spending money now to fulfill needs.

• The act of purchasing property with the hope that it will appreciate in value at a later date.

Answer explanation

Saving is defined as the act of setting aside a portion of one's income or resources for future use, distinguishing it from spending or investing.

Tracking income and _______ and reconciling financial records are crucial aspects of maintaining good financial health.

Answer explanation

Tracking income and expenses is essential for financial health, as it allows individuals and businesses to understand their financial situation and make informed decisions.

What is a production-possibilities curve?

• The amount of a good or service that producers are willing and able to offer for sale at a given price.

• The amount of a good or service that consumers are willing and able to purchase at a given price.

• The point when the quantity supplied and the quantity demanded are equal at a certain price.

• A graphical representation of the different combinations of two goods that a country, a firm, or an individual can produce given a fixed set of resources and technology.

Answer explanation

A production-possibilities curve illustrates the maximum output combinations of two goods that can be produced with limited resources and technology, highlighting trade-offs and opportunity costs in production.

What is the definition of income?

• The work someone does at their job.

• The money spent on expenses that are planned for.

• Money spent on unplanned expenses such as an emergency trip to the hospital.

• The money that a person or entity receives in exchange for their labor or products.

Answer explanation

Income is defined as the money that a person or entity receives in exchange for their labor or products, making this choice the correct definition. The other options describe work or expenses, not income.

What is insurance for?

Answer explanation

Insurance is designed to provide financial protection against potential losses or damages, helping individuals and businesses manage risk and recover from unforeseen events.

________ is a legal process in which individuals or organizations who are unable to repay their debts can seek protection from their creditors.

Answer explanation

Bankruptcy is the legal process that allows individuals or organizations unable to repay their debts to seek protection from creditors, providing a way to manage or eliminate debts.

What is another name for a Pure Market system?

• Capitalism

• Socialism

• Communism

• Marketism

Answer explanation

A Pure Market system is characterized by minimal government intervention and private ownership of resources, which aligns with the principles of Capitalism. Therefore, another name for a Pure Market system is Capitalism.