Understanding Basic Economics

What is the law of demand?

• The law of demand indicates that quantity supplied increases as price decreases.

• The law of demand suggests that higher prices lead to higher demand.

• The law of demand indicates that price and quantity demanded are inversely related.

• The law of demand states that price and quantity demanded are directly related.

How does an increase in supply affect prices?

• An increase in supply causes prices to stabilize.

• An increase in supply generally leads to a decrease in prices.

• An increase in supply has no effect on prices.

• An increase in supply leads to higher prices.

What are the four main types of market structures?

• Perfect competition, monopolistic competition, oligopoly, monopoly

• Monopoly, duopoly, oligopoly, perfect competition

• Perfect monopoly, oligopolistic competition, duopoly, perfect competition

• Monopolistic monopoly, perfect competition, oligopoly, market failure

Define a monopoly.

• A monopoly occurs when a government regulates the prices of goods and services.

• A monopoly is defined as a situation where consumers have unlimited choices in the market.

• A monopoly is a market structure characterized by a single seller dominating the market for a particular good or service.

• A monopoly is a market structure with multiple sellers competing for the same good.

What is the difference between a command economy and a market economy?

• A command economy relies on free trade, while a market economy is government-controlled.

• A command economy is based on individual choices, while a market economy is centrally planned.

• A command economy focuses on competition, while a market economy prioritizes regulation.

• A command economy is government-controlled, while a market economy is driven by supply and demand.

What is inflation?

• Inflation is the process of reducing the money supply to stabilize prices.

• Inflation is the decrease in prices and increase in the purchasing value of money.

• Inflation is the increase in prices and fall in the purchasing value of money.

• Inflation refers to the total amount of money in circulation without any price changes.

What causes deflation?

• A surge in consumer confidence

• Deflation is caused by a decrease in money supply, reduced consumer demand, or increased productivity.

• Higher interest rates

• Increased government spending

How does the central bank control inflation?

• By increasing government spending

• By implementing price controls on goods

• The central bank controls inflation by adjusting interest rates and managing the money supply.

• By lowering taxes on businesses

What is fiscal policy?

• Fiscal policy is the government's approach to managing the economy through spending and taxation.

• Fiscal policy refers to the central bank's control of interest rates.

• Fiscal policy is the regulation of money supply by the government.

• Fiscal policy is the government's strategy for international trade agreements.

How does government spending affect the economy?

• Government spending only benefits large corporations and not the general public.

• Government spending positively affects the economy by boosting demand and creating jobs.

• Government spending decreases demand and leads to job losses.

• Increased government spending has no impact on the economy.