Economics Final 2024-25 - Question 21

Under what circumstances would a consumer most likely take out a payday loan?

• to purchase materials for a home renovation

• to get quick cash to cover basic monthly expenses like rent

• to purchase a new car to commute to work each day

• to cover tuition expenses and course materials for university

A freelancer wants to build an emergency fund but is concerned that his income is inconsistent and is based on projects he gets to work on. What advice will be best for him to achieve his goals most efficiently?

• Get a loan to contribute to the emergency fund.

• Save unexpected tax refunds and birthday cash gifts.

• Start an emergency fund when he gets a salaried employment.

• Invest all earnings in high-return ventures to grow wealth quickly.

An individual wants to save $500 to buy a new bicycle in the next five months. Criteria for the account: • No risk, FDIC insured • Funds are accessible at any time • Low fees • No required minimum balance Which type of account best meets these criteria?

• A. A mutual fund

• B. A certificate of deposit

• C. A bank savings account

• D. A money market savings account

Which methods can lower the risk of losing money in investments?

• Investing in more than one type of asset

• Taking payday loans to have money to invest

• Holding on to investments for a long time

• Using high-value property as collateral to obtain money to invest

• Investing in high-return investments like cryptocurrency or venture capital

Why is investing in the stock market a good strategy for a young worker saving for retirement?

• Stocks are low-risk and provide a steady return.

• Stocks are guaranteed to consistently outperform bonds.

• Stocks are easier to access than money saved in certificates of deposit.

• Stocks provide a good return on investment in the long term despite the short-term risks.

What is one benefit of starting to invest money at a young age?

• Interest compounds over time.

• Accounts pay immediate returns.

• Early investing reduces investment risk.

• Investing early guarantees higher interest rates.

Which outcomes can result from an increase in income tax rates and tax revenues?

• A. Unemployment will decrease.

• B. Economic growth will increase.

• C. Interest rates will decrease.

• D. Aggregate demand will increase.

• E. Aggregate demand will decrease.

A poll of 100 economists found that most of them believe that an increase in government spending will lead to an inflationary gap. Which statement provides a rationale to support their belief?

• Increased aggregate supply will cause an increase in market prices.

• Decreased aggregate supply will cause an increase in market prices.

• Increased aggregate demand will cause an increase in market prices.

• Decreased aggregate demand will cause an increase in market prices.

A poll of 100 economists found that most of them believe that an increase in government spending will lead to an inflationary gap. Which statement provides a rationale to support their belief?

• Increased aggregate supply will cause an increase in market prices.

• Decreased aggregate supply will cause an increase in market prices.

• Increased aggregate demand will cause an increase in market prices.

• Decreased aggregate demand will cause an increase in market prices.

How will the economy be affected if the inflation level is greater than the target inflation rate?

• The economy will become less efficient because inflation will cause economic output to decrease.

• The economy will become less efficient because inflation will lead to an increased redistribution of wealth and income.

• The economy will become more efficient because there will be increased purchasing power for consumers.

• The economy will become more efficient because businesses and consumers will try to protect themselves more against inflation.