Recession and Economic Mechanisms Quiz
48 Questions
1 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

Which aspect of economics will be the focus of the workshop next week?

  • Risk sessions
  • Monetary supply
  • International economics
  • Corporations (correct)

    • What should one be able to explain well in order to do well in economic debates?

  • Basic mechanisms without relying on jargon (correct)
  • Fluffy analysis without concrete evidence
  • Social justice debates
  • Confidence and incentives

    • What is the main reason why money is valuable in an economy?

  • Money is a symbol of power
  • Money can be used to purchase goods and services (correct)
  • Money has inherent value
  • Money is a representation of economic well-being

    • What are a lot of economic debates about, according to the speaker?

    <p>Individual actor analysis</p> Signup and view all the answers

    Which of the following is a reason why inflation doesn't happen as much now?

    <p>Companies are hiring fewer people due to automation</p> Signup and view all the answers

    What is the definition of deflation?

    <p>A decrease in the price of goods and services</p> Signup and view all the answers

    Why is deflation considered bad for the economy?

    <p>It leads to unemployment and reduced spending</p> Signup and view all the answers

    Why do companies have to keep lowering prices during deflation?

    <p>To stimulate spending</p> Signup and view all the answers

    Which of the following is NOT a reason why inflation happens?

    <p>Companies raise prices to out-compete their competitors</p> Signup and view all the answers

    What is the ideal target for inflation according to central banks?

    <p>Two percent</p> Signup and view all the answers

    Why is deflation considered worse than inflation?

    <p>There are fewer tools to deal with deflation</p> Signup and view all the answers

    What is the main concern when inflation leads to hyperinflation?

    <p>Money loses value rapidly</p> Signup and view all the answers

    Which action can governments take to prevent a company from failing during a recession?

    <p>Bailout</p> Signup and view all the answers

    What is the difference between a bailout and a bail-in?

    <p>In a bailout, the government pays off the company's debt, while in a bail-in, the debt is cancelled.</p> Signup and view all the answers

    Why do governments sometimes choose to bail out companies during a recession?

    <p>To prevent a ripple effect of other companies failing</p> Signup and view all the answers

    What is the main concern for banks during a recession?

    <p>Lack of available money due to loans and investments</p> Signup and view all the answers

    During a recession, economic activity is declining because people are not buying and selling goods. What are some reasons that can cause a recession?

    <p>Financial crisis, adverse supply shock, and natural disasters</p> Signup and view all the answers

    Which of the following is a consequence of losing confidence during a recession?

    <p>Increased saving and decreased spending</p> Signup and view all the answers

    What is the impact of deflationary spirals during a recession?

    <p>They make it harder to recover from recessions</p> Signup and view all the answers

    In terms of economic crisis, what was the motion discussed at KCL Open?

    <p>The government should withhold information that is likely to damage market confidence</p> Signup and view all the answers

    What is the main difference between bailouts and bail-ins?

    <p>Bailouts put the burden of debt on the government, while bail-ins put it on the creditors.</p> Signup and view all the answers

    Why might bail-ins also result in a loss for taxpayers?

    <p>Because hedge funds are often responsible for pension funds, and if those pension funds are creditors and lose money, it affects the government's pension funds.</p> Signup and view all the answers

    Why might creditors feel invulnerable in the case of bailouts?

    <p>Because bailouts put the burden of debt on the government, which guarantees that the creditors will get their debt paid.</p> Signup and view all the answers

    When are bailouts considered to be more suitable than bail-ins?

    <p>When the events leading to the financial crisis were unexpected and couldn't have been predicted by the creditors.</p> Signup and view all the answers

    Why are recessions considered bad for the economy?

    <p>They cause deflationary spirals</p> Signup and view all the answers

    What are some reasons that can cause a recession?

    <p>Lack of confidence</p> Signup and view all the answers

    What is the main concern for banks during a recession?

    <p>Loss of market confidence</p> Signup and view all the answers

    What was the motion discussed at KCL Open in terms of economic crisis?

    <p>The government should withhold information that is likely to damage market confidence</p> Signup and view all the answers

    What is the main reason why companies eventually need to raise prices during inflation?

    <p>To keep up with the demand for their products</p> Signup and view all the answers

    Why do central banks target inflation at around two percent?

    <p>To prevent deflation</p> Signup and view all the answers

    What is the main concern when inflation leads to hyperinflation?

    <p>Decrease in purchasing power</p> Signup and view all the answers

    Why is deflation considered worse than inflation?

    <p>It causes a decrease in purchasing power</p> Signup and view all the answers

    What is the focus of the workshop next week?

    <p>Discussing international economics</p> Signup and view all the answers

    According to the speaker, why are economic debates easier to analyze compared to social justice debates?

    <p>The analysis in economic debates is more concrete</p> Signup and view all the answers

    What is the main factor that determines the value of money in an economy?

    <p>The confidence of people in the economy</p> Signup and view all the answers

    What is the observation made by the speaker regarding economic debates about recessions and crises?

    <p>They often focus on individual actor analysis</p> Signup and view all the answers

    Why does inflation lead to shortages of goods?

    <p>People hoard goods because they fear their money will lose value.</p> Signup and view all the answers

    What are two reasons mentioned in the text for why inflation doesn't happen as much now?

    <p>Automation and a large labor pool with lower labor costs.</p> Signup and view all the answers

    Why is deflation considered bad for the economy?

    <p>Companies lower prices, leading to decreased sales and job losses.</p> Signup and view all the answers

    What is one reason mentioned in the text for why deflation becomes cyclical and worsens over time?

    <p>People expect prices to continue decreasing, so they delay purchases.</p> Signup and view all the answers

    Which of the following actions can governments take to respond to a recession?

    <p>Bail out companies in financial distress</p> Signup and view all the answers

    What is the difference between a bailout and a bail-in?

    <p>A bailout involves canceling the company's debt, while a bail-in involves paying off the debt</p> Signup and view all the answers

    Why do governments choose to bail out companies during a recession?

    <p>To prevent a ripple effect of company failures</p> Signup and view all the answers

    What is the main concern when people lose confidence in a bank during a recession?

    <p>The bank's ability to pay back depositors</p> Signup and view all the answers

    What is the main difference between bailouts and bail-ins?

    <p>Bailouts put the onus of debt on the government, while bail-ins put the onus of debt on the creditors</p> Signup and view all the answers

    What is the potential consequence of a bail-in, according to the text?

    <p>Taxpayers may lose money indirectly through pension funds</p> Signup and view all the answers

    Why might creditors feel invulnerable in the case of bailouts?

    <p>Because the government guarantees their debt payment</p> Signup and view all the answers

    When are bailouts considered to be more suitable than bail-ins, according to the text?

    <p>During unexpected events</p> Signup and view all the answers

    More Like This

    Use Quizgecko on...
    Browser
    Open
    Browser
    Browser