FBLA Economics and Personal Finance 2 — Questions and Answers
Question 1: What is the 'law of supply' in economics?
- As price increases, quantity supplied decreases
- As price increases, quantity supplied increases (Correct answer)
- Supply is always equal to demand
- Producers supply more when costs rise
Correct answer: As price increases, quantity supplied increases
The law of supply states that producers will offer more of a good at higher prices, all else being equal.
Question 2: Which type of account typically offers the highest interest rate but requires keeping money deposited for a fixed term?
- Checking account
- Savings account
- Certificate of Deposit (CD) (Correct answer)
- Money market account
Correct answer: Certificate of Deposit (CD)
A Certificate of Deposit locks in funds for a set period in exchange for a guaranteed, often higher, interest rate.
Question 3: What is 'diversification' in personal investing?
- Putting all money into one high-performing stock
- Spreading investments across different asset types to reduce risk (Correct answer)
- Investing only in government bonds
- Withdrawing investments when markets fall
Correct answer: Spreading investments across different asset types to reduce risk
Diversification reduces risk by distributing investments across various assets, so poor performance in one area is offset by others.
Question 4: What does GDP stand for and what does it measure?
- Gross Domestic Product; total value of goods and services produced in a country (Correct answer)
- General Domestic Price; average price of consumer goods
- Government Debt Payment; total national debt repayments
- Gross Deposit Pool; total bank deposits nationwide
Correct answer: Gross Domestic Product; total value of goods and services produced in a country
GDP (Gross Domestic Product) measures the total monetary value of all goods and services produced within a country in a given period.
Question 5: Which of the following is considered a 'liquid' asset?
- Real estate
- Long-term government bonds
- Cash in a checking account (Correct answer)
- Collectible artwork
Correct answer: Cash in a checking account
Cash in a checking account is immediately accessible and can be used for transactions without conversion, making it highly liquid.
Question 6: What is compound interest?
- Interest calculated only on the original principal
- Interest earned on both the principal and previously earned interest (Correct answer)
- A fixed interest payment regardless of balance
- Interest charged on overdue credit card payments only
Correct answer: Interest earned on both the principal and previously earned interest
Compound interest accumulates on both the initial principal and the interest already earned, causing growth to accelerate over time.
FBLA Economics and Personal Finance 2
What is the 'law of supply' in economics?