Fundamentals Domain Economics Practice Test 2025 – 400 Free Practice Questions to Pass the Exam

Question: 1 / 400

Which of these typically reduces consumer confidence?

Increasing wages

High unemployment rates

High unemployment rates typically reduce consumer confidence because they signal economic instability and uncertainty about the future. When people are unemployed, they are less likely to spend money, feeling insecure about their financial situation. This decline in consumer spending can create a negative cycle, leading businesses to hold back on investments and hiring, which can further dampen economic growth and perpetuate high unemployment.

In contrast, increasing wages creates a sense of financial security, stable inflation rates suggest predictability in prices, and low interest rates often encourage borrowing and spending. These factors typically contribute to greater consumer confidence rather than detract from it.

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Stable inflation rates

Low interest rates

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