1. Which of the following best describes the concept of GDP
deflator?
a) Measures the change in the overall price level of goods
and services
b) Measures the change in real GDP over time
c) Measures the change in the nominal GDP over time
d) Measures the change in the unemployment rate
Answer: a) Measures the change in the overall price level of
goods and services
2. What is the formula for calculating the unemployment rate?
a) Number of unemployed / Total labor force
b) Number of employed / Total labor force
c) Number of unemployed / Total population
d) Number of employed / Total population
Answer: a) Number of unemployed / Total labor force
3. Which of the following is an example of an automatic
stabilizer?
a) Expansionary fiscal policy during a recession
b) A decrease in interest rates by the central bank
c) Progressive income tax system
d) A decrease in government spending during an economic
expansion
Answer: c) Progressive income tax system
4. The aggregate demand curve shows the relationship between:
a) The price level and the quantity of goods and services
demanded
b) The price level and the quantity of goods and services
supplied
c) Inflation and unemployment rates
d) Government spending and taxation
Answer: a) The price level and the quantity of goods and
services demanded
5. Which of the following is an example of an expansionary
monetary policy?
a) Decreasing government spending
b) Increasing taxes
c) Decreasing the money supply
d) Decreasing interest rates
Answer: d) Decreasing interest rates
6. The natural rate of unemployment is the:
a) Rate of unemployment that prevails when the economy is at
full employment
b) Rate of unemployment caused by changes in the business
cycle
c) Rate of unemployment caused by seasonal factors
d) Rate of unemployment caused by cyclical factors
Answer: a) Rate of unemployment that prevails when the
economy is at full employment
7. Which of the following is a component of aggregate
expenditure in the economy?
a) Net exports
b) Government transfers
c) Private savings
d) Tax revenues
Answer: a) Net exports
8. The crowding-out effect refers to:
a) An increase in government spending leading to higher
private investment
b) A decrease in government spending leading to lower
interest rates
c) An increase in government borrowing leading to higher
interest rates and reduced private investment
d) A decrease in government borrowing leading to lower
interest rates and increased private investment
Answer: c) An increase in government borrowing leading to
higher interest rates and reduced private investment
9. The production possibilities frontier (PPF) represents:
a) The maximum combination of goods an economy can produce
given its resources and technology
b) The maximum combination of goods an economy can consume
given its resources and technology
c) The equilibrium point where aggregate demand equals
aggregate supply
d) The level of output that maximizes social welfare
Answer: a) The maximum combination of goods an economy can
produce given its resources and technology
10. Which of the following is a characteristic of a recessionary
gap in the economy?
a) Actual GDP exceeds potential GDP
b) Actual GDP is below potential GDP
c) Inflationary pressures are high
d) Unemployment rate is low
Answer: b) Actual GDP is below potential GDP
11. The term “stagflation” refers to a situation where:
a) There is high inflation and low unemployment
b) There is high inflation and high unemployment
c) There is low inflation and low unemployment
d) There is low inflation and high unemployment
Answer: b) There is high inflation and high unemployment
12. The Phillips curve illustrates the relationship between:
a) Inflation and interest rates
b) Inflation and unemployment
c) Government spending and GDP
d) Taxes and economic growth
Answer: b) Inflation and unemployment
13. The term “crowding-in effect” refers to a
situation where:
a) Increased government spending leads to increased private
investment
b) Increased government spending leads to decreased private
investment
c) Increased government borrowing leads to decreased
interest rates
d) Decreased government borrowing leads to increased
interest rates
Answer: a) Increased government spending leads to increased
private investment
14. The concept of “comparative advantage” in
international trade suggests that:
a) A country should focus on producing goods in which it has
the highest absolute advantage
b) A country should focus on producing goods in which it has
the lowest opportunity cost
c) A country should focus on producing goods that are in
high demand in the global market
d) A country should focus on producing goods that require
the least amount of resources
Answer: b) A country should focus on producing goods in
which it has the lowest opportunity cost
15. The term “liquidity trap” refers to a situation
where:
a) Interest rates are very high, discouraging investment and
spending
b) Interest rates are very low, making monetary policy
ineffective
c) The money supply is very low, causing deflation
d) The money supply is very high, causing hyperinflation
Answer: b) Interest rates are very low, making monetary
policy ineffective
16. The concept of “marginal propensity to consume
(MPC)” refers to:
a) The percentage of additional income that is spent on
consumption
b) The percentage of additional income that is saved
c) The total amount of income spent on consumption
d) The total amount of income saved
Answer: a) The percentage of additional income that is spent
on consumption
17. The term “disinflation” refers to:
a) A decrease in the inflation rate
b) A temporary decrease in the price level
c) A decrease in the money supply
d) A decrease in government spending
Answer: a) A decrease in the inflation rate
18. The term “aggregate supply” refers to the total:
a) Quantity of goods and services demanded in the economy at
a given price level
b) Quantity of goods and services supplied in the economy at
a given price level
c) Quantity of money in circulation in the economy
d) Value of exports minus imports in the economy
Answer: b) Quantity of goods and services supplied in the
economy at a given price level
19. The concept of “automatic stabilizers” refers to:
a) Government policies that automatically stabilize the
economy during recessions and expansions
b) Monetary policies implemented by the central bank to
stabilize the money supply
c) Automatic adjustments in interest rates to stabilize
inflation
d) Automatic adjustments in tax rates to stabilize
government revenue
Answer: a) Government policies that automatically stabilize
the economy during recessions and expansions
20. The term “fiscal policy” refers to the
government’s use of:
a) Monetary tools to control the money supply
b) Taxation and government spending to influence the economy
c) Exchange rate policies to stabilize the currency
d) Trade policies to regulate imports and exports
Answer: b) Taxation and government spending to influence the
economy
21. The term “marginal propensity to save (MPS)”
refers to:
a) The percentage of additional income that is saved
b) The percentage of additional income that is spent on
consumption
c) The total amount of income saved
d) The total amount of income spent on saving
Answer: a) The percentage of additional income that is saved
22. The term “liquidity” refers to:
a) The ease with which an asset can be converted into cash
b) The overall level of inflation in an economy
c) The total amount of money in circulation
d) The total amount of savings in an economy
Answer: a) The ease with which an asset can be converted
into cash
23. The term “aggregate demand” represents the total:
a) Quantity of goods and services demanded in the economy at
a given price level
b) Quantity of goods and services supplied in the economy at
a given price level
c) Quantity of money in circulation in the economy
d) Value of exports minus imports in the economy
Answer: a) Quantity of goods and services demanded in the
economy at a given price level
24. The term “opportunity cost” refers to:
a) The monetary cost of producing a good or service
b) The cost of forgoing the next best alternative when
making a decision
c) The total cost of inputs used in production
d) The cost of inputs needed to produce an additional unit
of a good or service
Answer: b) The cost of forgoing the next best alternative
when making a decision
25. The term “trade deficit” refers to a situation where:
a) The value of a country’s exports exceeds the value of its
imports
b) The value of a country’s imports exceeds the value of its
exports
c) The value of a country’s currency is stronger relative to
other currencies
d) The value of a country’s currency is weaker relative to
other currencies
Answer: b) The value of a country’s imports exceeds the
value of its exports
26. The term “real interest rate” refers to:
a) The interest rate adjusted for inflation
b) The interest rate set by the central bank
c) The interest rate on short-term loans
d) The interest rate on long-term investments
Answer: a) The interest rate adjusted for inflation
27. The term “deficit spending” refers to:
a) Government spending that exceeds tax revenue
b) Government spending that is equal to tax revenue
c) Government spending that is lower than tax revenue
d) Government spending that is used for investment purposes
Answer: a) Government spending that exceeds tax revenue
28. The term “money multiplier” refers to:
a) The ratio of the money supply to the level of economic
output
b) The ratio of bank reserves to the money supply
c) The ratio of government spending to tax revenue
d) The ratio of imports to exports in an economy
Answer: b) The ratio of bank reserves to the money supply
29. The term “monetary policy” refers to the actions
taken by the:
a) Government to regulate international trade
b) Central bank to control the money supply and interest
rates
c) Government to control fiscal deficits
d) Central bank to regulate exchange rates
Answer: b) Central bank to control the money supply and
interest rates
30. The term “economic growth” refers to an increase
in:
a) The overall price level in an economy
b) The unemployment rate in an economy
c) The level of government spending in an economy
d) The production of goods and services in an economy over
time
Answer: d) The production of goods and services in an
economy over time
31. The term “cost-push inflation” refers to inflation
caused by:
a) An increase in aggregate demand in the economy
b) A decrease in aggregate demand in the economy
c) An increase in the costs of production, such as wages or
raw materials
d) A decrease in the costs of production, such as wages or
raw materials
Answer: c) An increase in the costs of production, such as
wages or raw materials
32. The term “economic equilibrium” refers to a state
where:
a) Supply and demand in the economy are perfectly balanced
b) The economy is experiencing high levels of inflation
c) The government intervenes to control prices in the market
d) Unemployment rate is at its lowest level
Answer: a) Supply and demand in the economy are perfectly
balanced
33. The term “structural unemployment” refers to
unemployment caused by:
a) A temporary downturn in the business cycle
b) Technological advancements that make certain jobs
obsolete
c) Insufficient aggregate demand in the economy
d) Inadequate government policies to stimulate economic
growth
Answer: b) Technological advancements that make certain jobs
obsolete
34. The term “disposable income” refers to:
a) The total income earned by individuals in an economy
b) The income after taxes and transfers that individuals
have available for spending or saving
c) The income earned by households before accounting for
taxes
d) The income earned by corporations and businesses in an
economy
Answer: b) The income after taxes and transfers that individuals
have available for spending or saving
35. The term “commodity money” refers to:
a) Money that has no intrinsic value and is authorized by
the government
b) Money that is backed by a commodity, such as gold or
silver
c) Money that is used for international transactions
d) Money that is in the form of paper currency and coins
Answer: b) Money that is backed by a commodity, such as gold
or silver
36. The term “supply-side economics” emphasizes
policies that focus on:
a) Increasing government spending and investment to
stimulate demand in the economy
b) Reducing taxes and regulations to incentivize production
and investment
c) Controlling inflation through monetary policy and
interest rate adjustments
d) Implementing redistributive policies to reduce income
inequality
Answer: b) Reducing taxes and regulations to incentivize
production and investment
37.The term “trade surplus” refers to a situation
where:
a) The value of a country’s exports exceeds the value of its
imports
b) The value of a country’s imports exceeds the value of its
exports
c) The value of a country’s currency is stronger relative to
other currencies
d) The value of a country’s currency is weaker relative to
other currencies
Answer: a) The value of a country’s exports exceeds the
value of its imports
38. The term “economic recession” is typically defined
as a period of at least two consecutive quarters of:
a) Falling real GDP
b) Rising real GDP
c) Falling inflation
d) Rising inflation
Answer: a) Falling real GDP
39. The term “marginal propensity to import (MPI)”
refers to:
a) The percentage of additional income that is saved
b) The percentage of additional income that is spent on
imports
c) The total amount of income saved
d) The total amount of income spent on imports
Answer: b) The percentage of additional income that is spent
on imports
40. The term “capital formation” refers to the:
a) Process of creating new physical capital goods
b) Process of creating new financial capital assets
c) Accumulation of physical and financial capital in an
economy
d) Exchange of physical and financial capital assets between
countries
Answer: c) Accumulation of physical and financial capital in
an economy
41. The term “business cycle” refers to:
a) The fluctuations in economic activity around its
long-term trend
b) The long-term growth trajectory of an economy
c) The level of unemployment in an economy
d) The overall level of inflation in an economy
Answer: a) The fluctuations in economic activity around its
long-term trend
42. The term “open market operations” refers to the
buying and selling of:
a) Foreign currencies by the central bank
b) Government bonds by the central bank
c) Stocks and shares in the financial market
d) Commodities in international trade
Answer: b) Government bonds by the central bank
43. The term “economic inequality” refers to:
a) The unequal distribution of income and wealth in a
society
b) The equal distribution of income and wealth in a society
c) The difference between nominal and real GDP in an economy
d) The difference between gross investment and net
investment in an economy
Answer: a) The unequal distribution of income and wealth in
a society
44. The term “hyperinflation” refers to a situation
where:
a) Inflation is very low or close to zero
b) Inflation is moderate and stable
c) Inflation is extremely high and rapidly accelerating
d) Inflation is negative, leading to deflation
Answer: c) Inflation is extremely high and rapidly
accelerating
45. The term “moral hazard” refers to a situation
where:
a) People change their behavior based on their expectations
of future events
b) The government intervenes in the economy to correct
market failures
c) The central bank adjusts interest rates to control
inflation
d) Individuals or institutions take excessive risks due to
the expectation of being bailed out
Answer: d) Individuals or institutions take excessive risks
due to the expectation of being bailed out
46. The term “inflation targeting” refers to a
monetary policy framework that aims to:
a) Stabilize exchange rates in the foreign exchange market
b) Maintain a fixed money supply in the economy
c) Achieve a specific inflation rate as the primary policy
goal
d) Stimulate economic growth through expansionary fiscal
policy
Answer: c) Achieve a specific inflation rate as the primary
policy goal
47. The term “cost of living index” measures changes in
the:
a) Average price level of a fixed basket of goods and
services over time
b) Rate of unemployment in an economy
c) Gross domestic product (GDP) of a country
d) Interest rates charged by banks
Answer: a) Average price level of a fixed basket of goods
and services over time
48. The term “aggregate expenditure” refers to the
total spending in an economy on:
a) Consumption, investment, government purchases, and net
exports
b) Consumption and savings by households
c) Investment and government purchases only
d) Consumption and exports only
Answer: a) Consumption, investment, government purchases,
and net exports
49. The term “inflation rate” is defined as the:
a) Rate at which the price level is increasing in the economy
b) Rate at which the money supply is increasing in the
economy
c) Rate at which the unemployment rate is changing in the
economy
d) Rate at which the gross domestic product (GDP) is growing
in the economy
Answer: a) Rate at which the price level is increasing in
the economy
50. The term “economic downturn” is characterized by a
period of:
a) Decreasing government spending and investment
b) Increasing levels of inflation and price levels
c) Falling levels of economic output and employment
d) Rising levels of economic growth and productivity
Answer: c) Falling levels of economic output and employment
51. The term “monopoly” refers to a market structure
in which:
a) There are many buyers and sellers, and no single buyer or
seller can influence the market price
b) There are only a few sellers, and they have significant
control over the market price
c) There is a single buyer or seller who has complete
control over the market price
d) There is no competition, and the market price is
determined by the government
Answer: b) There are only a few sellers, and they have
significant control over the market price
52. The term “economic efficiency” refers to a
situation where:
a) The government controls the allocation of resources in
the economy
b) The production of goods and services is maximized
c) Income and wealth are distributed equally in the economy
d) Resources are allocated in a way that maximizes the
overall welfare or satisfaction of individuals
Answer: d) Resources are allocated in a way that maximizes
the overall welfare or satisfaction of individuals
53. The term “Gini coefficient” is a measure of:
a) Economic growth and development in a country
b) Income inequality in a country
c) Inflation and price stability in a country
d) Unemployment rates in a country
Answer: b) Income inequality in a country
54. The term “financial intermediaries” refer to
institutions that:
a) Facilitate the buying and selling of financial assets,
such as stocks and bonds
b) Regulate and supervise the banking industry
c) Provide loans and credit to individuals and businesses
d) Serve as intermediaries between savers and borrowers,
channeling funds from savers to borrowers
Answer: d) Serve as intermediaries between savers and borrowers,
channeling funds from savers to borrowers
55. The term “economic globalization” refers to:
a) The process of reducing international trade and
increasing barriers to cross-border transactions
b) The integration of national economies through the flow of
goods, services, capital, and information
c) The focus on domestic production and self-sufficiency in
an economy
d) The regulation and control of international financial
markets by supranational organizations
Answer: b) The integration of national economies through the
flow of goods, services, capital, and information
57. The term “capital flight” refers to the:
a) Outflow of financial capital from a country due to
economic instability or political uncertainty
b) Inflow of foreign direct investment (FDI) into a
country’s productive sectors
c) Increase in government spending and investment to
stimulate the economy
d) Rise in domestic savings and investment rates in an
economy
Answer: a) Outflow of financial capital from a country due
to economic instability or political uncertainty
58. The term “consumer price index (CPI)” measures
changes in the:
a) Average wages and salaries in an economy
b) Total value of goods and services produced in an economy
c) Average price level of a fixed basket of consumer goods
and services over time
d) Unemployment rate in an economy
Answer: c) Average price level of a fixed basket of consumer
goods and services over time
59. The term “crowding out” refers to a situation
where:
a) Government spending increases, leading to a decrease in
private investment
b) Private investment increases, leading to a decrease in
government spending
c) Consumption increases, leading to a decrease in
investment
d) Savings increase, leading to a decrease in consumption
Answer: a) Government spending increases, leading to a
decrease in private investment
60. The term “foreign exchange market” is where:
a) Stocks and bonds are traded between buyers and sellers
b) Goods and services are exchanged between domestic and foreign
markets
c) Currencies are bought and sold by market participants
d) Commodities are traded in international markets
Answer: c) Currencies are bought and sold by market
participants
61. The term “economic stimulus” refers to:
a) Policies aimed at reducing government spending and
taxation
b) Measures taken by the government to increase aggregate
demand and stimulate economic growth
c) Programs that focus on reducing income inequality in
society
d) Monetary policies implemented by the central bank to
control inflation
Answer: b) Measures taken by the government to increase
aggregate demand and stimulate economic growth
62. The term “cost-push inflation” refers to inflation
caused by:
a) An increase in aggregate demand in the economy
b) A decrease in aggregate demand in the economy
c) An increase in the costs of production, such as wages or
raw materials
d) A decrease in the costs of production, such as wages or
raw materials
Answer: c) An increase in the costs of production, such as wages
or raw materials
63. The term “opportunity cost” refers to the:
a) Monetary cost of producing a good or service
b) Total cost of inputs used in production
c) Value of the next best alternative that must be forgone
when making a choice
d) Price of a good or service in the market
Answer: c) Value of the next best alternative that must be
forgone when making a choice
64. The term “comparative advantage” refers to a
situation where a country can produce a good or service:
a) At a lower opportunity cost than another country
b) With higher quality than another country
c) Using more advanced technology than another country
d) With higher wages and labor costs than another country
Answer: a) At a lower opportunity cost than another country
65. The term “liquidity” refers to:
a) The ease with which an asset can be converted into cash
without significant loss of value
b) The total value of money in circulation in an economy
c) The stability of financial markets and institutions
d) The profitability of a business or investment
Answer: a) The ease with which an asset can be converted
into cash without significant loss of value
66. The term “supply-side economics” emphasizes policies
that focus on:
a) Increasing government spending and investment to
stimulate demand in the economy
b) Reducing taxes and regulations to incentivize production
and investment
c) Controlling inflation through monetary policy and
interest rate adjustments
d) Implementing redistributive policies to reduce income
inequality
Answer: b) Reducing taxes and regulations to incentivize
production and investment
67. The term “cyclical unemployment” refers to
unemployment that is caused by:
a) Technological advancements that make certain jobs
obsolete
b) Fluctuations in the business cycle and a decrease in
aggregate demand
c) Structural changes in the economy that require workers to
acquire new skills
d) Voluntary job separations and transitions between jobs
Answer: b) Fluctuations in the business cycle and a decrease
in aggregate demand
68. The term “economic equilibrium” refers to a
situation where:
a) Supply and demand in the economy are perfectly balanced
b) The economy is experiencing high levels of inflation
c) The government intervenes to control prices in the market
d) Unemployment rate is at its lowest level
Answer: a) Supply and demand in the economy are perfectly
balanced
69. The term “fiscal policy” refers to the use of:
a) Government spending and taxation to influence the economy
b) Monetary policy tools by the central bank to control the
money supply
c) Exchange rate policies to manage international trade
d) Labor market regulations to protect workers’ rights
Answer: a) Government spending and taxation to influence the
economy
70. The term “trade deficit” refers to a situation
where:
a) The value of a country’s exports exceeds the value of its
imports
b) The value of a country’s imports exceeds the value of its
exports
c) The value of a country’s currency is stronger relative to
other currencies
d) The value of a country’s currency is weaker relative to
other currencies
Answer: b) The value of a country’s imports exceeds the
value of its exports
71. The term “market failure” refers to a situation
where:
a) There is a lack of competition in the market, leading to
higher prices
b) The market does not allocate resources efficiently,
resulting in an inefficient outcome
c) The government intervenes in the market and distorts
price signals
d) Consumers and producers are not fully informed about the
market conditions
Answer: b) The market does not allocate resources
efficiently, resulting in an inefficient outcome
72. The term “marginal propensity to consume (MPC)”
refers to:
a) The percentage of additional income that is saved
b) The percentage of additional income that is spent on
consumption
c) The total amount of income saved
d) The total amount of income spent on consumption
Answer: b) The percentage of additional income
73. The term “monetary policy” refers to the actions
taken by the central bank to:
a) Control the money supply and interest rates in the
economy
b) Regulate international trade and exchange rates
c) Manage government spending and taxation policies
d) Address income inequality and poverty in the society
Answer: a) Control the money supply and interest rates in
the economy
74.The term “aggregate supply” refers to the total
amount of:
a) Goods and services produced in an economy
b) Savings and investments in an economy
c) Money supply in circulation in an economy
d) Government spending and taxation in an economy
Answer: a) Goods and services produced in an economy
74. The term “deflation” refers to a situation where
there is a sustained:
a) Increase in the general level of prices
b) Decrease in the general level of prices
c) Increase in the money supply in the economy
d) Decrease in the money supply in the economy
Answer: b) Decrease in the general level of prices
75. The term “foreign direct investment (FDI)” refers
to:
a) The purchase of goods and services from foreign countries
b) The flow of capital from domestic investors to foreign
countries
c) The flow of capital from foreign investors to domestic
countries
d) The exchange of goods and services between countries
through international trade
Answer: c) The flow of capital from foreign investors to
domestic countries
76. The term “marginal propensity to save (MPS)”
refers to:
a) The percentage of additional income that is saved
b) The percentage of additional income that is spent on
consumption
c) The total amount of income saved
d) The total amount of income spent on consumption
Answer: a) The percentage of additional income that is saved
77. The term “structural unemployment” refers to
unemployment that is caused by:
a) Technological advancements that make certain jobs
obsolete
b) Fluctuations in the business cycle and a decrease in
aggregate demand
c) Inadequate skills and qualifications of workers for
available jobs
d) Voluntary job separations and transitions between jobs
Answer: c) Inadequate skills and qualifications of workers
for available jobs
78. The term “trade surplus” refers to a situation
where:
a) The value of a country’s exports exceeds the value of its
imports
b) The value of a country’s imports exceeds the value of its
exports
c) The value of a country’s currency is stronger relative to
other currencies
d) The value of a country’s currency is weaker relative to
other currencies
Answer: a) The value of a country’s exports exceeds the
value of its imports
79. The term “opportunistic behavior” refers to:
a) Actions taken by individuals to maximize their own
self-interests
b) Cooperative and collaborative behavior among individuals
in the market
c) Government intervention to regulate market activities
d) Inefficient resource allocation in the economy
Answer: a) Actions taken by individuals to maximize their
own self-interests
80. The term “capital stock” refers to:
a) The total amount of physical and financial capital in an
economy
b) The flow of funds from savers to borrowers in financial
markets
c) The interest rate charged by banks on loans and deposits
d) The ownership shares of a company traded in the stock
market
Answer: a) The total amount of physical and financial
capital in an economy
81. The term “marginal propensity to import (MPI)”
refers to:
a) The percentage of additional income that is saved
b) The percentage of additional income that is spent on
consumption
c) The percentage of additional income that is spent on
imports
d) The percentage of additional income that is spent on
exports
Answer: c) The percentage of additional income that is spent
on imports
82. The term “business cycle” refers to:
a) The fluctuation of stock prices in financial markets
b) The variation in exchange rates between different
currencies
c) The periodic expansion and contraction of economic
activity in an economy
d) The movement of goods and services across national
borders
Answer: c) The periodic expansion and contraction of
economic activity in an economy
83. The term “government budget deficit” occurs when:
a) Government expenditures exceed government revenues in a
given period
b) Government revenues exceed government expenditures in a
given period
c) Government expenditures and government revenues are equal
in a given period
d) Government debt decreases over time
Answer: a) Government expenditures exceed government
revenues in a given period
84. The term “opportunity cost of capital” refers to:
a) The interest rate charged by banks on loans
b) The return on investment foregone by using capital in one
project rather than another
c) The cost of borrowing funds to finance investment
projects
d) The price of capital goods in the market
Answer: b) The return on investment foregone by using
capital in one project rather than another
85. The term “demand-pull inflation” refers to
inflation that is caused by:
a) A decrease in aggregate demand in the economy
b) An increase in aggregate supply in the economy
c) A decrease in the costs of production, such as wages or
raw materials
d) An increase in aggregate demand in the economy
Answer: d) An increase in aggregate demand in the economy
86. The term “commodity money” refers to a type of
money that is:
a) Backed by a physical commodity, such as gold or silver
b) Created by the central bank through open market
operations
c) Issued by the government as legal tender
d) Stored and transferred electronically, such as digital
currencies
Answer: a) Backed by a physical commodity, such as gold or
silver
87. The term “trade barrier” refers to:
a) The ease of conducting international trade between
countries
b) Government policies and regulations that restrict
international trade
c) The level of competition in the domestic market
d) The willingness of consumers to purchase foreign goods
Answer: b) Government policies and regulations that restrict
international trade
88. The term “natural rate of unemployment” refers to:
a) The rate of unemployment that prevails when the economy
is at full employment
b) The rate of unemployment that prevails during a
recessionary period
c) The rate of unemployment that prevails among new entrants
to the labor market
d) The rate of unemployment that prevails among workers with
advanced skills and education
Answer: a) The rate of unemployment that prevails when the
economy is at full employment
89. The term “price elasticity of demand” measures
the:
a) Responsiveness of quantity demanded to changes in price
b) Responsiveness of quantity supplied to changes in price
c) Rate at which prices change in the market
d) Proportion of income spent on a particular good or
service
Answer: a) Responsiveness of quantity demanded to changes in
price
90. The term “opportunity cost of labor” refers to:
a) The wages and salaries paid to workers in an economy
b) The value of output that could have been produced if
labor had been used in the next best alternative
c) The cost of hiring additional workers in the production
process
d) The benefits and perks provided to employees in the
workplace
Answer: b) The value of output that could have been produced
if labor had been used in the next best alternative
91. The term “externalities” in economics refers to:
a) Costs or benefits of economic activities that are borne
by third parties, not directly involved in the activity
b) Economic policies that are implemented by supranational
organizations
c) The movement of goods and services across national
borders
d) The distribution of income and wealth in a society
Answer: a) Costs or benefits of economic activities that are
borne by third parties, not directly involved in the activity
92. The term “exchange rate” refers to:
a) The price of one currency in terms of another currency
b) The interest rate charged by banks on international loans
c) The total value of goods and services traded between
countries
d) The balance of trade between countries
Answer: a) The price of one currency in terms of another
currency
93. The term “monopolistic competition” refers to a
market structure characterized by:
a) A large number of firms, differentiated products, and
free entry and exit
b) A single firm with exclusive control over the entire
market
c) A small number of firms, standardized products, and
significant barriers to entry
d) A government-owned and operated industry
Answer: a) A large number of firms, differentiated products,
and free entry and exit
94. The term “supply shock” refers to:
a) An unexpected event that affects the availability of
production inputs and disrupts the overall supply of goods and services
b) A sudden increase in consumer demand for a specific
product
c) The impact of government regulations on market supply
d) Fluctuations in exchange rates that affect international
trade
Answer: a) An unexpected event that affects the availability
of production inputs and disrupts the overall supply of goods and services
95. The term “foreign portfolio investment” refers to:
a) The purchase of goods and services from foreign countries
b) The flow of capital from domestic investors to foreign
countries
c) The flow of capital from foreign investors to domestic
countries for investment in financial assets
d) The exchange of goods and services between countries
through international trade
Answer: c) The flow of capital from foreign investors to
domestic countries for investment in financial assets
96. The term “cost of production” refers to:
a) The monetary value of inputs used to produce goods and
services
b) The price at which goods and services are sold in the
market
c) The profit earned by firms from the sale of goods and
services
d) The total revenue generated by firms from the sale of
goods and services
Answer: a) The monetary value of inputs used to produce
goods and services
97. The term “capital accumulation” refers to:
a) The process of acquiring physical and financial capital
goods over time
b) The redistribution of wealth and income in society
c) The flow of funds from savers to borrowers in financial
markets
d) The adjustment of interest rates to control inflation
Answer: a) The process of acquiring physical and financial
capital goods over time
98. The term “income elasticity of demand” measures
the:
a) Responsiveness of quantity demanded to changes in income
b) Responsiveness of quantity supplied to changes in income
c) Rate at which incomes change in the market
d) Proportion of income spent on a particular good or
service
Answer: a) Responsiveness of quantity demanded to changes in
income
99. The term “capital flight” refers to:
a) The movement of physical capital goods from one country
to another
b) The flow of financial capital out of a country due to
economic or political instability
c) The transfer of ownership of capital assets from private
firms to the government
d) The practice of multinational corporations relocating
their headquarters to tax havens
Answer: b) The flow of financial capital out of a country
due to economic or political instability
100. The term “consumer surplus” refers to:
a) The total amount of money consumers spend on goods and
services
b) The difference between the price consumers are willing to
pay and the price they actually pay
c) The total amount of money consumers earn from selling
goods and services
d) The difference between the price suppliers receive and
the price consumers pay
Answer: b) The difference between the price consumers are
willing to pay and the price they actually pay
The term “inflation targeting” refers to a
monetary policy strategy where the central bank aims to:
a) Maintain a stable and low level of inflation over a
specific target range
b) Control the exchange rate between the domestic currency
and foreign currencies
c) Maximize economic growth by stimulating aggregate demand
d) Ensure full employment in the economy by reducing unemployment
rates
Answer: a) Maintain a stable and low level of inflation over
a specific target range
The term “crowding out” refers to a situation
where:
a) Increased government spending leads to a decrease in
private sector investment
b) Decreased government spending leads to an increase in
private sector investment
c) Increased government spending leads to an increase in
private sector consumption
d) Decreased government spending leads to a decrease in
private sector consumption
Answer: a) Increased government spending leads to a decrease
in private sector investment
The term “capital mobility” refers to:
a) The ability of physical capital goods to move freely
between countries
b) The ease with which financial capital can be moved across
national borders
c) The rate at which investment in capital assets occurs in
an economy
d) The proportion of income that is saved and invested in
the economy
Answer: b) The ease with which financial capital can be
moved across national borders
The term “cost-push inflation” refers to inflation
that is caused by:
a) A decrease in aggregate demand in the economy
b) An increase in aggregate supply in the economy
c) A decrease in the costs of production, such as wages or
raw materials
d) An increase in the costs of production, such as wages or
raw materials
Answer: d) An increase in the costs of production, such as
wages or raw materials
The term “capital-intensive production” refers to
a production process that:
a) Relies heavily on manual labor and human capital
b) Requires a large amount of physical capital and
technology
c) Utilizes a small number of specialized inputs and
resources
d) Focuses on the production of capital goods rather than
consumer goods
Answer: b) Requires a large amount of physical capital and
technology
