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web.groovymark@gmail.com
- December 7, 2024
Question 01
What is the basic economic problem caused by scarcity?
a) Limited wants
b) Unlimited resources
c) Opportunity cost
d) Trade-offs
Answer: d) Trade-offs
Explanation: Scarcity forces individuals to make trade-offs between limited resources and unlimited wants, leading to decisions on how best to allocate resources.
Question 02
What is the opportunity cost of a decision?
a) The next best alternative forgone
b) The monetary price paid
c) The total cost of the resources used
d) The time spent making the decision
Answer: a) The next best alternative forgone
Explanation: Opportunity cost refers to the value of the next best alternative that is given up when a decision is made.
Question 03
What does GDP measure?
a) The total market value of final goods and services produced
b) The standard of living
c) National income minus taxes
d) The level of government spending
Answer: a) The total market value of final goods and services produced
Explanation: GDP represents the total monetary value of all final goods and services produced within a country during a specific period.
Question 04
Which type of unemployment is caused by technological advancements that replace jobs?
a) Frictional unemployment
b) Cyclical unemployment
c) Structural unemployment
d) Seasonal unemployment
Answer: c) Structural unemployment
Explanation: Structural unemployment occurs when workers' skills are no longer in demand due to technological changes or outsourcing.
Question 05
What happens to total revenue when demand is elastic and price decreases?
a) Total revenue increases
b) Total revenue decreases
c) Total revenue stays the same
d) Total revenue fluctuates
Answer: a) Total revenue increases
Explanation: When demand is elastic, a decrease in price leads to a proportionally larger increase in the quantity demanded, which increases total revenue.
Question 06
What is the Phillips curve used to illustrate?
a) The relationship between inflation and unemployment
b) The trade-off between investment and consumption
c) The supply and demand for labor
d) The correlation between government spending and taxes
Answer: a) The relationship between inflation and unemployment
Explanation: The Phillips curve shows an inverse relationship between the rate of inflation and the rate of unemployment in an economy.
Question 07
How does inflation affect lenders?
a) It increases the value of the money repaid
b) It reduces the value of the money repaid
c) It has no effect on the value of the money repaid
d) It increases interest rates
Answer: b) It reduces the value of the money repaid
Explanation: Inflation erodes the purchasing power of money, meaning the money repaid to lenders has less value than when it was lent out.
Question 08
What are the two components of M2 money?
a) Cash and checkable deposits
b) M1 and certificates of deposit
c) Government bonds and stocks
d) Traveler’s checks and debit cards
Answer: b) M1 and certificates of deposit
Explanation: M2 includes all of M1 (cash, checkable deposits) plus savings deposits, money market funds, and time deposits like certificates of deposit.
Question 09
What causes a shift in the short-run aggregate supply (SRAS) curve to the left?
a) A fall in input costs
b) A decrease in wages
c) A rise in input costs
d) Technological advancements
Answer: c) A rise in input costs
Explanation: A rise in input costs, such as labor or raw materials, reduces firms' ability to produce, shifting the SRAS curve to the left.
Question 10
What does a price floor cause when set above the equilibrium price?
a) Excess supply
b) Excess demand
c) Market equilibrium
d) A price ceiling
Answer: a) Excess supply
Explanation: When a price floor is set above the equilibrium price, it leads to a surplus as suppliers produce more than consumers are willing to buy.
Question 11
What does a tariff do?
a) Lowers the price of imports
b) Increases government revenue
c) Raises the price of imported goods
d) Lowers the cost of domestic goods
Answer: c) Raises the price of imported goods
Explanation: Tariffs are taxes imposed on imports, making them more expensive and thus protecting domestic industries from foreign competition.
Question 12
What is the effect of an expansionary fiscal policy?
a) Decreases aggregate demand
b) Increases aggregate demand
c) Decreases inflation
d) Decreases government spending
Answer: b) Increases aggregate demand
Explanation: Expansionary fiscal policy involves increasing government spending or decreasing taxes to stimulate economic activity and increase aggregate demand.
Question 13
What is the goal of contractionary monetary policy?
a) To increase inflation
b) To increase aggregate demand
c) To decrease inflation
d) To decrease unemployment
Answer: c) To decrease inflation
Explanation: Contractionary monetary policy reduces the money supply and raises interest rates to lower inflation by decreasing spending.
Question 14
What happens to the quantity supplied when price rises, according to the law of supply?
a) Quantity supplied decreases
b) Quantity supplied increases
c) Quantity supplied remains constant
d) Quantity supplied fluctuates
Answer: b) Quantity supplied increases
Explanation: The law of supply states that as the price of a good rises, suppliers are willing to produce and sell more of it, leading to an increase in quantity supplied.
Question 15
What is a key characteristic of monopolistic competition?
a) A single seller dominates the market
b) Firms sell identical products
c) Firms sell differentiated products
d) Only a few firms compete in the market
Answer: c) Firms sell differentiated products
Explanation: In monopolistic competition, firms sell similar but not identical products, and they compete based on product differentiation, branding, or quality.
Question 16
What is cyclical unemployment caused by?
a) Mismatches between workers’ skills and job requirements
b) Changes in technology
c) Changes in the business cycle
d) Seasonal demand fluctuations
Answer: c) Changes in the business cycle
Explanation: Cyclical unemployment occurs when there is a downturn in economic activity, leading to a reduction in demand for goods and services.
Question 17
What is the relationship between aggregate demand and inflation?
a) Direct
b) Inverse
c) Neutral
d) Cyclical
Answer: a) Direct
Explanation: When aggregate demand increases, inflation tends to rise as higher demand pushes prices up, creating a direct relationship between the two.
Question 18
What is the effect of a quota?
a) Increases government revenue
b) Lowers the price of imports
c) Limits the quantity of goods that can be imported
d) Increases competition
Answer: c) Limits the quantity of goods that can be imported
Explanation: Quotas restrict the amount of a specific good that can be imported, protecting domestic industries by reducing foreign competition.
Question 19
What is the main purpose of the Federal Reserve?
a) To regulate fiscal policy
b) To control monetary policy and ensure financial stability
c) To increase government spending
d) To reduce unemployment
Answer: b) To control monetary policy and ensure financial stability
Explanation: The Federal Reserve is the central bank of the United States, and its primary role is to manage monetary policy, stabilize prices, and ensure financial stability.
Question 20
What are absolute quotas?
a) Taxes on imported goods
b) A fixed amount of goods allowed to be imported
c) A minimum quantity that must be imported
d) A trade restriction based on quality standards
Answer: b) A fixed amount of goods allowed to be imported
Explanation: Absolute quotas set a specific limit on the quantity of a good that can be imported into a country, regardless of price.
