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web.groovymark@gmail.com
- December 7, 2024
Question 41
What are examples of automatic stabilizers in the economy?
a) Interest rates and open market operations
b) Transfer payments and progressive tax systems
c) Price floors and ceilings
d) Monetary policy and exchange rates
Answer: b) Transfer payments and progressive tax systems
Explanation: Automatic stabilizers, like transfer payments (e.g., unemployment benefits) and progressive taxes, automatically adjust to counteract economic fluctuations without direct government intervention.
Question 42
What is a quota in international trade?
a) A tax on imported goods
b) A limit on the quantity of a good that can be imported
c) A subsidy for domestic producers
d) A restriction on foreign investments
Answer: b) A limit on the quantity of a good that can be imported
Explanation: A quota restricts the amount of a certain good that can be imported into a country, often to protect domestic industries.
Question 43
What does a vertical long-run aggregate supply (LRAS) curve represent?
a) The economy is at full employment
b) The economy is experiencing a recession
c) Aggregate demand is decreasing
d) Prices are perfectly flexible
Answer: a) The economy is at full employment
Explanation: A vertical LRAS curve indicates that the economy is operating at full employment and that any increase in aggregate demand will only lead to inflation, not an increase in output.
Question 44
What happens to the supply curve when a new technology improves production efficiency?
a) It shifts to the left
b) It shifts to the right
c) It becomes steeper
d) It remains unchanged
Answer: b) It shifts to the right
Explanation: New technology increases production efficiency, enabling firms to produce more at each price level, thus shifting the supply curve to the right.
Question 45
What is price elasticity of demand?
a) The responsiveness of quantity demanded to a change in price
b) The responsiveness of price to a change in demand
c) The ability of a company to set prices
d) The fixed relationship between price and quantity
Answer: a) The responsiveness of quantity demanded to a change in price
Explanation: Price elasticity of demand measures how sensitive the quantity demanded is to changes in price. High elasticity means consumers are very responsive to price changes.
Question 46
What is a tariff?
a) A limit on the number of goods that can be imported
b) A tax imposed on imports or exports
c) A government subsidy for domestic production
d) A restriction on foreign investment
Answer: b) A tax imposed on imports or exports
Explanation: A tariff is a tax placed on imported or exported goods, often used to protect domestic industries or generate government revenue.
Question 47
What is a budget deficit?
a) When government revenues exceed expenditures
b) When government expenditures exceed revenues
c) When the economy is in full employment
d) When inflation is at zero
Answer: b) When government expenditures exceed revenues
Explanation: A budget deficit occurs when a government spends more than it collects in revenue, leading to borrowing or debt.
Question 48
What is a public good?
a) A good that can be provided by private companies
b) A good that is non-excludable and non-rivalrous, meaning anyone can use it without reducing its availability to others
c) A good that is excludable and rivalrous
d) A good that is subject to market competition
Answer: b) A good that is non-excludable and non-rivalrous, meaning anyone can use it without reducing its availability to others
Explanation: Public goods, such as national defense or public parks, are accessible to all members of society without diminishing the quantity available for others.
Question 49
What is the difference between a recession and a depression?
a) A recession is a prolonged downturn in the economy, while a depression is a short-term slowdown
b) A depression is a severe and prolonged recession
c) A recession affects inflation, while a depression affects unemployment
d) A depression occurs only when inflation is negative
Answer: b) A depression is a severe and prolonged recession
Explanation: A depression is a more extreme form of economic downturn than a recession, characterized by a significant and prolonged decline in economic activity.
Question 50
What is the role of the Federal Reserve?
a) To set tax rates for consumers and businesses
b) To regulate the money supply and maintain economic stability
c) To establish trade agreements with foreign countries
d) To control the national debt
Answer: b) To regulate the money supply and maintain economic stability
Explanation: The Federal Reserve is the central bank of the United States and is responsible for controlling inflation, managing the money supply, and maintaining overall economic stability.
