-
web.groovymark@gmail.com
- December 7, 2024
Question 21
What is the purpose of fiscal policy?
a) To control inflation by adjusting interest rates
b) To regulate the stock market
c) To influence the economy through government spending and taxation
d) To stabilize the currency exchange rate
Answer: c) To influence the economy through government spending and taxation
Explanation: Fiscal policy involves adjusting government spending and tax policies to influence economic activity, such as boosting demand or controlling inflation.
Question 22
What is Gross Domestic Product (GDP)?
a) The total value of goods produced by a country abroad
b) The total value of goods and services produced within a country’s borders
c) The total value of all imports into a country
d) The total value of capital goods
Answer: b) The total value of goods and services produced within a country's borders
Explanation: GDP measures the total market value of all finished goods and services produced within a country's borders during a specific period, typically used to gauge economic performance.
Question 23
What is the concept of comparative advantage?
a) The ability to produce goods at the lowest cost
b) The ability to produce a good at a lower opportunity cost than another producer
c) The ability to produce more goods than another country
d) The ability to dominate global markets
Answer: b) The ability to produce a good at a lower opportunity cost than another producer
Explanation: Comparative advantage refers to the ability of a country to produce a good at a lower opportunity cost than another country, allowing for more efficient production and trade.
Question 24
What is a recession?
a) A period of economic growth
b) A sustained decline in economic activity, typically characterized by a decrease in GDP
c) An increase in government spending
d) A rise in inflation
Answer: b) A sustained decline in economic activity, typically characterized by a decrease in GDP
Explanation: A recession is defined as a significant decline in economic activity, lasting for an extended period, and is typically reflected by a fall in GDP and rising unemployment.
Question 25
What is the Consumer Price Index (CPI)?
a) A measure of the total economic output of a country
b) A measure of the average price of goods and services consumed by households
c) A tool to calculate business profits
d) A method for tracking labor productivity
Answer: b) A measure of the average price of goods and services consumed by households
Explanation: The CPI measures the average price level of a basket of consumer goods and services, and is commonly used to track inflation and the cost of living.
Question 26
What is the natural rate of unemployment?
a) The rate of unemployment during a recession
b) The rate of unemployment when the economy is operating at full capacity
c) The rate of unemployment that occurs during periods of inflation
d) The rate of unemployment caused by government policies
Answer: b) The rate of unemployment when the economy is operating at full capacity
Explanation: The natural rate of unemployment represents the level of unemployment that exists when the economy is operating at full potential, accounting for frictional and structural unemployment but not cyclical unemployment.
Question 27
What is a trade deficit?
a) When a country exports more goods than it imports
b) When a country imports more goods than it exports
c) When a country’s exports equal its imports
d) When a country has no international trade
Answer: b) When a country imports more goods than it exports
Explanation: A trade deficit occurs when the value of a country's imports exceeds the value of its exports, resulting in an imbalance in trade.
Question 28
What is a progressive tax system?
a) A tax system where everyone pays the same percentage of income
b) A tax system in which higher income earners pay a larger percentage of their income in taxes
c) A tax system where lower income earners pay more in taxes
d) A system where taxes are based on the consumption of goods and services
Answer: b) A tax system in which higher income earners pay a larger percentage of their income in taxes
Explanation: In a progressive tax system, the tax rate increases as an individual's income rises, meaning those with higher incomes pay a larger proportion of their earnings in taxes.
Question 29
What is monetary policy?
a) Government policy that focuses on adjusting tax rates
b) Actions by the central bank to control the money supply and interest rates
c) Trade policies that affect international transactions
d) Policies that regulate labor markets
Answer: b) Actions by the central bank to control the money supply and interest rates
Explanation: Monetary policy refers to actions taken by a central bank, such as the Federal Reserve, to regulate the money supply and interest rates in an effort to control inflation and stabilize the economy.
Question 30
What is a public sector?
a) The part of the economy that is run by private businesses
b) The part of the economy that is controlled by households
c) The part of the economy that involves government services and operations
d) The sector of the economy that deals with imports and exports
Answer: c) The part of the economy that involves government services and operations
Explanation: The public sector refers to the part of the economy that is controlled and operated by the government, including services such as education, public safety, and infrastructure.
Question 31
What is the difference between a nominal value and a real value?
a) Nominal value is adjusted for inflation, while real value is not
b) Nominal value is based on current prices, while real value is adjusted for inflation
c) Real value includes taxes, while nominal value does not
d) Nominal value is the future value, while real value is the present value
Answer: b) Nominal value is based on current prices, while real value is adjusted for inflation
Explanation: Nominal value refers to prices measured at current levels, while real value adjusts nominal prices to account for changes in inflation, providing a more accurate reflection of purchasing power over time.
Question 32
What is the purpose of fiscal stimulus?
a) To increase inflation by decreasing government spending
b) To slow down the economy by reducing taxes
c) To increase economic activity through increased government spending or tax cuts
d) To decrease government debt by reducing spending
Answer: c) To increase economic activity through increased government spending or tax cuts
Explanation: Fiscal stimulus refers to government policies aimed at boosting economic activity, often through increased public spending or tax cuts, particularly during times of economic downturn.
Question 33
What does the term “market equilibrium” refer to?
a) When supply exceeds demand
b) When demand exceeds supply
c) When the quantity supplied equals the quantity demanded at a certain price
d) When the government sets the price of a good
Answer: c) When the quantity supplied equals the quantity demanded at a certain price
Explanation: Market equilibrium occurs when the quantity of goods supplied by producers matches the quantity demanded by consumers, resulting in a stable market price.
Question 34
What is the impact of subsidies on production?
a) They decrease the cost of production and encourage more output
b) They increase the cost of production and discourage output
c) They have no impact on production
d) They raise prices for consumers
Answer: a) They decrease the cost of production and encourage more output
Explanation: Subsidies reduce the cost of production for businesses, allowing them to produce more goods at a lower cost, often resulting in increased output and lower prices for consumers.
Question 35
What is a budget deficit?
a) When government spending exceeds revenue in a given year
b) When a country’s exports exceed imports
c) When a government has more revenue than spending
d) When government spending is equal to revenue
Answer: a) When government spending exceeds revenue in a given year
Explanation: A budget deficit occurs when a government spends more money than it receives in revenue during a fiscal year, leading to borrowing or increased debt.
Question 36
What is the function of an exchange rate?
a) To set the price of domestic goods
b) To determine the price at which one currency can be traded for another
c) To regulate the flow of goods between countries
d) To calculate inflation rates
Answer: b) To determine the price at which one currency can be traded for another
Explanation: An exchange rate represents the value of one country's currency in terms of another currency, facilitating international trade and investment.
Question 37
What is meant by the term “capital”?
a) The number of workers in an economy
b) The physical and financial resources used to produce goods and services
c) The total value of imports and exports in a country
d) The government revenue generated from taxes
Answer: b) The physical and financial resources used to produce goods and services
Explanation: Capital refers to the tools, machinery, buildings, and financial resources used by businesses to produce goods and services.
Question 38
What is the result of inflation on purchasing power?
a) It increases purchasing power
b) It reduces purchasing power
c) It has no effect on purchasing power
d) It reduces the price of goods
Answer: b) It reduces purchasing power
Explanation: Inflation erodes the purchasing power of money because as prices rise, each unit of currency buys fewer goods and services.
Question 39
What is an import quota?
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 requirement to export a certain percentage of goods
Answer: b) A limit on the quantity of a good that can be imported
Explanation: An import quota is a restriction imposed by a government on the quantity of a specific good that can be imported into a country during a set period.
Question 40
What is meant by “marginal utility”?
a) The total satisfaction received from consuming a good
b) The additional satisfaction received from consuming one more unit of a good
c) The cost of producing one more unit of a good
d) The price elasticity of a good
Answer: b) The additional satisfaction received from consuming one more unit of a good
Explanation: Marginal utility refers to the additional satisfaction or benefit that a consumer gains from consuming one more unit of a good or service.
