1. What is the primary goal of monetary policy?
- A) Reduce unemployment
B) Control inflation
C) Increase exports
D) Achieve political stability
Answer: B) Control inflation
Explanation: Monetary policy, typically managed by a central bank, aims to stabilize the economy by controlling inflation and ensuring price stability.
2. What is “demand-pull inflation”?
- A) Inflation caused by rising production costs
B) Inflation caused by an increase in aggregate demand
C) Inflation due to currency devaluation
D) Inflation resulting from supply chain disruptions
Answer: B) Inflation caused by an increase in aggregate demand
Explanation: Demand-pull inflation occurs when aggregate demand exceeds aggregate supply, leading to higher prices.
3. What is the opportunity cost?
- A) The cost of producing one more unit
B) The benefit foregone by choosing one option over another
C) The actual cost incurred in production
D) The cost of inputs used in production
Answer: B) The benefit foregone by choosing one option over another
Explanation: Opportunity cost represents the value of the next best alternative that is not chosen.
4. What does GDP stand for?
- A) Gross Domestic Product
B) Gross Development Plan
C) General Domestic Production
D) Gross Domestic Plan
Answer: A) Gross Domestic Product
Explanation: GDP measures the total monetary value of all finished goods and services produced within a country’s borders in a specific period.
5. Which organization publishes the “World Economic Outlook”?
- A) World Bank
B) International Monetary Fund (IMF)
C) World Trade Organization (WTO)
D) United Nations (UN)
Answer: B) International Monetary Fund (IMF)
Explanation: The IMF publishes the “World Economic Outlook,” which provides analysis and projections of global economic developments.
6. What is a ‘trade surplus’?
- A) When imports exceed exports
B) When exports exceed imports
C) When a country has no trade with others
D) When trade deficits are eliminated
Answer: B) When exports exceed imports
Explanation: A trade surplus occurs when the value of a country’s exports is higher than the value of its imports.
7. Which curve represents the trade-off between unemployment and inflation?
- A) Laffer Curve
B) Phillips Curve
C) Kuznets Curve
D) Lorenz Curve
Answer: B) Phillips Curve
Explanation: The Phillips Curve shows the inverse relationship between unemployment and inflation in the short term.
8. What is “quantitative easing”?
- A) Reduction in tax rates
B) Central bank’s purchase of securities to increase money supply
C) Tightening of monetary policy
D) Increase in government spending
Answer: B) Central bank’s purchase of securities to increase money supply
Explanation: Quantitative easing is a monetary policy tool used to stimulate the economy by increasing the money supply.
9. What is a ‘mixed economy’?
- A) Economy based entirely on market forces
B) Economy controlled by the government
C) Economy with both private and public sector participation
D) Economy with no taxation
Answer: C) Economy with both private and public sector participation
Explanation: A mixed economy combines elements of capitalism and socialism, with both private enterprise and government intervention.
10. What is the Gini coefficient used to measure?
- A) Economic growth
B) Income inequality
C) Trade balance
D) Inflation rate
Answer: B) Income inequality
Explanation: The Gini coefficient measures income distribution within a population, with 0 indicating perfect equality and 1 indicating maximum inequality.
11. What is “stagflation”?
- A) Low inflation with high economic growth
B) High inflation and low unemployment
C) High inflation with stagnant economic growth
D) Economic growth with declining prices
Answer: C) High inflation with stagnant economic growth
Explanation: Stagflation refers to a situation where an economy experiences stagnant growth, high unemployment, and high inflation simultaneously.
12. Which sector is included in the primary sector of the economy?
- A) Manufacturing
B) Services
C) Agriculture
D) Retail
Answer: C) Agriculture
Explanation: The primary sector involves the extraction and harvesting of natural resources, such as agriculture, fishing, and mining.
13. What is “fiscal deficit”?
- A) Total government revenue minus expenditure
B) Total expenditure minus total revenue (excluding borrowings)
C) Excess of exports over imports
D) Excess of savings over investments
Answer: B) Total expenditure minus total revenue (excluding borrowings)
Explanation: Fiscal deficit occurs when the government’s total expenditure exceeds its revenue, excluding borrowings.
14. What does the term “repo rate” mean?
- A) The interest rate at which banks lend to the central bank
B) The interest rate at which the central bank lends to commercial banks
C) The rate of inflation
D) The rate of unemployment
Answer: B) The interest rate at which the central bank lends to commercial banks
Explanation: Repo rate is a key monetary policy tool used by central banks to control liquidity in the economy.
15. What is “capital formation”?
- A) Increase in money supply
B) Accumulation of physical assets
C) Expansion of the labor force
D) Increase in government spending
Answer: B) Accumulation of physical assets
Explanation: Capital formation refers to the process of building up the capital stock of a country through investments in infrastructure, machinery, and equipment.
16. What is the primary objective of the World Trade Organization (WTO)?
- A) Promote free and fair trade globally
B) Provide loans to developing countries
C) Stabilize currency exchange rates
D) Monitor inflation in member countries
Answer: A) Promote free and fair trade globally
Explanation: The WTO aims to facilitate international trade by reducing trade barriers and ensuring a level playing field.
17. What does “PPP” stand for in economics?
- A) Purchasing Power Parity
B) Public Private Partnership
C) Personal Property Portfolio
D) Price Protection Policy
Answer: A) Purchasing Power Parity
Explanation: PPP compares the relative value of currencies based on the cost of a basket of goods and services in different countries.
18. What is “hyperinflation”?
- A) A sustained decrease in prices
B) An extremely high and typically accelerating inflation rate
C) Inflation at a steady rate
D) Inflation controlled by the government
Answer: B) An extremely high and typically accelerating inflation rate
Explanation: Hyperinflation occurs when prices rise uncontrollably, eroding the value of currency rapidly.
19. What is “market equilibrium”?
- A) When supply exceeds demand
B) When demand exceeds supply
C) When supply equals demand
D) When the market is unregulated
Answer: C) When supply equals demand
Explanation: Market equilibrium is the state where the quantity demanded equals the quantity supplied, resulting in stable prices.
20. Which economic concept is associated with the “invisible hand”?
- A) Government intervention
B) Market self-regulation
C) Monopoly pricing
D) Planned economy
Answer: B) Market self-regulation
Explanation: The “invisible hand,” a concept introduced by Adam Smith, suggests that individual self-interest in a free market leads to economic efficiency.
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